More firms continue to enter the Multi Family Office and Registered Investment Advisor space, and as the field becomes increasingly crowded, the need to differentiate your firm becomes more critical. The basic blocking and tackling of investment management is not enough in a highly competitive landscape. Firms excelling in the space do so by adding financial planning, estate and tax advisory, property and casualty risk management (P&C) to their service offerings.
When working with successful families, ensuring that the entire balance sheet is protected is critical. Offering in-house Property and Casualty (P&C) services will allow you to manage the entire balance sheet risk and increase your client acquisition and retention strategy. Research conducted by Oliver Wyman and Chubb found that only 28% of financial advisors address their clients’ P&C insurance needs, even though 77% of successful individuals want their advisors to provide that support. Nearly 40% of respondents would consider switching to an advisor who provided property and casualty services.
A singular catastrophic loss, or an underinsured property loss can be the difference between meeting one’s financial goals and starting over. As a financial advisor, you know what your clients have to lose. But do you truly know if the lifestyle and tangible assets side of the balance sheet is protected? Relying on someone who solely sells insurance policies without knowing the financial picture in its entirety, or who may not have access to the right solutions can potentially lead to unintentional consequences.
Properly managing liability, lifestyle, and tangible asset risks on the balance sheet requires a high level of attention, expertise, and guidance. Simply paying premiums is not enough. As an advisor, it is your responsibility to look at the whole risk architecture, employ mitigation strategies, and identify the right risk transfer solutions on both sides of the balance sheet.
There are 3 ways you can offer a P&C Solution and not all of them are equal. The three options are:
- Add a P&C Specialist to your team
- Refer out to a insurance agent or broker
- Outsource to a Risk Management Consultant
While staffing and referring are the more dubious options, there are challenges to take into consideration before hiring someone or referring out to an insurance agent. If you want to provide high-level P&C services these are some key areas for success that need to be taken into consideration:
ADDING A SPECIALIST TO YOUR TEAM
If you want to hire someone for P&C Services, talent that is knowledgeable of the risk management and resiliency needs of successful families is in short supply. Working with high-net-worth individuals requires highly specialized knowledge, there is a limited number of insurance agents who are Certified Advisor in Personal Insurance (CAPI), Chartered Personal Risk Insurance Advisor (CPRIA) or Certified Personal Risk Managers (CPRM). These designations are for insurance professionals providing insurance and risk management services specifically to the high-net-worth clientele, and not many insurance professionals have invested the time to undergo additional training in one or more of these programs. More firms continue to enter the Multi Family Office and Registered Investment Advisor space, and as the field becomes increasingly crowded, the need to differentiate your firm becomes more critical. The basic blocking and tackling of investment management is not enough in a highly competitive landscape. Firms excelling in the space do so by adding financial planning, estate and tax advisory, property and casualty risk management (P&C) to their service offerings. Seamless Integration Licensing & Compliance Scale High Net Worth Insurance Expertise
Additional requirements when hiring to staff a P&C expert:
- Individual will need to have their insurance license in all 50 states.
- Agency (entity) will need to have its license in all 50 states.
- Some states will require the entity have an appointment with an insurance carrier.
Should you go through the trouble of obtaining insurance licenses for the individual and your agency, you will find that a one expert professional cannot provide the level of support each of your clients expects and deserves. As your firm grows, the team supporting clients will also need to scale. Hiring a new team member also involves many moving parts and requires lots of resources. The hiring process, employee benefits, systems, payroll, and licensing use up a lot of time, money, and human capital.
REFER P&C OUT TO AN AGENT
When you refer P&C out to an agent, consistency in service can impact your clients’ experiences. Referring business out means that your clients will receive varying levels of support depending on the agency service model. With many agencies being acquired, change is a constant. Remember, the insurance agent is compensated when they sell a policy, and the service structure is aligned to the transactions of policies. If P&C is not integrated with your processes and procedures, you and your clients will be at the mercy of how the agency operates. That might not align with your service model. Furthermore, agency mergers and acquisitions can put agencies in a position where they must manage competing priorities. In 2020, there were 744 announced insurance agency mergers and acquisitions, up nearly 20% from 2019. The private equity-backed/ hybrid group of buyers continues to dominate the volume of transactions accounting for 70% of agency mergers and acquisitions. This means that recommendations may be aligned with the insurance carrier(s) that pay the largest commissions and the highest contingency. When it comes to making sure that clients have the proper level of support from an experienced professional who will act in their best interests, it is not a gamble you want to take.
AN APPROACH THAT WORKS: OUTSOURCE TO A RISK AND RESILIENCY CONSULTANT
Outsourcing to a risk and resiliency consultant provides your firm and your clients the best of both worlds.
The right risk and resiliency consultant will bring with them decades of expertise serving families of exceptional wealth. Their firm will have the ability to scale and expand as you grow your firm. Additionally, individual consultants as well as the firm itself will be licensed to do business where your clients are located. Lastly, the most important thing your consultant will be able to do is to seamlessly integrate P&C into your new and existing client processes. Without integration, you and your team will play catch-up, and the service offering will not be the success driver you are expecting.
Adding additional services to offer clients can be filled with challenges and growing pains. Working with a team of experts to integrate a new service into your suite of services will pay for itself in new client acquisition and client retention.