Four reasons P&C carriers can win with wealth management
In our last post, we discussed how turbulence is challenging the top and bottom earnings of P&C companies. We also looked at why we see advice-based wealth management as an attractive market for carriers right now. In this post, we will highlight why we believe P&C companies and agents have a unique right to play in this market.
First, let’s remind ourselves why this market is so attractive. Historically low interest rates and new entrants to distribution are driving carriers into high-cap, low-return segments of the financial services value chain. From a strategic perspective, moving into advisory and wealth management offers carriers and agents a potential lifeline amid the vicious cycle of stressful turbulence. It can also provide a path to growth and improve customer retention as well as overall brand stability by increasing portfolio share.
Based on changing customer expectations and the existing reputation of P&C carriers and agents, we believe they have a head start on the competition – if they’re flexible enough to take advantage of it.
Let’s explore four reasons why P&C firms and their agents are uniquely positioned to access and thrive in the wealth management and advice markets there.
1. Customer expectations turn into comprehensive financial advisory
Consumers are increasingly looking to trusted advisors to provide services that run the full gamut of financial products. recent Accenture Consumer Wealth Management Survey I found a widespread and clear demand for all-inclusive offerings. More than half (56%) of respondents want a comprehensive wealth management offering that includes advice, risk protection and lending. Furthermore, 79% of investors – including 85% of Gen X and 91% of millennial investors – expect their advisor to offer banking and insurance products.
Despite this desire for advice, many consumers question the value of the advice they are currently getting. According to the same Wealth Management consumer survey, 55% feel the advice they receive is too general. The same portion (55%) also think they can do a better job investing themselves by making decisions that generate better returns net of fees.
As consumers increasingly seek financial advice that looks at their entire financial situation and makes specific recommendations, they are more likely to seek a net new source of advice, or to switch from their current source of advice. In fact, nearly one in five survey respondents have changed advisors in the past year. This creates the opportunity for insurers to pool risk solutions and move to or partner with neighboring industries to serve the full range of clients’ wealth advice and management needs.
2. P&C companies and agents have ongoing relationships with their customers
Insurance companies and their agents remain among the most trusted financial institutions. the Latest Accenture Global Banking Consumer Study It found that 24% of consumers say they trust their insurance company “very much” to take care of their long-term financial well-being. If that doesn’t sound like much, consider that only 8% said the same to retailers. Similarly, 32% of consumers said they trust their insurance company “very much” to protect their data, compared to 21% for online payment companies and 7% for social networks. Furthermore, customers are willing to provide additional information and personal data to insurers and their agents if there is a perceived benefit in doing so.
In addition, insurance companies are already used to having frequent, intimate conversations with their clients. The average car policy will be renewed 13 times while a home policy will be renewed seven times. This creates multiple points of contact between agents and their clients as they review coverage and discuss options, leading to unique opportunities for the agent to provide additional services such as wealth management. This level of interaction is to be expected on the advice and wealth management front as well – nearly four in ten respondents to a consumer wealth management survey wanted to hear from their advisor more proactively. The insurance-policyholder relationship remains unique in financial services, and carriers that went the extra mile for their customers yesterday are in a strong position to talk to those customers about wealth management tomorrow.
P&C firms and agents also have unique access to the underserved financial advisory market. As net worth (and investable assets) rise with age, financial advisors tend to work with an aging demographic. However, P&C agents and agents operate across both the net worth and age spectrum as they provide personal insurance to America at large. The relationships this creates naturally open the door to wealth management opportunities for today’s underserved markets. This gives carriers a head start on taking advantage of The largest intergenerational transfer of wealth in historyUnlike their financial advisor counterparts who will first have to establish relationships with younger clients.
3. P&C agents have a lot in common with financial advisors
From a geographic footprint to selling controlled products, there are more similarities between P&C agents and financial advisors than might seem obvious at first glance.
Let’s start with the geographic footprint. Both financial advisors and insurance agents market themselves as “local”. Due to the nature of exclusive dealership and independent agent channels, these dealerships are in virtually every town, city, and community in America. P&C companies do not have to establish a local presence because they already have one.
These agents are also used to selling controlled products. For P&C companies and agents who also sell life insurance and annuities, the differences are almost non-existent due to “best interest” and policy clarification regulations. Granted, additional governance will be necessary for P&C companies, and additional licenses are essential for dealerships. But the leap is not as far as one might think. In fact, there are many organizations out there that believe agents will need to obtain securities licenses to sell fixed-index annuities or indexed stocks at some point in the future. Some are pushing for this change.
4. Many insurance companies and agents have already taken small steps down this road
Finally, several P&C companies with exclusive dealerships are already on the path to offering wealth management products. Carriers such as Farmers, Allstate, Country Companies, and many Farm Bureau insurers already have limited brokers/dealers that allow them and their agents to sell mutual funds, either as part of an insurance product or as a standalone investment, to their clients. we know one, FBL Financial Group, who has established a registered investment advisor and offers a full range of fee-based investment and asset management advice. This service has been embraced by both its agents and customers.
A unique opportunity in a unique moment
In short, there is a huge opportunity for P&C companies to take advantage of today’s market stressor disruption and create a new light revenue stream. A shift in client expectations toward comprehensive financial advice paired with solid client relationships unique in the industry, and its proven ability to sell complex and structured products all create a unique path for growth. While some P&C companies have successfully addressed this, we believe the biggest results are yet to come. By creating or building upon a comprehensive set of capabilities, P&C companies can really win in this market.
In our next blog in this series, we’ll explore the strategic principles and capabilities required to seize this opportunity.
In the meantime, if you would like to discuss diversifying your offering to include wealth management advice, we’d love to hear from you. You can find Scott Stace And Bob Bisio.
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