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Insurance vs. investment IFPs: Some differences highlighted

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Independent financial professionals can broadly be divided between those who do most of their business selling (1) insurance products and (2) investments. What differences in practice focus are there between these two groups?

The LIMRA-NUL IFP study identifies several, starting an obvious one: the percentage of sales or revenue derived from insurance or investments. Among IFPs with an insurance focus, life insurance contributes on average 50 percent of revenue and annuities an additional 11 percent.

Health insurance and P&C products nab an additional 27 percent and 6 percent of revenue, respectively. Investment and advisory services are in the low single digits: just 3 percent and 1 percent, respectively, of sales.

For advisors with an investment focus, share of revenue for the latter two categories are nearly half of the total: 25 percent derived from investments and 22 percent from advisory services. Share of revenue for other solutions break down as follows:

Annuities: 28 percent

Life insurance: 13 percent

Health insurance: 3 percent

Other: 8 percent

Other differences distinguish the two advisor communities. Those with an insurance focus cater, on balance, to a less wealthy clientele.

Nearly half of their clients (48 percent) have less than $100,000 in investable assets and 23 percent have between $100K and $249K. Fewer than 3 in 10 clients (29 percent) have investable assets exceeding $249,000.

More than half of clients (54 percent) of advisors with an investment focus, in contrast, have investable assets topping $249,000.  And nearly one-third of the clientele (30 percent) hold investable assets topping $500K.

The differences between the two IFPs types extend as well to the state of their practices.

Nearly 4 in 10 (37 percent) of investment-oriented advisors have established practices, a stable client base and are looking for opportunities to expand their businesses. Just 24 percent of insurance-focused advisors fit this description.

Insurance –focused advisors are more in evidence than their investment-oriented counterparts in two other practice categories: (1) those IFPs who are still establishing themselves (31 percent vs. 24 percent); and (2) those who are established but have experienced some years of negative growth (15 percent vs. 9 percent).

Where the two advisor communities are about evenly divided is in the second of two growth phases: IFPs who have a stable client base and revenue stream.

The study flags one other measurable difference between the two IFP types: sourcing preferences. Not surprisingly, among those with an insurance focus, more than half (52 percent) prefer to place fixed life insurance and/or fixed annuity business directly with an insurer. Among those with an investment focus, just 42 percent indicate this preference.

Conversely, 54 percent of investment-oriented IFPs favor working through an intermediary, like a BGA or IMO. This compares to 42 percent of insurance-focused advisors.