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Many breakaway advisors have experience with insurance. But when starting a new RIA practice, advisors from the commissioned world often are unaware of what fee-only products are available and ways they can be used in a financial plan that is in the client's best interest. Here's how one Georgia-based team worked with DPL to help deliver a more holistic, transparent client experience by embracing Commission-Free insurance in their fee-only firm.

A High-Bar for Financial Products

January 2018 marked a new year and a new direction for the team at Decatur, Ga.-based Chicory Wealth. Formerly affiliated with a commission-oriented independent broker-dealer, the group spun out at the start of the year as a fee-only RIA because they “wanted to align compensation and products with [their] fiduciary responsibilities,” said Jacob Newcomer, a financial advisor at the three advisor, eight-person firm.

They utilized commission-based insurance products through channels at their prior home, but quickly realized they were “not a great deal for clients,” according to Newcomer. “Trying to explain why they were in the clients’ best interest while also sharing how we got paid was a headache, and it felt like a conflict.”

So, when the Chicory team opened their doors, they understood that fee-only insurance would be an important part of their value proposition for clients in the vital protection area of a plan. But they figured that crafting an insurance offering that cleared their high bar for value and transparency was going to take some time. And they had a lot of questions—What products are available as feel only versions? How should we get compensated for insurance review and placement? Can we help solve for guaranteed income more efficiently with no-load products as alternatives to commission-based products our clients already own and may like? With the demands of setting up their new business, they had little free time to get the answers any time soon, they thought. Then DPL happened to call.

Getting Started with DPL

DPL Consultant Ross McGoodwin reached out to Chicory about three months into the firm’s existence to begin a dialogue. Through a series of conversations, it emerged that—when the time came—they would primarily be looking for three things from insurance products.

--Low costs; the team was all too aware that commissions drive up the costs of traditional annuities and life insurance.

--Diversification; the team understood annuities and other insurance products and how they can provide income and hedge risk in the context of a broader holistic approach to wealth management.

--Transparency and ease-of-use; consistent with their holistic approach, the firm is committed to providing clients with a window on their assets and financial plan; any insurance offering would need to integrate with their legacy systems—Orion, Black Diamond and others.

Newcomer says he and his colleagues were surprised by the extent to which DPL checked all three boxes and could check them quickly.  “The DPL story is unique,” he says. “At first it sounded too good to be true.” After doing their due diligence, Chicory became a member of DPL and quickly rolled out an insurance capability that included vetted, Commission-Free annuities and life products as part of their holistic financial planning process.

Our “go-to guy” for insurance

DPL’s first order of business was reviewing the $5 to $10 million in commissioned annuity products Chicory clients already owned, but were likely overpaying for and not getting the optimal cost-benefit from. “When I saw their book of existing annuities, I knew we could make a difference right away,” said DPL’s McGoodwin, who worked with Chicory’s advisors to review existing client policies. In virtually every case, they were able to reduce client costs and find additional benefits in transparency, return, and fit through an exchange into a Commission-Free alternative.  

McGoodwin also introduced the team to a new product for clients looking for guaranteed income with downside protection—the fixed indexed annuity. Though Newcomer was aware of the product, he had never used a FIA. “Once Chicory understood how these products are built and how they work to meet clients’ needs, they became big fans,” said McGoodwin, who has helped the Chicory team implement several FIA solutions for clients.  Added Newcomer, “DPL is on top of it. They go to bat for us and help us understand and use insurance for what it can accomplish within the plan.  They either know or find answers to all our questions”

With DPL as their strategic partner, DPL member Chicory Wealth is able to do exactly what they hoped to achieve when they became fully independent – to construct every part of the financial plan, including providing fee-only insurance solutions that reflect the desire to be a true fiduciary for all clients, regardless of their product needs.

 

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