In the long battle to position themselves as wealth managers, life insurance companies still have to prove to financial advisers that they can do more than sell annuities.
“There are a number of carriers that have done well in wealth management, including
MetLife Inc., Axa [Financial Inc.] and ING [Groep NV],” said Garth A. Bernard, president and chief executive of Sharper Financial Group, a consulting firm that specializes in marketing and developing retirement products. “The good news is that on the investment management side, there's been some bloodshed from the impact of the last 18 months.”
The economic downturn not only shook up asset management firms and wirehouses, but it also altered their conception of wealth management services.
Whereas the term “wealth management” once referred to the accumulation of assets, industry experts now think that it will encompass retirement income products and the melding of advice with solutions.
However, the path to success on the wealth management side — a renewed area of focus for The Hartford Financial Services Group Inc.'s new chief executive, Liam E. McGee — is beset with obstacles for insurers, including the difficulties of finding opportunities through effectively combining advice and attractive products.
FIGHT FOR ATTENTION
A challenge that is universal to wealth management providers is the fight to maintain investors' attention as they retire.
“People tend to shrink the number of advisers and firms they deal with,” said Elvin Turner, managing director of Turner Consulting LLC. “Those left standing get more assets.”
A strong distribution network is the key to being the wealth management provider that makes a strong impression on advisers and clients, he said.
“If you get the network excited and you adequately support it, then you can put in 529s and retirement plans, and adapt it to your distributors,” Mr. Turner said.
Those with a large force of wholesalers who have an intimate knowledge of product offerings, and can help advisers find ways to implement them in plans, will make a splash within the independent channel, industry experts said.
Advisers agree.
“Because you have a working relationship with this person you
trust, you pay attention when they offer you a new product,” said Stephen F. Lovell, an adviser at Forsyth Heritage, an
LPL Financial affiliate.
Aside from having a troop of wholesalers, insurers that are poised to succeed in wealth management have their own broker-dealers and registered-investment-adviser arms, as well as an open-platform product structure, Mr. Bernard said.
“You don't need your own mutual funds, because at the end of the day, it's just a vehicle for accumulating or distributing wealth,” he said. “There's investment advice or insurance advice, but very few players are bringing the two together, and that's one of the things that represents an opportunity to win more assets in the marketplace.”
Experts pointed to MetLife as an insurer that not only covered its bases on the product front but also encouraged the registered representatives at its four broker-dealers to take a more holistic approach when giving retirement advice.
“You can't just be someone who knows the annuities; you have to be able to talk about investment needs, credit needs and, in our case, protection needs,” said John J. Brett, senior vice president of MetLife's broker-dealer group.
Just this past summer, the company launched an updated version of its wealth management platform, which has some $4.9 billion in plan assets and allows reps to view and manage clients' annuities, life insurance and investments. MetLife recently rolled out another version of that platform that is built around mutual funds and has a lower account minimum.
“In our broker-dealer, we have reps who spend their time focusing on their securities business, whereas we have others who do insurance and spend little time on investments,” Mr. Brett said. “The cross-selling is key.”
More than just a hot product is needed to put insurers higher in the wealth management ranks. Independent advisers who look to insurers for only insurance products have placed compelling product design, cost and especially financial strength at the top of their list.
“Independent brokers are going to be careful of who they place business with now, and it's going to take time for them to go back to a company they feel has burned them,” said Scott DeMonte, director of guaranteed-income products and insurance research at Financial Research Corp.
Amid tough times, Gregory L. Olsen, a partner at Lenox Advisors Inc., said he turned to Jackson National Life Insurance Co., while other advisers, including Mr. Lovell, did more business with
Prudential Financial Inc.
Prudential managed to climb the Morningstar Annuity Research Center rankings list of annuity sellers, taking third place for the second quarter of the year. Five years ago, it was 10th.
BANKING ON BONDS
Jacob Herschler, vice president of business strategy for Prudential's annuities unit, attributed the gain to the company's Highest Daily guaranteed-income benefit, which includes a feature that moves a portion of a variable annuity's account value into an investment-grade-bond portfolio under certain conditions.
Mr. Turner noted that it's still too soon to find out which carrier is the best or, more accurately, which one came through the 2008 crisis the strongest. Third-quarter earnings will give some indications as to which company came out on top in asset growth.
“At the multiline firms, you get a mixed bag, with some products doing very well,” Mr. Turner said. “The issue is, what product carries the day? Which product was so strong that it lifted overall results?”
E-mail Darla Mercado at [email protected].
