Being an Information Intermediary an Opportunity for Advisers

Recent research from LIMRA shows 71% of American consumers sought information for life insurance and annuities online—up from 61% in 2012.

However, nearly eight in 10 sought information from advisers. More than half (51%) of U.S. consumers reported they sought information about life insurance and other financial products from both the Internet and advisers.

With so much financial information shared, and the Internet making research about financial products and information so easy, should advisers, even those who specialize in one market, play the part of information intermediary?

For advisers that specialize in helping sponsors of retirement plans, Michael Welz, president and chief investment officer (CIO) at USI Advisors in Glastonbury, Connecticut, says they should be qualified to talk about all financial products available to plans because the need and goal of different retirement plans vary widely. In addition, he tells PLANADVISER, if the adviser almost exclusively makes recommendations for defined contribution (DC) plans, it should still know how defined benefit (DB) plans work in order to offer a more holistic consulting service.

According to Deb Dupont, associate managing director for retirement plans research at LIMRA in Windsor, Connecticut, an adviser whose focus is on retirement plans is more likely to offer participant services than advisers who serve just a few plans. “They are engaged with participants from minute one, and they may not bring retail solutions to the table, but they bring education,” she tells PLANADVISER.

Dupont says the focus on overall financial wellness and whether participants are going to be able to retire with enough money will continue to grow; there will be more specialist advisers who focus on holistic plan success.

Mary Art, research director for distribution and technology research at LIMRA in Windsor, Connecticut, says advisers should be prepared to discuss all financial products. “The focus for advisers is to do a complete evaluation of what people need then be able to recommend products or someone to help them find the right products,” Art says. Dupont adds, “It’s about establishing a holistic relationship.”

Daniel D’Ordine, a certified financial planner (CFP) with DDO Advisory Services, LLC, in New York City, agrees, “Just because an adviser is not offering a product, it doesn’t mean they shouldn’t be well-versed about it.” He tells PLANADVISER today’s adviser needs to know about college savings plans, asset protection plans, debt repayment, long-term care (LTC) insurance, longevity insurance and new products like hybrid cash value life insurance plus LTC.

“It’s our responsibility to have an understanding about products and know when we need to call in a specialist,” he says. “Just like a doctor; if a general practitioner sees a patient has a heart issue, he will call in a cardiologist.”

As an example, D’Ordine says some clients may have small credit card debt and need a repayment plan, but some may have $125,000 across nine credit cards, and they are drowning. He will refer those that are drowning to credit counseling to decide whether to file bankruptcy or have a vendor negotiate their debt. “Maybe when they get stable financially, they will come back to me for help,” he says. “Advisers need to know enough about a topic to be able to guide a client, and they need a deep rolodex of other professionals.”

Art says more financial professionals are either partnering now or planning to partner in the future with professionals and providers that specialize in other areas because they can’t be specialists in everything. “If they can partner with other specialists, when building client relationships, they have someone to recommend,” she says. “Partnering is a way to provide a better, more holistic service.”

Welz adds that, in order to provide holistic consulting to retirement plan sponsors, advisers need to have Employee Retirement Income Security Act (ERISA) attorneys, actuaries, certified public accountants (CPAs) and other service providers in their pockets to field questions and help provide consulting. Advisers just starting out will need to decide in what they want to specialize and what resources they will need.

Welz says the recordkeeping group at USI, which also provides education to participants, sees investment committees, plan sponsors and participants getting information from the Internet. “Colleagues say it is fairly rare they are finding faulty information, but it may be misleading,” he states. “But, it is only misleading such that what they have read does not give them the entire picture for the decision process. They have found some valuable information, but not all information needed to make a prudent decision.”

According to Welz, for the most part, investment committees or participants will bring up specific questions and say, “I have read X or Y, what can you tell me about that?”

“Information is powerful, but usually information on the Internet is shared in a broad sense to apply to a wide array of users. It may not be appropriate for specific individuals or plans,” he explains. “As intermediaries, advisers provide education. Sometimes information is incomplete or misinterpreted, and advisers clear up how it applies to a specific situation.”

D’Ordine agrees, “Every now and then, someone will write a piece (that gets picked up by twitter, blogs, etc.) that advises the general public to do things that may not be appropriate for them to do,” he says. Examples that he’s observed include a book that recommends a “one-size-fits-all” asset allocation, magazines and TV hosts recommending specific stocks to buy, a TV host and author recommending people only pay cash for everything so they don’t have to worry about their credit scores, and blanket rules of thumb for savings specific percentages of salary at different ages.

“There is a lot of financial misinformation floating around, and that translates into opportunities for us to be effective information intermediaries,” D’Ordine says. “As professionals we need to stay current, stay up on the latest research, and filter for a client the difference between positions—and what we think and why.”

He also suggests that face-to-face discussions with clients is the most effective way to really ensure whether clients understand the information they’ve found and whether they will be better able to make informed, deliberate decisions.

“Having a client or prospect come having pre-researched certain topics is unavoidable now; I expect and embrace it,” D’Ordine says. “It’s an opportunity to show the value they gain from working with a professional.”

According to D’Ordine, an adviser is not doing his best service for a client if he only looks at the topic they bring to the table and doesn’t ask the client about other aspects of his or her finances. For example, a client may approach an adviser wanting to put $10,000 in a 529 college savings plan, but the adviser should ask the client about his or her debt and other savings they need to have in place first.

Welz agrees that having clients source information on the Internet or elsewhere opens up and improves education with advisers because what the client has found may not include all elements that need to be discussed. Advisers can provide interpretation of how it applies to clients’ situations.

Art adds that it increases clients’ comfort level with advisers. They feel more comfortable because they have self-educated and know what questions to ask. Advisers should be more knowledgeable themselves to prepare to address that, she adds. “Those who know their stuff shouldn’t have to worry [able clients coming pre-informed], they’ll be ready to help sort them out.”

Dupont says the Internet can be an adviser’s friend, and advisers can use it to enjoy economies of scale in communicating and deepening relationships. “Engage in social media and start sharing information,” she suggests. Art adds that directing clients to sources of information can build trust; they know the adviser is trying to educate them and not just sell them something.

What D’Ordine has done, because a client may not have the time or ability to talk for hours about something researched on the Internet, is start a blog separate from his website. “I don’t editorialize, but I explore topics, such as disability insurance or indexing versus active management,” he says. “Keeping a blog is like thinking out loud, a place to send them to learn about things, and it shows that I’ve thought about these topics, researched them and worked through them. It shows my position.”