Report Holds a Mirror to NAIFA Membership
On the eve of its annual convention and 125th birthday celebration, the National Association of Insurance and Financial Advisors (NAIFA) released a report that attempts to answer the question: Who are our members?
“NAIFA’s Insurance & Financial Advisors: Securing America’s Financial Future” holds a mirror to the association’s membership, using data taken from NAIFA surveys, industry research and interviews with members. The report identifies some common characteristics of NAIFA members.
Are they financial advisors or are they agents? NAIFA members reported about 50 percent of their business comes from giving financial advice and 50 percent comes as being an insurance agent. Fully 30 percent said they were also an owner or partner in their firm.
Membership is almost evenly divided between captive agents and independent agents, with about one-fourth of those surveyed identifying as either one or the other. About 15 percent said they are solely financial advisors, 13 percent described themselves as “semi-captive” agents, 8 percent as owners or partners, and 4 percent as managers.
Insurance isn’t all NAIFA members offer their clients. Sixty-three percent of members sell securities products, either as a registered representative of a broker/dealer or as a registered investment advisor, or both. In addition to selling variable products, mutual funds and investments, most of the broker/dealers (90 percent) offered planning services.
Now that we know who the members are and what they do, the next question is: What markets do they serve? Seventy percent said they served the senior market, 67 percent said the family market, 65 percent said the business market and 30 percent the employee benefits market.
The Main Street market is how NAIFA members often describe the segment that they primarily serve. About half of the clients served by NAIFA members have annual household incomes of less than $100,000. Only about 10 percent of their clients have household incomes in excess of $250,000.
The need to serve this market is especially clear in light of a recent LIMRA survey of life insurance ownership, showing that less than half of U.S.middle-market households have life insurance.
NAIFA had its beginnings as the National Association of Life Underwriters and life insurance remains at the core of what the members sell.By far, life insurance is the predominant product that they sell, with 94 percent of members indicating they had sold a life insurance policy in the last two years. Term life was reported as the top kind of life policy sold, followed by whole life, universal life and group life.
About three-fourths of NAIFA’s members reported selling long-term care coverage (73 percent). Also high on the list were disability income (69 percent), fixed annuities (68 percent), individual health (50 percent), Medicare supplement (45 percent), group health (35 percent), dental (33 percent), health savings accounts (28 percent), vision (23 percent) and critical illness (16 percent).
But retirement planning and investments are still part of the NAIFA member’s practice. Nearly two-thirds of members reported selling an individual retirement account, 52 percent mutual funds, 36 percent 401(k) or 403(b) plans, 33 percent 529 education plans and 23 percent other types of investments.
What I found interesting in this survey is the amount of time and expense that NAIFA members spend on compliance. NAIFA members reported spending about 500 hours and $9,000 per year on compliance and securities examinations. They spend about half a day per week on compliance and almost a third have hired staff to do compliance work.
The report is the second such study to come out of NAIFA this year. In March, NAIFA released its study, Advisor 2020, which presented research on industry trends and identifies opportunities for advisors seeking success in a changing marketplace.