Commission-free annuities: no longer an oxymoron
When you are a market disruptor, countless people will be confused by your movements; others will be delighted as a punch. Allowing RIAs to sell annuities prompted this latest response from these advisers.
“I have been told several times, ‘You are doing God’s work! ”Says David Lau, founder and CEO of DPL Financial Partners, first in the marketing of commission-free annuities, and arguably the leader, in an interview with ThinkAdvisor.
As trustees, RIAs are unable to accept commissions, which insurance companies typically pay to advisors for the sale of annuity products. But Lau has created a form of distribution that allows these advisers to incorporate annuities into their practices and receive compensation for them from clients as part of their AUM fees.
DPL’s turnkey insurance platform, available to RIAs and paid subscription advisors, includes commission-free products to meet other needs as well, such as life insurance, long-term care duration and disability.
The Louisville, Kentucky-based company, launched in 2018, has worked with 20 insurance companies and has a base of more than 10,000 advisory clients from more than 3,500 RIA companies.
Lau, 54, pioneered the idea of commission-free insurance products at Jefferson National, where, as chief operating officer, he designed the world’s first fixed-cost variable annuity, he says.
Prior to Jefferson, Lau, as chief marketing officer, helped found E-Trade Bank after its merger with TeleBank, the world’s first pure-play internet bank, where he was chief marketing officer and strategist.
Between E-Trade Bank and Jefferson, he co-founded a management consulting firm, The Oysterhouse Group. Clients included Merrill Lynch, Ace Insurance Group and Shinsei Bank.
His “mission,” he said in the interview, is to create a market for “low-cost, no-charge insurance products for advisers of all channels.”
It also explains how its way of distributing annuities enables RIAs and paid advisers to be remunerated for these products as part of their AUM fees.
The tech-driven company models 3,000 different annuities – including Variable Indexed, Fixed Indexed and Registered (RILA) annuities, plus 40,000 endorsements and at 400,000 different prices, he says.
ThinkAdvisor recently interviewed Lau, who spoke by phone from Louisville. He discussed his innovative method of delivering annuities, then delved into the roller coaster of working at pioneering internet banks before and during the dot-com bust.
Here are the highlights of our interview:
THINKADVISOR: Do RIAs commend you for giving them the opportunity to sell annuities?
DAVID LAU: In general, the RIA market is really happy with us. I have been told several times: “You are doing the work of God!”
Is that how you see it too?
For me, it’s a double mission. If we can bring simple, low cost, value-added products to market, that’s a really important thing for the end customer to do, especially today when retirement lasts a full third of your life and you have to be self-financing. for 30 years. At the same time, we allow the trustees to do the implementation. Thus, the client now receives his opinion on the annuity from a trustee rather than from a seller who might sell him an inappropriate product.
How do you add value with annuities?
By changing the distribution. We basically eliminated those big annuity commissions paid to representatives; wholesalers [who sell annuities to reps] also do a lot. We distribute through technology.