Wholesalers Need To Do More With Less

PALM BEACH, Fla. - Holistic financial planning isn’t restricted to retail financial advisors; it applies to life and annuity wholesalers too.

With profit margins shrinking and compliance costs rising, wholesalers need to do more with less.That's the word from Corey Walther, head of business development and relationship management with Allianz Life.

Walther moderated a Monday panel on wholesaling at the annual meeting of the Insured Retirement Institute at The Breakers.

Panelists included Gary Baker, president of Cannex USA, a platform which supports the exchange of pricing information for annuity and bank products and Philip J. Pellegrino, executive director, Annuity Product Management, at UBS Wealth Management.

Couple those economic and regulatory trends with the new-found ease and access that retail advisors have to product information and online tools, and wholesalers will need to justify what value they bring to advisors with whom they do business.

No more pushing product onto retail advisors.

“Today planners don’t need people coming in to say here’s how the product bells and whistles work,” Walther told InsuranceNewsNet prior to the conference.

Instead, wholesalers, including independent marketing organizations (IMOs), need to help retail advisors run their practices more efficiently. Wholesalers also must explain how products fit within the construct of a retirement income portfolio, he said.

Critical Link in the Distribution Chain

Thousands of wholesalers, some employed directly by insurers and others indirectly as contractors to insurers, have helped distribute between $220 billion and $265 billion worth of fixed and variable annuities every year for the past 10 years.

It’s true that while the overall variable annuity market has shrunk, parts of it – structured, or buffered, variable annuities - have reported double-digit growth.

Wholesalers have a role in explaining to retail advisors how product demand is shifting, why these shifts are taking place and how, in the case of structured variable annuity product, these fast sellers fit into a retirement income portfolio.

“Wholesaling is a real important part of the (distribution value) chain,” Walther said. “It might even be the most critical part.”

That’s because a large wirehouse like UBS Wealth Management doesn’t have the in-house staff to train their 8,000 retail advisors.

UBS relies on Allianz Life wholesalers to educate advisors about how and where annuities fit and under what conditions in a retirement income program, Walther said.

Wholesalers aren’t going anywhere, but they will be forced to evolve as advisors move further down the path of a planning model anchored in a best interest world where the interest of the client comes before the interest of the advisor.

The Mutual Fund Parallel

Walther drew a parallel between the changes taking place in the variable annuity business with the changes that took place decades ago in the mutual fund business.

It used to be that the only way to buy a mutual fund was through a broker. The broker would charge a commission and the fund would charge a fee.

Now mutual fund commissions have dropped and thousands of funds no longer saddle investors with a fee, or load.

Wholesalers who explained how those changes would affect an advisor’s practice served their purpose.

“A good relationship with the wholesaling team means there’s no daylight between what I’m doing at UBS and what wholesalers are doing and saying,” he said.

Wholesalers who want to remain in the business for the next five years or longer need to feel a sense of urgency with respect to the evolution of the wholesale annuity business, as well as a willingness to “step it up,” for retail advisors, Walther said.

As the name implies, wholesalers need to think about the “whole” needs of retail financial advisors with whom they do business.

InsuranceNewsNet Senior Writer Cyril Tuohy has covered the financial services industry for more than 15 years. Cyril may be reached at [email protected].
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