Until the Gramm-Leach-Bliley Act passed in 1999, the banking, investing and insurance industries remained somewhat separated, essentially occupying their own respective market niches.
But GLB has opened the floodgate for financial convergence. It started as only a trickle of mergers and acquisitions, but recently it has evolved into a torrent of cross-industry activity. This includes the newest concept: The debut of hybrid financial productsthe so-called “convergence” products.
Such products combine elements of banking, investing and insurance in one package.
At least one of these products is already on the market and several others will surely follow as the lines between industries continue to blur.
Convergence products not only gratify the demands of consumers by giving them more investment options, but they can also help producers act as financial services “supermarkets,” offering expertise in insurance, banking, investing and asset management.
Until recently, insurance producers had to refer clients interested in purchasing bank products elsewhere.
Now, due to convergence products, insurance producers can offer bank products themselves, thus retaining a potentially lost client.
Furthermore, the convergence products have been modified in such a way that allows typical bank customers to branch out and broaden their portfolios. For example, insurance producers can now offer clients a Certificate of Deposit with a rate of return linked to a major stock market index, similar to some equity indexed annuities, yet backed by the FDIC up to the coverage limits.
Whats in it for the producers? Opportunity.
Convergence products offer them an opportunity to strengthen relationships with present clients while aggressively competing with other financial services professionals for new customers.
This suggests the time for producers to learn about and start selling convergence products is now, when the products are just being introduced.
The marketing can be fairly straightforward. Here are a few tips:
Proactively inquire about CD status. When working with existing annuity or insurance clients, producers can also present the CD option, as dictated by a clients needs. Whether that means finding out the maturity dates of a clients existing CD in order to follow up later, or exploring the product benefits immediately for clients who may need to diversify their portfolios, producers will be offering a convenient investing opportunity and financial planning services.
Emphasize the range of product lines you offer. The availability of convergence products (like a CD with guaranteed principal and returns linked to the market) gives consumers a wider variety of conservative product options just when the demand for such products is peaking. Additionally, the more products a producer is licensed to sell, the more likely they will be to meet a clients needs without having to send that client elsewhere.
Make a difference with personalized service. One strength insurance producers may have over typical bank employees offering traditional fixed-rate CDs is the in-depth service producers can provide. They do this by reviewing client portfolios, evaluating needs, and offering options. How many people get calls from their bank to talk about options as their CDs mature? Not many. This client benefit originates from engaged and attentive producers committed to giving their clients the best possible service.
To be successful in this post-GLB era, producers need to present themselves as long-term financial planning partners.
By adding convergence products to their product menu, producers can offer investment opportunities with a mix of cross-industry features, providing the best of all worlds for their customers.
Convergence products allow the financial services industry and individual producers to provide consumers with increased flexibility, extensive options and comprehensive service. All that adds up to more rewarding and longer-lasting relationships with clients.
, vice president of thrift products at Jackson National Life Distributors in Santa Monica, Calif., says the above represents his own views. He can be e-mailed at firstname.lastname@example.org.
Reproduced from National Underwriter Life & Health/Financial Services Edition, August 20, 2001. Copyright 2001 by The National Underwriter Company in the serial publication. All rights reserved.Copyright in this article as an independent work may be held by the author.