After years of urging its financial advisers to sell more life insurance, UBS Wealth Management Americas is bringing in full-time experts and offering financial incentives to prod its tradition-bound sales force outside its comfort zone.
Most advisers are more comfortable dealing with stocks and bonds than life insurance products, and they resist the notion of delivering their clients to the insurance specialists at third-party firms that work with most brokerages, consultants say.
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But UBS and other big U.S. firms want to expand sales of insurance as well as mortgages and other bank loans because the products can lock in client loyalty and generate fees that are often higher than in conventional investor advisory programs.
"They are trying to gently push advisers into a more holistic planning-style relationship," said Bing Waldert, a director at Cerulli Associates, which specializes in wealth management.
Financial plans often include insurance components.
To push the process along, the U.S. brokerage arm of Swiss banking giant UBS AG - for the first time - has hired a half-dozen in-house agents, each with 10 to 25 years of experience in insurance.
UBS believes its insurance business is not growing as fast as it could because the outside agents it uses have been stretched too thin, said David McWilliams, head of "wealth management transformation," a position that UBS Wealth Americas created to encourage a shift to financial planning.
To be sure, UBS will still use outside agencies to help its 7,000 brokers identify prospective insurance customers, and to explain the tax intricacies and cost trade-offs of complex products such as healthcare trusts, long-term care and second-to-die policies.
If the in-house expertise leads to a higher level of support for brokers, UBS will expand the pilot, McWilliams said.
Whether they use in-house or third-party agents, advisers who sell insurance split the commission with the agent. UBS wouldn't give details, but advisers at the firm and competitors said agents generally get about 15 percent, with the rest credited to the revenue pie of the individual adviser.
Knowing that compensation can drive behavior, UBS also has tweaked incentives to encourage advisers to write comprehensive financial plans, which can lead to sales of insurance and bank loans as well as of traditional investment securities.
Financial plans with insurance components are a time-honored prospecting tool for brokers - particularly at firms that cater to so-called mass affluent clients with less than $250,000 to invest. UBS and many of its big-brokerage competitors now focus on wealthier investors and are upgrading the level of customized financial planning to cultivate them.
In disclosure documents filed last month, several UBS brokerage units informed clients that advisers can make more from writing plans than from selling other products. The firm allows them to charge up to $50,000 for financial plans and retain as much as 65 percent of the fee on plans priced over $1,000. That compares with payouts of 20 percent to 48 percent on other products and services they sell.
UBS is not the first firm to experiment with in-house insurance experts to supplement third-party help. Raymond James Financial has four agents on call to walk its 5,400 advisers through the insurance shoals. It decided to go in-house because outside agents could not devote enough time to its business.
"We made the first hire about three years ago," said Jim Swink, a vice president at Raymond James Insurance Group.
Advisers who do most of the insurance work on their own get credited with 100 percent of the commission. Those who use in-house or outside agents get credit for 85 percent of the insurance sale. As at other firms, full-time Raymond James advisers are paid on a grid that lets them retain a higher percentage of the revenue they produce as it increases.
Unlike UBS, however, Raymond James is moving to a product-neutral compensation plan this fall. They receive 50 percent of the revenue from an insurance sale, well above the grid payout that even the most successful brokers now earn. The new plan will eliminate particular product incentives, a process that the Florida-based firm says protects clients from inappropriate product pushes.
Either because they are rushing to close sales before the new payout plan takes effect or because they are more comfortable with the product, Raymond James says its brokers are embracing insurance. Life insurance revenue, excluding annuities, has risen this year by 30 percent, Swink said.
Morgan Stanley, the biggest brokerage firm with some 17,000 advisers, relies solely on outside general insurance agencies to help their advisers with insurance sales, a spokesman said. However, it insists that agents it works with focus exclusively on Morgan Stanley advisers and clients. Smaller firms do not have the clout to make such demands on agencies.
A spokesman at Bank of America's Merrill Lynch said the firm has in-house insurance specialists to help advisers across its wealth management and retirement businesses. It also uses outside agents, but declined to provide details on either resource.
Wells Fargo & Co. employs in-house insurance experts to work with clients in its bank branches as well as with clients in its private bank who have at least $1 million of assets to invest, said Rob Chewning, director of insurance at Wells Fargo Private Bank.
However, the 11,000 brokers working at branches of Wells Fargo Advisors, the bank's principal broker-dealer, are advised only by outside general insurance agents.
(Editing by Frank McGurty and Jan Paschal)