Investing in the Future


Investing in the FutureRecently, Aite-Novarica Group’s Insurance Practice hosted our quarterly Broker-Dealer Technology Research Group meeting. I had the opportunity to co-host this session with my colleagues John Keddy, Nancy Casbarro, and Jack Krantz. These sessions focus on the unique challenges and opportunities faced by broker-dealers that are owned by insurance companies, which are distinctly difference from true independent broker-dealers and wirehouses.

For this group, demographic changes are clearly in the wind. While registered representatives tend to track a few years younger that the average life insurance agent, the fact of the matter remains that distribution systems continue to age. Even more importantly, perhaps, is that the highly transactional nature of the investments world ensures that there are more client touchpoints—and as a result there is an elevated understanding of the important role technology plays in solidifying relationships across the value chain.

With at least four different generational cohorts involved in the investments business as both producers and clients, firms need to be agile in how they think about technology deployments now more than ever. Organizations that understand the producer demographics can frame deployment strategies around targeting specific groups for pilot programs, allowing for true “test-and-learn” efforts. Since success breeds success, using these initiatives as a way to transform and modernize business models can be critical.

From the discussion, and our research, several key themes emerged during the session:

  • Modernization and transformation, including account-opening activities, are now deemed critical to future-state success. Expectations have been reset during the pandemic, and broker-dealers need to pick up the pace to maintain relevance.
  • There is an ongoing power shift away from manufacturers and toward distributors in the investments/insurance domain. Broker-dealers are considering how they can best leverage this, particularly in a world where there continues to be significant M&A activity, some of it fueled by private equity firms.
  • Digital adoption of capabilities that are deployed remains a top-of-mind concern. “Build it and they will come” isn’t a very effective strategy. Broker-dealers can learn a lot about this space from what has already happened in banking, which we explored in some depth.
  • An ongoing discussion with this group focuses on the best ways to work with insuretech/fintech firms, a subject we’ve written about at great length. One of the keys is for large companies to remember that they need to find contractual arrangements that offer mutual reciprocity between client and solution provider. Many startup firms need to be mindful of cash flow. Conversely, vendor management office processes at many financial institutions are designed to defer this, creating a remarkable lack of alignment in goals and priorities.

The insurance-carrier-owned broker-dealer space—operating at the intersections of investments and insurance as well as distribution and manufacturing—remains a fascinating one for the new year. Competitive and margin pressures will continue to be a factor as companies jockey for position in a world where producer and customer expectations continue to expand as we roll out from under the pandemic’s dark cloud. Some of the resulting UX/CX issues will be at the core of our upcoming Silicon Valley Innovation Tour as well. Registration for this is now open, and it is a terrific way to leverage “use it or lose it” budgets!