Despite greater demands among investors for financial advisors to take a more holistic approach to their financial plan, a new study published by LIMRA and the National Association of Independent Life Brokerage Agencies (NAILBA) found that not all financial advisors are getting the message.
The study, which was released this month, surveyed more than 240 advisors or producers that have contracts to place annuities, life insurance and similar products.
It found that 35% of advisors that have been in the business for 11 years or more were less inclined to offer financial planning and wealth management. Whereas 49% of those who had been in the industry for less time said they were willing to offer those services.
“The holistic approach gives the producers a better sense of the client’s overall financial picture and they can offer a broader range of services to meet the client’s current needs,” said Peter Dewitt, assistant research director for LIMRA, in a statement. “This opens an opportunity for building a lasting and rewarding producer-client relationship.”
The study highlighted another difference between experienced independent advisors and the less experienced ones: The latter appeared more likely to shy away from digital tools and training.
Only 10% of those in the industry for more than 11 years said they value digital tools as opposed to the 35% with less experience. Finally, only 11% of the more experienced advisors said they value training compared to the 25% with less experience.
The study also surveyed 70 broker general agencies (BGAs) and independent marketing organizations (IMOs) that work with independent advisors and agents of annuities and insurance. BGAs are wholesalers for insurance and annuity products while IMOs work between independent agents and carriers. They assist with recruiting, marketing, and similar efforts.
Given the expansion by advisors into more financial planning and wealth management services, the BGAs and IMOs working with them want to support that line of business, the study found. Many surveyed believe expanding into financial planning services will yield greater revenues in the future although only 37% of those surveyed said they offer financial planning services currently.
However, 74% said they expect that up to 5% of their total revenue will come from financial planning and wealth management services in the next three years. Others are more optimistic as 31% expect financial planning and wealth management to produce 10% of their overall revenue in the next three years.
Those added revenues will only contribute to revenue streams that have already seem tremendous growth for BGAs and IMOs in the past couple of years. Of those surveyed, 50% reported revenues of more than $5 million in 2022 as opposed to 35% that reported the same revenue the year before.
There are a variety of factors contributing to this revenue growth. However, the study speculated that a major contributing factor could be a push by BGAs and IMOs to increase their advisor networks. For two years, this has been an ongoing priority for them as this year 82% and last year 77% listed growing their network of advisors as the number one business priority, according to the study.
“The increase in reported revenues could be related to BGA/IMOs pursuing their network growth goals,” Dewitt said in a statement. “The intermediaries are looking for revenue growth by more independent producers selling through them.”
The other priorities for the entities were increasing sales of current product offerings with 77% and improving advisor sales support at 54%, the study said.
While technology was not a main priority this past year, it was one of the fastest growing ones for BGAs and IMOs, according to the study. It had been a top priority for 44% of the entities surveyed in 2021 and increased to 51% of those surveyed in 2022. Laura Murach, research director with Distribution Research at LIMRA, said there are interesting details about the type of technology BGAs and IMOs are investing in.
“The intermediaries, the BGA's and IMOs, they're investing in back-office processing technology but their second big investment is also marketing and social media so there's a lot of investment being made there,” she said.
To maintain their success, BGAs and IMOs should embrace new technology and expand their businesses to meet advisors and agents’ growth into financial planning and wealth management services, according to LIMRA and NAILBA.
“For BGAs and IMOs to continue increasing their advisor networks, and ultimately their bottom line, they will need to increase the digital tools and training they offer, especially those that support holistic financial planning and wealth management services,” they said in a statement. “This will help experienced and inexperienced independent producers close sales and increase their book of business.”