When you're a market disrupter, countless folks will be troubled by your moves; others will be pleased as punch. Enabling RIAs to sell annuities has provoked the latter response from these advisors.
"I've been told several times over, 'You're doing God's work!'" says David Lau, founder and CEO of DPL Financial Partners, first in marketing commission-free annuities, and arguably the leader, in an interview with ThinkAdvisor.
As fiduciaries, RIAs are unable to accept commissions, which insurance companies typically pay advisors for selling annuity products. But Lau has created a form of distribution that allows these advisors to incorporate annuities into their practices and receive compensation for them from clients as part of their AUM fee.
DPL's turnkey insurance platform, available to RIAs and fee-based advisors by membership subscription, includes commission-free products to address other needs too, such as life insurance, long-term care and disability.
The Louisville, Kentucky-based firm, launched in 2018, has worked with 20 insurance carriers and has a base of more than 10,000 advisor clients from more than 3,500 RIA firms.
Lau, 54, pioneered the idea of commission-free insurance products at Jefferson National, where, as chief operating officer, he designed the first flat-fee variable annuity, he says.
Before Jefferson, Lau, as chief marketing officer, helped build E-Trade Bank after its merger with TeleBank, the 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 says in the interview, is to build a marketplace of "low-cost, no-load insurance products for advisors of every channel."
He also explains how his way of distributing annuities allows RIAs and fee-based advisors to be compensated for these products as part of their AUM fee.
The technology-focused firm models 3,000 different annuities — including variable, fixed indexed and registered index-linked annuities (RILAs), plus 40,000 riders, and at 400,000 different price points, he says.
ThinkAdvisor recently interviewed Lau, who was speaking by phone from Louisville. He discussed his innovative method of distributing annuities, then looked back at the rollercoaster ride of working at pioneering internet banks before and during the dot-com bust.
Here are highlights of our interview:
THINKADVISOR: Are RIAs applauding you for giving them an opportunity to sell annuities?
DAVID LAU: In general, the RIA market is really happy with us. I've been told several times over: "You're doing God's work!"
Is that the way you see it, too?
For me, it's a twofold mission. If we can bring simple, low-cost, value-added products to market, it's a really important thing to do for the end client, especially today, when retirement is lasting a whole third of your life, and you have to self-fund it for 30 years. At the same time, we're enabling fiduciaries to do the implementing. So the client is now getting their annuity advice from a fiduciary rather than a salesperson who might be selling them an inappropriate product.
How do you deliver value with annuities?
By changing the distribution. We basically eliminated those big annuity commissions paid to reps; wholesalers [who sell annuities to reps] also make a lot. We're distributing through technology.
