Asset manager offers health insurance to indie reps

Jun 12, 2006 @ 12:01 am

By Brooke Southall

SAN FRANCISCO - A turnkey asset management company is raising the bar by lowering the barriers independent representatives face in getting health insurance.

Dunham & Associates Investment Counsel Inc. of San Diego is making the benefit available to customers for 25% to 30% less than what they would have to pay as an independent entity.

"Nobody's ever done it on the product side," said Keith Gregg, Dunham's executive vice president and chief sales officer.

Executives at broker-dealers are taking notice.

Seventeen broker-dealers, including First Allied Securities Inc., H. Beck Inc. and NEXT Financial Group Inc., already have registered to make the insurance available to their reps through Dunham, which manages $860 million using 11 mutual funds and 12 separately managed account styles.

Smart approach

"Dunham is really taking a smart, up-to-date approach," said Steve Porter, managing principal with Rockville, Md.-based H. Beck, which has 600 reps. "The beauty is that the reps can get it for additional staff."

Thus far, a total of 22 reps have purchased insurance policies through Dunham. They must have a minimum of $1 million in assets with the company.

The policies are offered by Blue Cross/Blue Shield of Atlanta.

One competitor admires Dunham's initiative.

"That's value added," said Brian O'Toole, chief executive of AssetMark Investment Services Inc. of Pleasant Hill, Calif., which manages $8.5 billion in turnkey-asset-management-program assets.

"I applaud them," he said. "Independent advisers have a whole series of issues that our industry will have to face."

But demand for insurance may be at the top of the list for independent reps.

Although 33% of reps are insured through some form of group plan, another 33% of them are underinsured, Mr. Gregg noted.

And an equal proportion of advisers are flying without a net.

"One-third [of them] are uninsured," Mr. Gregg said.

"That's crazy," he said. "Some of them have spouses working at Starbucks."

Seattle-based Starbucks Corp. provides health benefits to all employees.

But solving the problem by forming group plans is something for which Mr. Gregg has a knack, said Chris Daras, managing principal of Bernardsville, N.J.-based Daras Capital Management Group LLC, which manages $80 million.

"It does not surprise me that Keith was able to do the virtual impossible - to get insurance for guys like me who were uninsurable," he said.

Mr. Daras, a former broker at Morgan Stanley of New York, suffered a brain aneurysm in 2001 that left him unable to walk or talk for three months.

Affordable insurance

Adrift, he joined Wachovia Securities Financial Network LLC of Richmond, Va., as an independent broker only after Mr. Gregg, who then worked there, assured him that he would develop an affordable health insurance plan. Prior to Mr. Gregg's intervention, insurance carriers were quoting Mr. Daras annual premiums as high as $26,000. Dunham provides health insurance to reps for annual premiums of between $7,000 and $12,000.

Although several independent broker-dealers such as Securities America Inc. and those in the AIG Advisor Group Inc. are beginning to offer health insurance plans, Dunham's may be valuable for a large subset of independent reps.

Many broker-dealers are too small to afford to offer the benefit, and others are leery of jeopardizing their 1099 status by acting too much like an employer, Mr. Gregg said.

He expects other turnkey asset management programs to follow suit but doubts that many of them can do it anytime soon."Many of these folks don't know how," Mr. Gregg said. "I established a 5010(6) - a member benefit organization called Dunham Institute."

Advisers shouldn't doubt the efficacy of this structure, Mr. Daras added. "If Keith says it works, it works," he said.


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