Insurance Blog | Accenture

Customer expectations are shifting towards a preference for holistic financial guidance. Today’s customers are looking for advice that’s tailored to their specific needs. They will actively switch to companies that can provide both personalized support and experiences that are aligned with their preferences.  

In our last post, we discussed the four key reasons we believe P&C carriers and agents should move into financial advice and wealth management markets to get ahead amid compressive disruption. Providing the right level of interaction and technology enablement is a part of offering increasingly personalized experiences that will enable carriers to win in the wealth management space. 

P&C carriers and agents are well-positioned to provide holistic financial advice because they already have ongoing relationships with their clients and have insight into how they live. Their activities are also already tied to the financial services industry: insurance is, of course, a part of customers’ overall financial resilience and wellbeing.  

In this post, we’ll turn our focus towards what it will take for P&C carriers, specifically, to win in the advice and wealth management market.  

We will start with an examination of the strategic decisions carriers must make as they enter the advice and wealth management markets. We will then provide an overview of the capabilities required based on the decisions. Finally, we’ll provide insight into the potential value at stake.  

Choosing where to play and how to differentiate   

There are several avenues P&C carriers could take to enter the financial advice and wealth management market. For the purposes of this post, we’ve identified four major market entry points: 

1. Customer access: Brokering the sales of leads between agents or the sales of leads to financial advice and wealth management firms. 

2. Advice services: Providing proprietary advice or exclusive access to existing sources of advice through a partner organization.  

3. Product offerings: Offering proprietary products or access to a marketplace of products that provide options for customers to choose from.  

4. Platform innovation: Building wealth management and advice into a platform that facilitates access to advise services and products or integrated financial health information.  

To see success, carriers must optimize and leverage specific areas of their business to differentiate themselves as they move into their chosen market entry point. Carriers need to choose their market entry point(s) and, within that entry point, select an imperative based on their belief in the market. Below is a starting point for the imperatives—or what a carrier would need to believe to be true—to be successful in a given market entry point. 

Market Entry Point 1: Customer Access 

  • The carrier’s distribution partners are able and willing to monetize the advice and wealth management share of the wallet of their existing customer base through selling that portion of the untapped customer portfolio as a lead to other firms.  
  • The carrier has the agency to effectively connect distribution partners and the ability to facilitate a lead marketplace.  
  • The carrier has the clout to create partnerships with advice and wealth management firms as potential recipients for the lead that can best meet the customers’ needs.

Market Entry Point 2: Advice Services 

  • The carrier has unique and defensible data or knowledge about their customers that enable more tailored advice than the competition, or 
  • The carrier is able to create a proprietary offering with an existing advice provider, or 
  • The carriers’ distribution partners are willing to provide or partner with someone who can provide the advice offering.

Market Entry Point 3 – Product offerings 

  • The carrier needs to create products that are on par with or better than current market offerings at the same or lower cost, or 
  • The carrier is able to access a marketplace of products—at the same or lower cost as competitors—in the wealth management space that offers the same suite of products, or 
  • The carriers’ distribution partners are willing to sell or partner with someone that can sell the product. 

Market Entry Point 4 – Platform Innovation 

  • The carrier has the technical ability to create a high-functioning proprietary platform that can outperform current market offerings, or 
  • The carrier is able to partner with a technical provider that can build and maintain a competitive platform offering. 

With these considerations in mind, there are several different go-to-market configurations with which carriers could approach each entry point. For example, there might be a go-to-market configuration that requires partnership across advice, product, and platform. Alternatively, there might be a go-to-market configuration that results simply in the monetization of leads and does not consider expansion into advice, product, or platform. Keep in mind that different configurations will have varying amounts of risk, investment, and reward. 

Additional options for exclusive agent carriers  

On top of the entry points discussed above, exclusive agent carriers have additional options for capitalizing on the wealth management and advice market given their unique relationship with their agents. As with the previously discussed entry points, each option has its own unique set of risks and benefits carriers need to consider. These opportunities include: 

  • Licensing current agents for wealth management and advice services. 
  • Leveraging current or experienced financial advisors on a commission split basis. 
  • Directly employing current or experienced financial advisors as specialists within the organization.  

While the configurations are potentially endless, there are a vital set of capabilities required across configurations that merit discussion here

Capabilities required across entry point configurations 

While P&C carriers are used to gearing their business and operating models to a complex, highly regulated business, there are additional capabilities required to operate within financial advice and wealth management. These capabilities may need to be built—or provided with or through a partner. 

Let’s start with what it will take for carriers to enable advice services. Within the underserved market described in our first post, a hybrid advice capability—which includes both automated digital interactions and human-to-human interaction—is table stakes. Customers expect ease and cost savings associated with automation but also need human touchpoints to handle complex situations as they arise.  

As these hybrid models evolve, companies that do it right will be able to dynamically toggle between digital and human advice provision channels to optimize the customer experience at the lowest cost to serve.  

Carriers also need to ensure that agents either have or have access to individuals with the right designations and licenses to be able to provide financial advice. Credentials such as the certified financial planner (CFP) designation or series 65 and 66 designations are mandatory to offer services in this space. 

Next, let’s look at offering new or enhanced products. Carriers looking to enter wealth management need to have access to market-leading products, which is typically made possible with the open-source architecture. In many ways, the financial product space is mature and there is already a diverse selection of proven products, so the natural route for most carriers is to provide customers access to a marketplace of products rather than building a proprietary product. Carriers need to be extremely confident in their ability to create a desirable proprietary product to justify the investment it would take to create an offering that could compete. 

Platform development has similar “build versus buy” considerations. Carriers will either need to develop or partner with firms that provide best-in-class portfolio management software platforms. They need to carefully consider whether they have the resources to develop platforms that rival what’s currently in the financial technology market when it comes to customer experience.  

In addition to these entry point-specific considerations, carriers will also need to hire or partner with a registered investment advisor (RIA) and hire or partner with a full-service broker-dealer (B-D). Another key consideration is the strength of a carrier’s compliance function given the high level of regulation within the financial advice and wealth management market. 

Assessing the value at stake 

There are four primary—potentially overlapping—value levers associated with the opportunity in the advice and wealth management market. These are:  

  1. Revenue from lead activity 
  2. Commission income 
  3. Advice fees 
  4. Assets under management fees 

While each lever is important, we believe assets under management fees are the largest value lever with the greatest opportunity.  

In our first post in this series, we discussed the underserved market, which encompasses the $15 trillion in wealth associated with households that have less than $1 million in investable assets.  

For conservatism’s sake, let’s assume that the true underserved market is those with less than $500k in investable assets which, according to a report from John Hancock, accounts for $7.3 trillion in total wealth. If a P&C carrier could capture just one-tenth of one percent of that market, at 30 basis points per year in margin, that would represent $20-$30 million of incremental annual fee-based profit.   

Because this revenue is fee-based, it also provides the additional benefit of diversifying a carrier’s revenue streams while simultaneously strengthening customer relationships and driving improvements in customer retention. To put this opportunity into perspective, at a 95% combined ratio, a carrier would need to add $500 million worth of property/casualty premiums to generate a similar margin contribution. 

Additionally, we see expanded opportunities for growth for carriers that combine assets under management fees with any or all of the other three levers

In conclusion 

Through this series of posts, our intention was to light the way for P&C carriers looking to diversify their revenue streams and capture more share of wallet by entering the financial advice and wealth management market. It’s an area of business we believe holds massive potential for insurance carriers to differentiate themselves and get ahead.  

We hope that this series has inspired the next steps—or given you food for thought as you look at your long-term strategy—and look forward to speaking to you about how breaking into this market could impact your own business. Find Scott and Bob and stay tuned for our next series which will cover our perspective on embedded insurance. 

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Disclaimer: This content is provided for general information purposes and is not intended to be used in place of consultation with our professional advisors.