A New Platform that Offers Insurance Products to Fee-Only Advisors
David Lau is the founder and CEO of DPL Financial Partners, a firm focused on the distribution of commission-free insurance products geared toward the RIA and fee-based advisor channel. He is an executive with more than 25 years of professional experience directing strategy for innovative financial services companies. Mr. Lau has expertise in financial services sales, marketing, technology and operations.
Prior to founding DPL, Mr. Lau was chief operating officer of Jefferson National, a leading innovator of tax-advantaged investing strategies for Registered Investment Advisors and fee-based advisors at broker dealers.
I interviewed David last week.
What was the market opportunity that led you to start DPL? What was the problem you wanted to solve for advisors?
I identified the RIA market as an underserved insurance market in 2005. When you look at the world in which RIAs work, there is a major product category gap – insurance. RIAs, if they are fee-only, cannot use insurance products in their practice because insurance is almost exclusively a commission-driven industry. At the same time, the vast majority, better than 70% according to our research, of RIAs believe insurance is an important component to a holistic financial plan. This creates an obvious problem that disadvantages both RIAs and their clients.
Apart from the ethical issues commissions create for RIAs, they also create economic issues. The distribution expenses built into commissioned insurance products are significant, making RIAs question the value of the products from an economic perspective.
So, three years ago I set out on this quixotic mission to bring low-cost, commission-free insurance products to the RIA market. We work with carriers that offer best-in-breed products across life, health and annuity products. My grand goal is to bring transparency and price competition to insurance.
If you are eliminating commissions, how does DPL generate revenue?
Two ways. First, we are a membership organization for RIAs. Firms join DPL to get access to our insurance expertise as well as our commission-free product set. We operate like an outsourced insurance department for our member firms. Some members view it almost like a co-op for insurance.
The second way we generate revenue is from the multiple carriers with whom we work. DPL creates the infrastructure through which we can issue policies on behalf of these carriers for our RIA members. We provide the product education, the licensing capabilities and the broker/dealer (for variable products). For this infrastructure, we get an administrative fee. The fee, which is 80%-90% lower than carriers’ traditional distribution costs, enables the repricing of products to create greater benefit for the RIA’s client.