Insurance Opens Opportunities For Bank Investment Sales
The fall of the Glass-Steagall Act in 1999 and the resulting removal of sales limitations on insurance products in banks sparked new life in bank insurance offerings. Now banks are evaluating not only their ability to compete within a broad landscape of financial services providers but also the success of their existing insurance efforts.
To remain competitive with other financial services providers in the post-Glass-Steagall era, insurance can be an important fee-income source and a significant means of capturing additional customer wallet share.
Cerulli Associates has found, however, that most banks consider their existing insurance offerings to be less successful than expected.
To be successful at selling insurance, a bank needs to evaluate how it fits into the bank reps product mix. The answer may be rooted in banks ability to provide comprehensive financial planning.
Selling insurance often involves customer profiling and needs analysis–two fundamental components in the delivery of financial planning advice.
Born in the upper echelons of private-client arrangements, the financial planning concept has emerged as the preferred delivery model for advice and guidance. Its emergence occurred because it promotes consistency and objectivity of advice and helps deepen advisors relationships with clients.
Although previously limited to select pockets of the financial services industry, today the financial planning mindset permeates virtually every stripe of advisor at every type of financial services provider. As a result, both investors and advisors are beginning to see the benefits of the current shift toward financial planning.
To support advisors in meeting the growing demand for advice, banks are creating programs, tools and education and training.
Often, implementing the recommendations outlined in an investors financial plan includes a robust set of products–mutual funds, annuities, insurance and broker-dealer separate accounts, among other products. Industry studies, however, reveal that advisors can only learn six products well enough to sell comfortably.
Another barrier to success encompasses the fact that bank broker/dealers often view insurance product sales as a deterrent to their primary focus–selling investment products.
The fact that an advisor can only sell a limited number of products effectively underscores the challenge banks face in introducing a full range of products suitable to the financial planning model.
Nonetheless, advisors in general expect that they will sell more insurance products in the future, according to Cerulli Associates proprietary survey into the financial advisor community. Cerulli Associates attributes this increase to the inherent shift in the investor populations financial goals and the need for advice on longer-term issues, such as funding retirement income.