Consumers and business people turn to financial advisors at financial advisory firms, broker-dealers, wirehouses and banks to manage their investment portfolios. But many of these financial professionals have an Achilles Heel: They lack expertise in life insurance products and life insurance-funded planning their clients need. Enter Saybrus Partners, a five-year-old company whose consultants help advisors fulfill these needs with insurance solutions for basic protection, as well for income, estate and business planning. To learn more about the company, LifeHealthPro Senior Editor Warren S. Hersch recently interviewed Kevin Kimbrough, the company’s principal of national sales. The following are excerpts.
Hersch: How has Saybrus Partners positioned itself in the life insurance space? What’s the company’s niche?
Kimbrough: I describe us as a life insurance partnership firm. We have 75 to 80 consultants nationwide to assist non-traditional producers make life insurance products and life insurance-funded planning a part of their business. If you’re a financial advisor at a bank, broker-dealer or wirehouse, you’re focused on assets under management and wealth management, but life insurance is not a core competency. Our folks explore how the needs of their clients — mostly the high net worth and the mass affluent, but also people in the middle market — can be addressed by life insurance. Then we help build a financial plan around the product.
Our clients mainly include advisors at the financial services firms Edward Jones, OppenheimerFunds, Wells Fargo and Farmers Insurance. Right now, we’re not active in the [registered investment advisor] space, though it is an area we’re examining. Given RIAs’ focus on investment advice, they’re good examples of people we can assist.
Hersch: Saybrus Partners is, I understand, is a spin-off of The Phoenix Companies? Do you sell their insurance products?
Kimbrough: No. Phoenix is an equity investor in Saybrus Partners, but we were not set up to drive sales of their insurance products. We distribute The Phoenix Companies’ annuities in other spaces, but we operate mainly as distribution partner of other carriers.
Thus, we assist Farmers in selling their insurance products. For Edward Jones, we sell John Hancock and Pacific Life solutions. At Wells Fargo, we represent John Hancock, Pacific Life and probably 6 to 8 other carriers.
Hersch: Do your advisors have a greater interest in certain life products than others?
Kimbrough: We tailor our life insurance offerings to our partners’ business models. Edward Jones has not approved indexed universal life products, so we sell only traditional fixed universal life and variable UL products to their clients.
Wells Fargo is comfortable with indexed products, so we do sell these solutions in their space. Farmers doesn’t don’t market an indexed product, but later this year the company will be introducing one. We also sell whole life solutions for Farmers. The majority of sales is fixed UL and, where approved, indexed UL.
Hersch: How is your product mix changing? What’s growing or declining in demand?
Kimbrough: Over the last five years, we’ve been selling fewer VUL products. Conversely, the growing popularity of indexed UL products has been reflected in our own increased sales.
The greatest demand is for UL products with optional long-term care, accelerated death benefit, critical illness and chronic illness riders. These riders are popular because they do multiple-duty: If clients need an LTC or critical illness benefit, they can access it; if they don’t need it, they still have the death benefit and the cash value.
The nice thing about having a multi-carrier platform is the ability to provide the products that best meet the clients’ needs, whether the focus is cash accumulation, the death benefit or additional living benefits. And by offering products from multiple carriers, we’re seen as objective in our product recommendations and focused on serving their clients’ best interests.
Hersch: Which companies do you regard as your main competitors in your space?
Kimbrough: A number of small, regionalized general agencies offer point-of-sale support for non-traditional life insurance advisors. In terms of a national footprint, we compete against Time Financial, Highland Capital Brokerage and Capitas Financial.
What distinguishes Saybrus Partners is our structure: All of our fields consultants are W2 employees registered with our own wholesale-only broker-dealer; none of have a separate retail practice. As employees, they report only to us: We manage where they go. If you’re working at Edward Jones, you’ll go work only with Edward Jones advisors to help them sell life insurance.
This relationship — being a W2 employee dedicated to a single firm — is key because it assures advisor-clients that our consultants are not in competition with them. Nor are they helping advisors at the other companies we serve build their books of business.
Also, the advisors we cater to are commission-only broker-dealers. We’ve had conversations with carriers that are developing low-cost insurance and annuity products for the RIA space because many consumers prefer fee-only advisors. We potentially could be distribution partners for these companies in the future.
Hersch: Speaking of fees, with the both SEC and DOL now considering fiduciary standards for investment and retirement advisors, respectively, how might this impact your business model? Is Saybrus Partners and its clients prepared to transition from commission- to fee-only compensation if this is required by a fiduciary rule.
Kimbrough: We’re aware of these discussions at the SEC and DOL. Whether compensation is based on commission or asset-based fee compensation is irrelevant to us. We can function under either model.
Separately, we’re hearing more talk about robo-advisors that offer automated portfolio investing. If asset management becomes an increasingly automated function, then investment advisors may need to look for additional ways to gain a competitive edge. And the way to do that is to offer additional planning benefits — including tax efficiencies — connected with insurance products.
Hersch: Do the non-traditional advisors you serve have certain misperceptions about life insurance products? And have you observed a shift in recent years in respect to how life insurance is used?
Kimbrough: The biggest misperception is to view life insurance as an expense. Permanent life insurance is, among things, a vehicle for transferring wealth to children, grandchildren or a spouse in a tax-efficient manner.
The biggest shift we see is in the growing demand for long-term care, critical illness and chronic illness riders. We used to see more discussions around life insurance in estate planning. But now that a husband and wife can each shelter more than $ 5 million from estate tax, we touch fewer people who may be subject to estate tax.
We have, however, seen a continuing focus on life insurance in income tax planning. More people are accumulating wealth in qualified plans; if they leave their wealth in a taxable vehicle like a 401(k) or IRA, they need to think about what children and grandchildren might net from the proceeds; they might receive only 60 or 70 percent after-tax. So the efficiencies of life insurance from an income tax standpoint remain just as important.
In respect to business planning, because of life insurance products’ tax-efficiencies, indexed UL and variable products are widely used accumulation vehicles, including for non-qualified deferred compensation and IRC Section 162 executive bonus plans.
Hersch: What would you identify as Saybrus Partners’ chief opportunities in the coming years?
Kimbrough: The opportunities lay in doing more of what we’re doing: helping the non-traditional life insurance advisor sell life insurance. Fewer and fewer people have this core competency, but there is no dearth of people who need life insurance products and planning. There’s a very fertile field of companies where we can offer our services.
The number of non-traditional advisors we serve is large — and growing. In the aggregate, we interface with 12,000 advisors at Edward Jones, 15,000 at Wells Fargo, 13,000 agents at Farmers Insurance, plus a few thousand at smaller firms. All are U.S.-based.
Our consultants in the field now total between 80 and 90. We also have 40 internal sales people who support advisors by telephone, webinars and videoconferencing platforms. We’re in a definitive growth mode, as we’re actively seeking to add another company to partner with.