insurance technology for advisors

#ItzOnWealthTech Ep. 87: The Engine Powering the SS&C Advent Insurance Marketplace with David Lau, DPL Financial Partners

“I know this from my many years at Jefferson National, it was difficult to get the Orions and the BlackDiamonds of the world to build insurance functionality, because they didn’t have demand. Their advisors aren’t really using these products, so a data feed would be enough. But as there’s more demand, the technology becomes necessary even if it’s a little ahead of where the market’s going to be. So our notion was, let’s build the technology and embed it into platforms so we don’t have to wait for demand from advisors, let’s build it ourselves and get it integrated into these platforms because that’s what everybody works from and if you’re going to truly make your services usable and accessible, they’ve got to be integrated.”

— David Lau, Founder & CEO, DPL Financial Partners

David Lau has spent his career disrupting distribution in the financial services industry. He set his sights on insurance five years ago when he founded DPL Financial Partners to build a technology platform that fee-based advisors can use to sell high quality insurance products. I spoke to David about advisors who can leverage this platform to increase client wallet share, what his plans are for the $26 million in capital that DPL just raised, why he partnered with SS&C Advent to power their insurance exchange, and a whole lot more on this episode of the WealthTech Today podcast.

Click here and schedule a free Discovery Session to find out how Ezra Group can help your fintech firm grow revenue in the wealth management space.

Companies Mentioned:

Topics Mentioned:

  • Leveraging the DPL Platform to Increase Wallet Share
  • $26 Million Funding
  • DPL Partnering with SS&C Advent to Power Insurance Exchange

Complete Episode Transcript:

Craig: I would like to introduce my guest for this episode of the WealthTech Today podcast is David Lau, founder and CEO of DPL Financial Partners. Hey David.

David: Good morning. How are you, Craig.

Craig: David I’m doing fantastic, thank you for asking. How are things in Louisville, Kentucky?

David: Terrific, terrific. I mean, in this world where there’s so much turmoil, it’s been really good for us business wise and things in general are good. I mean, Louisville as you probably know, was in the news a lot more than Louisville likes to be in the news over the past year, but things seem to have settled down in all kinds of ways here so all is good.

Craig: It is all good. I live in New Jersey, New Jersey gets into the news plenty, so I’m always happy when it’s not in the news. But let’s get this show on the road, can you give us the are your 30-second elevator pitch for DPL?

David: So I founded DPL a little over five years ago on the notion, I had been the Chief Operating Officer at Jefferson National for a decade. I built that company from the ground up and I’ve spent my career kind of disrupting distribution in financial services. I was the Chief Marketing Officer of the first internet bank in the country called TeleBank, and we built that and sold it to E*trade. And so I’ve always built companies based on the notion of, let’s change distribution, because in financial services distribution is often the biggest expense in the product, so you want to provide a better product for the end client. The best way to do that is to lower distribution costs, in banking it’s pretty simple you get rid of a branch, and you get rid of a really expensive mechanism and part of the distribution and insurance, the commission. So on one hand, there’s this motivation to provide better product, better value to end clients which really drives me. On the other hand, you also look at the world in financial services, and you see that insurance is really antiquated in terms of still being commissioned driven distribution. The whole rest of financial services has moved on from that model, whether it’s wirehouse reps, broker dealer reps. Everybody has moved to fee based, except for insurance. Long ago, mutual funds, no load had become the standard in the mutual fund world, the same needs to happen in insurance and it will because insurance has got to keep up with the advisors’ business model.

Craig: Indeed, it does and we’ve seen that a lot with our clients, our insurance clients seem to be on a very strong path moving their agents and advisors more onto the wealth space. Do you see this as a trend across your clients as well?

David: I think it’s a it’s a big trend and it’s part of the reason for building DPL. Again, being focused on the end client value and delivering better outcomes for clients, apart from the pricing problems that commissions cause they also cause conflicts of interest whether it’s for a commission salesperson who’s motivated to sell them the most amount of a policy that they possibly can, or for a fiduciary who traditionally hasn’t been able to get paid on products that might be really beneficial for their clients. So when you eliminate the commission, you can take that commission salesperson out of the equation, and you let products be implemented by fiduciaries. So that’s, to me, again, an important component of delivering great value to the end consumer. You get lower priced commission free products implemented by a fiduciary, and that’s obviously far better formula than expensive complex products implemented by a salesperson.

Craig: I would agree with that. I know I read a study where it said that even with the presentations or the descriptions or the diagrams of how the insurance works, experienced insurance agents still don’t understand their own products.

David: Our products are incredibly complex, and they don’t need to be. And that’s part of what we do is we work with carriers to bring products to market, you want to keep them, relatively simple so that people understand them and know how to use them. Not understand how to sell them, which is you know where the commission market has evolved to over the number over the decades. It’s how do you differentiate in the commission world, well you’ve got to have a good sales story, from the product manufacturer point of view. So you come up with a rider or a feature of the product that sounds compelling on a sales story, and that’s the way the industry has had evolved. And it’s really unfortunate, because the industry winds up doing itself no favors when these are really good products, an annuity is a great product at its heart, so let’s get back to what the heart of the product is, cut out the expense and the commission and the complexity. And at the heart of it, you’ve got a risk pooling product that provides tax deferred accumulation, whether on a variable or fixed basis, and then lifetime income. I mean that’s a really useful product for a financial advisor, and the client, obviously.

Leveraging DPL to Increase Wallet Share

Craig: Both, it should be mainly beneficial for the client. And annuities have gotten a bad rap over the years, and but we’re seeing more and more carriers offer different annuities and also more tech platforms build in the ability for advisors to do planning with annuities. How is DPL helping out in that area?insurance technology for advisors

David: In many different ways, so let me address the first part of that question first. When you say annuities have developed a bad rap, well number one, we do more than annuities, we’ll get to that, but when you say annuities have developed a bad rap, and when you understand what’s at the heart of those things, all the issues that you’ll bring up about annuities, those are all driven by commission. Right, so it’s bad sales practices you read about overly aggressive sales practices or products being sold inappropriately to an 85 year old widow or whatever it might be. Expense, that’s driven by commission, those bad sales behaviors driven by commission, long surrender periods meaning lockups, why is that because of the commission and the carrier’s got to recoup the commission they paid out to the commissioned rep. All of those things that people don’t like about annuities, they’re all driven by the commission.

David: So, that’s a great start for us, let’s get rid of the commission so that’s going to help things tremendously. And then additionally in insurance, outside of a select few products maybe like term life, it’s hard to compare. Where do you price shop, an annuity, other than like a single premium immediate annuity which is super easy, right, let’s see what the rate is. But how do you compare and price shop one annuity to another, to try to find the best product? Nobody talks about that. So we’ve developed technology that enables you to do that. As an advisor or as a client, you can look at our tools and our calculators and say, okay I want a guaranteed income stream, I need $5,000 a month or whatever the number is. We can help you find the product that will do that for the least amount of money, and depending on your preferences and your risk tolerances and things like that, we’ll help you find the best product across all kinds of carriers and all kinds of product types, which is again something that’s really needed in the insurance space. There’s a million ways to compare mutual funds and tools to do that and things like that, againwWhy couldn’t you do that with insurance and that is part of what we’re doing, you know on the technology side is bringing that capability to the market that enables people to find really good products.

Craig: That’s really interesting. That’s one of the things I really like about your company and what you’re doing. And we started talking earlier before we were recording, about how your company comes up in a lot of our work with insurance carriers and doing research on the market for insurance. And I think you pioneered that at Jefferson National the move away from commissions and to be able to fit insurance products into a fee based environment and we’ve seen this for a while that RIAs need to be more holistic and offer more than just investment products, because you’re missing out on more than half of what clients need in their financial lives. Can you talk about how DPL is making RIAs more holistic in the sense that they can now provide insurance?

David: Yeah, absolutely. I’ve focused on the RIA market for 17 years now, going back to my time at Jefferson National and the reason I have is because I personally aligned with the fiduciary ethic. I want to deliver a good product, good value to end clients, I care about people getting a good deal, and not being ripped off.

Craig: That’s crazy how can you do that? That’s not normal for insurance.

David: I know, I know, but the RIA market very much aligned with me personally and the fiduciary ethic of the market, I think, was great. But over time the RIA industry has evolved. I mean 17 years ago when I got into it RIAs were primarily asset managers you know portfolio managers, they managed assets. The market has evolved tremendously since then. So that RIAs are now financial planners and wealth managers and providing more holistic services, for a lot of reasons. I mean, it’s a natural extension in growth of a business and an industry to go from just one segment of your client’s financial life to expanding.

David: And so insurance is also a natural expansion of what’s going on now. When you’re when you’re creating a financial plan, as an RIA for your client, that includes insurance. And we’ve talked about annuities, but it includes annuities, life insurance, long term care, disability, those are all addressed through a financial plan. And now if you’re an RIA, and you’re writing basically a prescription for your client for these insurance needs, and you can’t fulfill them on your own, that’s terrible business. I mean you’ve got to send them to a competitor let them go find insurance on their own. It’s not a great experience for the client, particularly when they can get what you’re offering from other people who can provide that. We were also talking before we started recording, about how insurance providers are now wealth managers. Your average New York Life agent is not just selling life insurance anymore, they’re selling holistic planning and wealth management.

David: So as an RIA you really need to incorporate insurance, one, to be protective and defensive of your clients, and keeping competitors away but also just that natural growth and extension of your business. It’s a very logical and natural thing to be doing, and it’s kind of precarious not to be at this point. And, again, for me, I love to see it, because these are important products. Through investing alone you cannot deliver for your client guaranteed lifetime income, you can’t protect their income during their accumulation years like you do with life insurance. I mean, you can’t do these things you need the tools your clients need the solutions. So let’s bring them about to the market in a low cost fiduciary way. And I think that’s good for everybody except for the traditional commission salesperson.

Craig: Exactly. You made a great point when you said RIAs should be protective of their clients. I think it’s something that a lot of RIAs don’t necessarily think about, they think once they have a client, okay now I can move on and get more clients. They don’t really think about, how do I protect the clients I have because they’re the ones who are going to help them grow, you have to have a base, you have to maintain. You don’t want to have a lot of churn of existing clients who are leaving because you don’t provide all the things that they need.

David: That’s right. We we hear that in a couple different ways of protecting clients, number one is from a fiduciary standpoint, many of the advisors, and we work with over 1100 RIA firms, already in the two and a half years we’ve been out in the market. Many of them from a fiduciary standpoint say, as a fiduciary I’m defining these insurance needs. I should make sure my clients get these products, right. So, if I just tell them they need them and then let them go do it on their own, I’m not really looking after their best interest. If I say you need life insurance, I should make sure you get it, you know, if I say you need disability because it’s a smart thing to do because you’re a doctor, I should make sure you get the insurance. I mean that’s one point of view, and the other is again business 101. When you think about growing your business, what are the first things you want to do? You want to protect that client base, you don’t want to lose clients, but you also want to get more wallet share from your existing clients it’s far easier to grow your business by getting more business from your existing clients than to go find new ones. So, insurance represents about 20% of a client’s investable assets. You’re leaving 20% if you’re an RIA and not addressing insurance besides all those other reasons, you’re leaving 20% of wallet share off the table and inviting another advisor into your clients life.

Craig: I had never heard that statistic, that’s a really powerful number. Insurance is 20% of many clients investable assets, is that an average number across mass affluent clients?

David: That’s an average number between permanent life insurance, your cash based policies permanent life and annuities. I mean the permanent life insurance market is an $18 trillion market, the annuity market is about a $4 trillion market, the RIA market is about a $3 trillion market. So when you think about your clients assets, if you don’t think, or you’re unaware that they own annuities, it’s pretty likely that they do. I mean, the annuity market is bigger than the RIA market. We often hear from RIAs that we work with, my clients don’t own annuities, I know they don’t, and it’s like you know what, they do. Ask them. And sometimes a client won’t tell you because they bought it from their brother in law, or they just don’t think that that’s something that as an RIA that would be within your purview it’s just, you know, a product that they had purchased at one point in their life. But when they do ask I mean, our firms that we work with, they’ll typically find 30% or so their clients will come back and say, hey yeah I do own an annuity, if you can take a look at it, that’d be terrific.

David: So it’s this huge market that RIAs historically, just turned a very cold shoulder to, because as you’re saying it’s been ugly in some ways the annuity market, but it’s an important product. Academics love the product well, they’ve got checkered reputation they don’t among academics academics universally love, not variable annuities, but just annuities in general for generating retirement income. But RIAs I think because they haven’t been able to use them, because they’ve been commissioned driven and not no load, have shunned annuities forever.

Invest In Others

$26 Million in Funding

Craig: I want to congratulate you on your recent capital raise congratulations. Big news for you guys.insurance technology for advisors

David: Absolutely it’s it’s always kind of amazing when you think about it like that somebody gives you money, they’re just gonna give you money I mean you’re giving up something, you’re giving you’re giving up part of the company and all of that, but I mean it’s an incredible honor, for somebody to entrust you with a bunch of money. We raised $26 million from two terrific investment firms Eldridge and Atlas Merchant Capital, and so we’re thrilled to bring them on, they’re going to be hugely helpful in helping grow the business not just from the assets, but from their board participation in helping grow the business. It’s an incredible honor for somebody to entrust you with a bunch of capital and based on effectively your promise to say, hey here’s what I’m going to go do, you give me, you give me the money this is what it does the vision, this is what we’re gonna go do and for some people say, hey we trust you and we believe in the vision, that’s tremendous.

Craig: With your success in the last just the last two and a half years since you started selling your technology with over 1000 RIAs, what’s your goal for the next two and a half years? Where do you see DPL going and with your technology platform in the insurance market?

David: Well we internally call our platform, it’s DPL and we’re DPL Financial Partners our tech platform which I don’t know that we’ve officially dubbed it in the marketplace, people just think of it through DPL but internally, we call it DPL Everywhere because that’s the intention, that we have the technology everywhere, because I again think it’s necessary. It’s hugely complex technology, because knowing annuities, knowing insurance, incredibly complex products, all kinds of riders, all kinds of things we’ve modeled every annuity ever sold, so you can compare any annuity ever sold to another. You can compare them against your goals. And basically we’re bringing price shopping and price comparison to market for advisors and clients and and consumers. And so I think that capability really needs to be in as many places as it can be for the benefit of the end consumer again.

One of the things that when you put it in context, sometimes you know I find myself helping connect dots for people, because when you’re really familiar with a topic, people may not have the same level of consideration or just haven’t looked at things in the same way that you have. But when you look at the expense of a traditional commission variable annuity, and many people understand that they’re really expensive, but let’s put it in context. A traditional variable annuity, it costs about 140 basis points just to own the product, the M&E charge is about 140 basis points. The investment options within it are pretty expensive, particularly relative today to today’s indexing age, about 100 basis points average expense for the investments, then you put a rider on top of that for income or whatever, it’s another 125 basis points. So you’re up to like 365 basis points in expense on a variable annuity. Now what does that mean? On a $200,000 policy, that’s about $600 a month for life, that you just signed up for. And you probably didn’t do it knowingly and you probably, almost certainly, didn’t do it price shopping. From my point of view, there needs to be some transparency relative to those fees. There needs to be the ability for the marketplace, whether it’s advisors, clients to be able to understand the value that they’re getting from the product that they’re purchasing and linking that all the way back to your question on the technology and our technology helps you be able to do that so I think it’s really important technology.

DPL Partnering with SS&C Advent to Power Insurance Exchange

Craig: Oh yeah, that sounds like it. We’ve written about and talked about other technologies and other platforms that are starting to do the same thing after basically decades of no transparency in the annuity market the insurance market. It’s like health care there’s no transparency in the pricing of healthcare you just go and do it, you go to the doctor and you pay the bill, you don’t really know what the best price is and similar with insurances it’s been very opaque. You guys recently partnered with SS&C and BlackDiamond on the Advent Insurance Marketplace, powered by DPL. Can you talk about why you did that and and how that works, we’re big proponents of these marketplaces because we feel that they will do what you just said, help provide transparency and help enable advisors and their clients to price shop. How does the SS&C Advent Insurance Marketplace different now that it is powered by DPL?insurance technology for advisors

David: Yeah, so it’s it’s a new creation, you have through the combination of the two firms you know so since the Advent and DPL, so it’ll be a new offering but if you step back to the vision of what we’re trying to do at DPL, and that is, let’s create a no load commission free low cost insurance marketplace, that’s where we start. So we work with carriers to bring products to market, to help design products that are driven by consumer value. And then how do you bring them to market? We do it through the marketplace and again, we were talking about earlier, we’re trying to create a market, not be the market. So we want to create this commission free market of products available to anyone. I mean, we believe we’ll execute well enough, we’ll get our fair share. It’s a plenty big enough market, we don’t have to be selfish about it let’s bring product to market and let’s make them available across the board. Only on a few products where we think we really put some intellectual capital into differentiation do we look for any kind of exclusivity relative to a product.

But, the next thing is you have to make the products accessible. And in order to be accessible, you kind of have to be “on platform”, right if a mutual fund is not available through, Charles Schwab and you’re a Schwab advisor, you’re not going to use the fund, it’s extremely difficult. So it’s the same thing now with insurance. Let’s get insurance accessible through your desktop, as an RIA. And so leveraging our capabilities and the technology we build, let’s embed it into different RIA platforms and if you look at it from the platform’s point of view, and I know this from my many years at Jefferson National and trying to get the Orion’s and BlackDiamonds of the world to build insurance functionality, they didn’t have demand. I mean their advisors aren’t really using the products, a data feed would be enough. But as there’s more and more demand for the products, the technology is necessary, but it’s a little ahead of where the market is going to be. So our notion was, let’s build the technology and embed it into platforms, so we don’t have to wait for the demand to apprise from the advisors for the technology companies to build it, let’s build it ourselves and get it integrated into these platforms, because, as you’re saying that’s what everybody works from. And if you’re going to truly make your services usable and accessible, they’ve got to be integrated.

Craig: And they have to be everywhere like DPL everywhere, they have to be at the advisors fingertips.

David: Yes, yeah we set low goals for ourselves. Trying to be everywhere.

Craig: Right, but are you guys exclusive with SS&C? Is that the only partner you’re going to have with these types of insurance marketplaces?

David: No, the implementation we’ll do will you have it’s your differences and some you know some things that will be designed, because we’re basically enabling our technology to be utilized by SS&C and through BlackDiamond. So there’ll be a particular implementation of it through them which will be you know differentiated and unique. But our intention, again, is to make the technology accessible to RIAs no matter what platform they use. So, that’s the goal and that’s what you will anticipate continuing to roll out you know here in 2021.

Craig: You like the Intel Inside.

David: You got it. Again, that’d be fantastic right if you if you ultimately got to that place where you’re the intel inside. The other part though that we do is we combine the technology with human beings. Again, you’re looking at RIAs who have historically not used these products, whether it’s life insurance, disability, annuities, not big users. Familiar with why you’d use them, and conceptually why you need them within a financial plan and the benefits they’re going to bring, but not necessarily the product expert on what’s a good annuity versus poor annuity. Price is obviously one thing but you have some of these riders work, how does all this work, and you need some support for that. Internally at DPL we’ve got about 40 consultants who work with the 1100 firms and growing, that we support. So not only do we provide you with technology we provide you with the human support that you also need. And on top of that many RIAs, because why would they be, haven’t been insurance licensed in the past because products were commissioned based they couldn’t use them. Why would you go get an insurance license? So we provide that licensing, we make it completely turnkey for a firm who may not be providing insurance for their client today. They join DPL tomorrow, they’ve got complete insurance support from people to technology and expertise.

Craig: So the use of the word turnkey makes me perk up. Of course we all know of turnkey asset management platforms or TAMPs. Is there a term for turnkey insurance platforms?

David: Yes, and I like to keep it to that I mean because it’s kind of a new thing right so I mean we’re we’ve kind of pioneered it. So some people said oh you’re a TIMP, turnkey insurance management platform, it’s like, well I guess so if that if that helps you conceptualize.

Craig: Better a TIMP than a WIMP, a wealth insurance management platform.

David: Not the most flattering acronym. Yes, I tend to go to turnkey insurance platform, and just use TIP.

Craig: Or a platform for insurance technology will be a PIT.

David: There you go. There’s all kinds of terrible accurate acronyms for what we do, I guess.

Craig: Well, we’re running out of time I just want to say when I compare you to other firms, you’re the originals. When you see people copying your model of enabling advisors who are not licensed that they can sell insurance through your platform, and other firms are copying it, how do you guys stay ahead?

David: One, I think it’s good. Just like at TeleBank, when we were building the first internet bank in the country, as we’re continuing to grow people always ask, do you care about this competitor that competitor or Bank 1 just got into the business are you worried? No, because what we’re doing is a very big idea. Taking insurance from being commissioned driven to fee driven, that’s not going to happen by one company making that happen. We want to be the instigator, we want to drive the market, we want to make it happen, which we do through our ongoing work with insurance carriers, with the media we do a lot of media events, with academics and the like to drive media understanding of the products.

We want to drive the market and we want to help create the market but we by no means need to be the market. The market is big enough that if you’re trying to own the whole thing, you’re only going to mess it up. It’s better for more people to be in it more people to be served. And again, the ultimate goal is, let’s deliver better outcomes for clients and make these products more accessible to clients because clients need them, and they need them to be delivered through fiduciaries. So let’s do that in as big a way as possible and if that means other people are doing it as well, that’s fine. We’re comfortable with our execution, we’re comfortable with what we do and where we’re going, that we’ll be a market leader, and you don’t worry about you know other people imitating or coming in. If you do your job, you’re going to be just fine.

Craig: And on that note, I’m going to wrap up this episode and our interview. Thanks David so much for being here. How can I advisors who want more information about DPL get in touch with you?

David: The best way is through the website, DPLFP.com, DPL Financial Partners that is, and give us a call. The numbers on the website, 1-888-327-0049. So reach out, we’ve got a staff of more than 40 agnostic consultants who do nothing but work with RIA firms to help them implement insurance. We’re not just a phone number you call if you need us, we are very actively engage with the firms we work with to help them understand, adopt and educate on insurance and help them serve the needs of their clients in a very active way.

Craig: That’s fantastic. Thanks David.

Click here and schedule a free Discovery Session to find out how Ezra Group can help your fintech firm grow revenue in the wealth management space.

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