The U.S. wealth management industry has responded to the economic environment much like a surfer would at high tide, seeking opportunities for lift during the storm. If the economic downturn of 2008-2009 could be compared to low tide, 2010 looked to be the year waves might once again crest to a high point. The wealth manager’s ability to recover was short-lived, however, when a flash crash on May 6, 2010 caused the Dow Jones Industrial Average to plunge 900 points, only to recover within minutes.

While it would be wrong to assume that wealth managers are in any way considered surfers, we can safely categorize them as a economic scientists of sort, as this vertical market took great pains to better respond to further turmoil at sea.

Clark Troy, PhD., research director of the insurance practice at Aite Group, LLC, authored a report that examines this turmoil and how it affects a specific class of wealth managers —financial advisers affiliated with broker-dealers housed within insurance firms. The result of this Q1 2011 survey of 438 financial advisers, 32 of whom are affiliated with brokerages that are parts of life insurance companies, provides insight into the inner workings of their books of business, revenue, assets under management, behaviors, future expectations, and more. The report also compares the insurer-affiliated advisers surveyed to their companions in other segments of the advisery community.

The study found that because insurer-affiliated advisers have large books of business derived from the mass-retail and mass-affluent demographics, they must work hard to earn each incremental unit of revenue.

This plays forward into this group holding positive regard for technologies that make them more efficient and speed sales, including self-directed investing and STP processes for life insurance and annuities, notes the report.

“Broker-dealers and solutions vendors that could offer robust self-directed functionality at a low cost could have a competitive advantage in recruiting producers to their platform,” Troy says in the report.

In spite of this positive regard, however, these same advisers remain skeptical of the feasibility of some changes, including STP for life insurance and annuity sales.

“This means that insurers who wish to roll out these changes must be prepared to invest heavily in roll out initiatives to ensure significant uptake from advisers, or see their investments in expensive technologies wither from disuse,” notes Troy.

Complicating this challenge is the group’s relatively modest revenue production, further affecting their technology budgets and ability to spend.

Troy notes that this creates a niche market for solution providers that can provide robust and scalable solutions at modest price points.

Insurer-affiliated advisers are challenged further with the desire to sell investment products, but have mixed feelings about how much revenue they want to derive from these sales. “Few want to turn their backs on the insurance products that are their bread and butter,” Troy adds.

Also, because of the diversity of product types that they sell, insurer-affiliated advisers have crowded “shelf space” limiting the range of investment products they can sell. Combined with the fragmented landscape of the insurer-based broker dealers themselves, this makes insurer-affiliated advisers difficult to wholesale to.

“Insurers’ broker-dealers need to be certain that their advisers have a range of non-proprietary products to sell, lest they stand accused of not acting in their clients’ best interests,” notes Troy. “In a sense, this limited space creates an opportunity for dedicated wholesalers who can bring good products to the advisers’ table.”

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