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Advisors put insurance on menu to cater to clients

Insurance is an essential part of any financial plan, but what's the best way to incorporate this expertise into a financial advisory practice?

"We bring the experts to our clients," said certified financial planner Andrew Savant, a financial advisor with Rinehart Wealth Management. "They want us to provide a collaborative concierge service to them."

Insurance
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Concierge service

"As a fee-only advisor, we do not sell any investment or insurance products, but we provide insurance analysis and review our clients' current policies and then provide recommendations that are in their best interest," he said.

"If the client needs additional insurance or we think there are better alternatives, we bring in an insurance professional to our office to meet with the client."

This has been an extremely effective and popular practice with clients, Savant said, for several reasons.

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"Because … we are in the room with the client, they are assured that they are not going to be sold something that they don't need or doesn't fit their budget," he said.

Beyond the convenience, it saves them time and builds trust. The brokers shop multiple insurers to find the best product for the client; often, it leads to an opportunity to consolidate multiple policies.

"It's good for the brokers, too, because they know they don't have to do any selling," Savant said.

Savant's firm works with two brokers: one who specializes in long-term care, disability and life insurance, and another who specializes in property and casualty. While clients are not required to work with these brokers, most of them choose to.

Two-hat approach

"I have a separate risk-management [piece] of my practice," said Craig Cowles, CFP and partner with Cardinal Wealth Advisors. "Since it is one of the disciplines with the CFP designation, I use it as a tool to help clients."

Cowles divides the financial conversation with clients into two parts, telling them that he is changing hats from financial planner to insurance broker.

"Don't be afraid to add additional compensation for the firm if you clarify with the client each area you're working in," he said.

"The client should know that there is a commission paid on the transaction and that the planning agreement says that they do not have to pick our firm for their insurance needs," Cowles said.

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Clients appreciate the in-house aspect.

"Someone is going to get paid if they need the insurance, so we offer them the option to work with us, since we already know some of the best alternatives," he said.

How does this fit in with fiduciary responsibility?

"The plan dictates the action," Cowles said. "We are giving the client the best choices based on the original planning document. In this way, we've completed the plan."

"Working in the benefits area is a big help when reviewing that aspect of a client's financial plan, which is often an important piece of their situation." -Robert Wander, owner of Wander Financial Services

Sub-specialty expertise

For Robert Wander, CFP and owner of Wander Financial Services, the employee-benefit consulting half of his practice informs the other, financial planning, half.

"Working in the benefits area is a big help when reviewing that aspect of a client's financial plan, which is often an important piece of their situation," he said.

This is especially true during clients' fall enrollment periods, when they need to make choices about health insurance, supplemental disability, supplemental life insurance, flexible spending plans, health savings accounts and 401(k) plans.

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"They can give me access to all the information, and I'll guide them as to what elections to make," Wander said. "Many clients are not taking full advantage of what's being offered to them, especially with HSAs and flexible spending accounts—they tend to overlook these options because they don't understand them."

Wander said his expertise allows him to integrate all these benefits into the client's whole financial picture and to be more thorough. Furthermore, if clients retire or are between jobs, they still need his help to deal with benefit options.

Full commission model

"Commissions are not bad; they're just another way to serve my client," said Juli McNeely, CFP with McNeely Financial Services.

"I am solidly in the commission model," she said. "About 80 percent of my clients are smaller accounts who wouldn't meet minimum asset requirements.

"In a very small community like this, it has to fit the client base of the advisor," McNeely added. "It's the best model for my practice."

McNeely is the current president of the National Association of Insurance and Financial Advisors and also holds the Chartered Life Underwriter and NAIFA's Life Underwriter Training Council Fellow designations.

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"If you want to move to the insurance side, NAIFA is a great source of education and information," she said.

For those wishing to grow their insurance-related knowledge base, McNeely recommends the newly revamped LUCTF program, which is relaunching this July through a new partnership with the College for Financial Planning.

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Shortened to one year, the program is targeted to new associates and others new to the insurance industry. The curriculum provides an industry overview, training in sales skills and real-world action-plan assignments.

McNeely also recommends NAIFA as a useful local, state and national referral network to find professionals to service out-of-state clients, professionals within other insurance specialties and mentors.

—By Deborah Nason, special to CNBC.com