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BGA'S ENHANCE INDIE ADVISORS PRACTICES AND OVERALL BUSINESS

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BGA's Enhance Indie Advisors Practices and Overall Business

BGAs Enhance Indie Advisors Practices and Overall Business

By Victoria Bowen, President Bowen Enterprises LLC and Steve Finkle, President National Brokerage Associates

Normally, one of the first steps an advisor takes when preparing a financial plan is to evaluate the client's life and/or special needs insurance coverage.   So, it is very understandable that the question regularly asked by advisors thinking of transitioning to independence is "Where would I place my insurance business?" 

The quick answer to the question is that their options for insurance placement will typically become much broader than their current wirehouse environment; they will be able to utilize the services of a Brokerage General Agency - an organization that helps advisors provide the most suitable and cost effective insurance products to their clients.

The following provides greater detail about a Brokerage General Agency - what it is, how it works and how independent advisors use them to their advantage.

WHAT IS A BROKERAGE GENERAL AGENCY (BGA) AND HOW DO THEY WORK

A BGA is an organization that helps insurance advisors find and obtain life, long-term care, annuities and various forms of specialized insurance coverage for their clients. (Examples of Specialized Coverage are insuring an individual with a difficult medical condition or solving a complex business insurance situation that requires special, technical assistance.)

A BGA is commonly defined like this: They represent numerous life insurance companies, they are not owned or controlled by a life insurance company, and their primary business is the sale of insurance through agents or brokers who sell directly to the consumer and who are not under the control of the agency.

Working in a wirehouse, an advisor more than likely is compelled to utilize the firm's "insurance desk" to obtain insurance coverage for their clients.  The policies are either written by their firm or written by a company that their firm has an arrangement with.  Most independent Broker/Dealers, however, permit their advisors to utilize the services of a BGA of their choosing and independent RIAs can make their own choice.

ADVANTAGES TO THE INDEPENDENT ADVISOR

The way BGAs work provide a number of elements extremely beneficial to the advisor, not the least of which is efficiency.

  •     BGAs partner with many insurance companies resulting in a full range of client options and solutions.
  •    BGAs' highly trained staff1) are insurance subject matter experts 2) provide assistance in expediting cases and 3) are very familiar with their companies' their  product lines so that all the available options can be identified.

o   They also know their companies' underwriting policies making the application and underwriting process more efficient.

·         The insurance application process is a tedious task for the advisor, especially if they are not familiar with the forms and procedures used by a particular insurance company.  BGAs resemble small home offices in that they interface with the insurance company's home office on the advisors behalf.  Two important elements of the BGA partnering relations are:

 

  •   Factors used by the BGA in selecting their partners are the home office competency and professionalism. 
  •  BGAs often use a "Preliminary Inquiry form" (an informal trial application) or other tools to get a quick indication of acceptability from a home office.

·         Premiums and rates for various types of insurance - and the nuances of the individual to be insured - can be both compared quickly and provide assurance that the client is getting the best possible rate for the coverage.

A CASE STUDY

The following case study illustrates the effectiveness and utility of an independent advisor using a BGA to address an insurance case.

Clients of an independent advisor, a married couple, wanted to purchase life insurance with a long-term care rider. There was no sell here; the clients understood and knew why they needed the coverage.  The husband battled with prostate cancer, the most common cancer for American men, besides skin cancer (about 1 in 6 men will be diagnosed with prostate cancer).

The advisor followed her normal process in a case like this - took a deposit, completed an application, submitted it to the insurance company she normally placed life insurance and waited for final approval. Much to her surprise the husband, due to his prior illness, was rejected but not the wife. She had to go back to the client and explain the situation (an embarrassment and some loss of credibility). She also had to have a plan B course of action or she would lose the sale. (Also, placing the insurance for just the wife was not an option as the husband was the primary breadwinner.)

She was advised to contact a BGA, one that her B/D had a relationship with.  After explaining the case to its representative, he did the following:

  •   While on the phone with the advisor, prepared "Preliminary Inquiry Form".
  •  He then went to the BGAs' partners that 1) wrote life insurance and 2) in his experience would underwrite a policy for a person with this type of pre-existing condition.
  •  Within a reasonably short period of time, the BGA rep notified the advisor that he had found a company that would provide coverage to (both) his clients.  (This wasn't a commitment, as the formal application needed to be submitted, but given the strength of the Preliminary Inquiry and the BGAs knowledge of the companies underwriting policies, a high degree of assurance could be given to the clients.)

Results: The two policies were written.  Whether your client has certain types of cancer, a cardiac event, a plus-sized build, or is a diabetic, working with a brokerage general agency generally results in more competitive offers through the BGAs' knowledge of underwriting strengths.

CONCLUSION

It is said that the advisor who provides insurance counseling to their clients 1) learn a great deal more about their client's life and their assets and 2) are in the position to add greater value to their financial picture than those who don't. The flip side of that is that investigating and going through the insurance application process can be time consuming and tedious.  Having a BGA available to you, and using them to leverage their partner relationships, has a great deal of benefit and no downside.

 

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