RIAs struggle to keep up with ancillary services that clients want

Like many sectors of the wealth management space, RIAs face a number of headwinds and changes as they move forward in 2024.

Gone are the days when the talk of the town was fee compression. The “hot items” this year are ancillary services, says Chad Druvenga, CEO of CBS Brokerage, an independent insurance brokerage that services RIAs.

“Clients are demanding more from their RIA or their partner,” Druvenga says. “That includes the ancillary services, things such as tax, estate planning, trust services, and then that's where insurance comes into play. We're becoming more involved with many of our RIA partners looking on how to integrate insurance into their advisor and client experience and make it part of their business.”

He said many RIA firms are telling him the same thing: they’re dealing with several challenges, including slow adoption of modern technologies amid the ongoing wealth transfer. Because of this, they don’t have the human capital to deliver the same level of service in such areas as taxes and insurance as they do with financial planning.

The greatest transfer of wealth will produce a need to have the “greatest transfer of knowledge,” Druvenga says.

“We have a transition from generation one advisors to generation two,” he says. “It's going to be imperative that they're partnering, collaborating with people that can help them provide the knowledge and expertise to these advisors as they do that.”

An important part of that, Druvenga added, is creating more conversation around insurance and legacy planning than has taken place in the past.

When it comes to modern tech from an insurance standpoint, a lot of what’s being used at the insurance carrier level has been somewhat antiquated, Druvenga says, and a lot of that was due to historically low interest rates, which didn't allow insurance companies to invest in technology to get where they need to be.

“All the insurance companies, from a technology standpoint, will look at things from their product, their portfolio and their company on an individual basis,” he says. “If you're a true fiduciary, or an RIA, you're going to determine what is the best product or solution for your client, which could be any one of the 50 carriers that we work with.”

How advisors can effectively take all that information from those 50 carriers and integrate it into the tech stack of the wealth management space, has been quite the specialty for them. “We built custodial-like view of insurance that receives feeds from the carriers, and we built that feed not only for them to view via our website at the enterprise level as well as the adviser level, but we also built that in a way that it can then build into their tech stack and they can take that data and dump that into their CRM,” Druvenga says.

Integrating insurance into RIAs’ practices involves several hurdles, Druvenga said, as firms are asked to do more for clients in terms of all kinds of ancillary services. “It’s a time factor,” he said.

And while CBS represents fee-only products for the RIA space, he says many of the best products for clients are “on a commission platform, which is contradictory to how [RIAs] traditionally do business.”

CBS spends a lot of its time figuring out where most clients of an RIA fit. As for demographics and age range, Druvenga says clients range from around their mid-50s to early 70s.

“That's where most of the capital or the money is with the clients or the people in the United States today,” he says. “With that, are normal planning conversations, a lot of wealth transfer conversations with business owners, business succession planning, dealing with long-term care events, and how that could affect the plan.”

What makes CBS unique and different as an insurance partner for RIAs, Druvenga says, is the fact that it is “comprehensive and planning-focused.”

“We specialize in the space, we have members on staff that have built out platforms inside RIAs, we have an advanced markets attorney on staff, we do things under a fiduciary lens where we levelized our compensation, and then we help them monitor the policies on the back end," he says.

“That entire story and how we get and understand their business, we've built it around the advisor client experience and focus on client outcomes,” Druvenga says. “It’s something that's drastically different in the way traditional insurance products are distributed to RIAs.”