Because they typically provide customers with unequivocally sound advice on investment strategies, securities brokers and other financial planners rarely have to respond to an implication known as caveat emptor, or "buyer beware."

Most brokers keenly understand their investment products and deliver the counsel that keeps clients coming back for more. But in the rapidly evolving financial services market, carriers now realize the importance of high-end producers to function within the fabric of their operations. Many insurer are scouting for independent third-party broker/dealers to distribute wealth management products, such as life policies and annuities.

But as carriers search to expand their producer network, many find themselves reaching across the fence to embrace securities brokers and other financial planners-many of whom admit to little, if any, insurance-selling experience.

As industry experts agree, this can become problematic. At the very same time newly licensed insurance brokers are giving advice to customers about complex life, annuity or small-business insurance, they are also laboring to master the dynamics of these product lines.

Furthermore, financial advisors are expected to provide clients more than a wealth management product. They must also give advice on regulatory issues-particularly to small-business owners who must contend with HIPAA regulations.

But with the steep learning curve, and with reputations-not to mention new business opportunities-on the line, it's incumbent upon high-end producers to implement the marketing, training and technology tools that guarantee customer satisfaction.

Going for broker

When a broker adopts a new selling program, the investment is accompanied by a painful indoctrination period to fully grasp the nuances of the product. Therefore, an insurance broker who branches off into asset management and estate planning must quickly learn to master complicated tax laws, as well as understand the intricacies of tax shelters.

"I've seen insurance carriers training their brokers to handle estate planning where they push them out in the field with some level of training," says Sue Stevens, director of financial planning for Chicago-based Morningstar Inc. "These tax laws have a huge impact on an individual's retirement, placing a premium on obtaining sound financial advice. But an insurance broker is not going to go out and get a certified public accounting license to perform estate planning. Instead, they will network with the people who understand the nuances of estate planning."

On the flip side, financial planners who have sold stocks and mutual funds for their entire careers face obstacles when they elect to expand into wealth management insurance.

"It's much more difficult for these producers to sell a variable universal life policy than it is for an insurance producer, conversely, to branch off and sell a mutual fund," says Charles Cornelio, executive vice president and CIO of Greensboro, N.C.-based Jefferson Pilot Financial. "As high-end producers explore insurance partnerships, we try to differentiate ourselves from the pack through our technology."

Carriers such as JP Financial, which has $210 billion in total life insurance in force and has forged relationships with several independent broker/dealers, will have an excellent opportunity to put that technology in the hands of brokers. By 2003, 71% of new life insurance premiums industrywide will come through third-party channels, with brokers and planners combining to account for 27% of life insurance sales, according to LIMRA International, Windsor, Conn.

Technology magnet

For carriers, one method of attracting brokers is to build internal technology that's robust enough to greatly enhance their operations. Among its many distributors, JP Financial has accumulated a stable of 250 third-party broker/dealer affiliates, and is always seeking to add more.

"We concentrate a great deal of effort on recruiting and retaining quality, high-end producers," Cornelio says. "About 80% of our sales in life and annuity products come from independent third-party channels, such as banks, independent brokers or agents."

Realizing the importance of third-party producers, The Prudential Insurance Co. of America launched a Web-based marketing program in March intended for its mass affluent customers.

As it constructed the program, marketed as PrudentialXpress, the Newark, N.J.-based carrier turned to independent, third-party financial services producers to drive distribution.

"To attract general agencies and brokers, carriers can leverage several key elements of their operation," says Roy Schwartz, vice president, information systems and distribution technology for Prudential. "One is the brand itself. Another is the compensation terms. A third is technology. PrudentialXpress is an 'add-on' differentiator that presents value to a competitive product."

PrudentialXpress combines a suite of Web-based sales tools and streamlined processes to create a business opportunity for independent broker/dealers, brokerage general agencies and producer groups. Foremost, PrudentialXpress represents speed and efficiency. General agencies that have adopted the program were sold on several compelling features, including increased productivity and paperwork reduction-a valuable asset when dealing with intricate life applications.

Through PrudentialXpress, broker/dealers get access to online illustrations, new business application status, preliminary underwriting rating, licensing and appointment data, business forms and marketing and training materials.

Prudential will eventually expand PrudentialXpress to its own career producers, but initially third-party distributors are the program catalysts, Schwartz says. So far, 40 general agencies and 12 large broker/dealer firms have implemented the PrudentialXpress platform. By the end of the year, Prudential, which charges no fee for an agency to use PrudentialXpress, projects it will have 75 to 100 agencies on the platform.

For an individual broker to have access to the program, they must be authorized by a general agency with which they are affiliated. And, obviously, the agency must be registered to activate PrudentialXpress.

Restricted area

General agencies that opt to incorporate PrudentialXpress only need Internet access to activate the technology. An agency then registers its broker/dealers on an individual basis-providing various levels of broker access to the program depending on the broker's function. Registration is carried out under a batch-link process.

"One user may get access to A, B and C but not to D and E," Schwartz explains. "We continually maintain a hierarchial user list that displays all registered users of the program and what they are able to access."

In designing PrudentialXpress, the company accounted for the fact that many broker/dealers have a tendency to move from agency to agency over time-or they build affiliations with multiple agencies. PrudentialXpress was designed to account for this activity.

Brokers who move to another general agency can seamlessly continue to access PrudentialXpress with the new agency, Schwartz explains.

Or, if a broker does business with three agencies, PrudentialXpress provides security for the broker/dealer by restricting an agency's access to data. An agency can access only the broker customer data that pertains to that agency-not customer data pertaining to the other two agencies. Meanwhile, brokers can access all their business with the convenience of a single sign-on Web entry.

Once individual brokers are authorized to use the system, they can proceed with formulating a business proposal. Navigating through various Web pages, brokers often begin the underwriting process by submitting a short application electronically. Subsequently, the application process graduates to a client "tele-interview" phase, that's conducted with a Prudential underwriter. The XpressApp simplifies the process for an advisor and for the tele-interviewer, and enables Prudential to make the best offer to the applicant.

Currently, PrudentialXpress provides a policy application status report once a day. But this fall, brokers who log onto and navigate to the secure area where they can access PrudentialXpress, will be able to obtain policy status reports updated four times daily, Schwartz says.

In the final analysis, PrudentialXpress will continue to address the various chronic workflow dilemmas that have historically plagued brokers. "One major savings that brokers realize is the reduction of errors," Schwartz says. "The system forces data to be entered correctly. The XpressApp features drop-down menus that force producers to fill in all of the fields that pertain to the life product in question."

Pilot's navigation

To earn the endorsement of independent distributors, Jefferson Pilot Financial also identified its technology infrastructure as a difference-maker in attracting various levels of producers.

JP Financial distributes through both captive and independent agents along with other third-party affiliates. The carrier has a broker/dealer subsidiary based in Concord, N. H., and associations with 250 outside agencies. This multilayer segmentation is punctuated by more than 40,000 agents accessing 400-plus new business and service forms, and 72 products in two product lines (life and annuity).

Adding to the complexity was JPF's nine marketing distribution channels and five life insurance subsidiaries.

This segmentation convinced the provider that it needed to implement an automated solution that could enhance the abilities of its producers by integrating all these disparate product lines and producer affiliates.

In 1999, Jefferson Pilot launched the JPF NET-a totally revamped extranet located within its Web site. JPF NET stores all the information that producers need to sell and service JPF's diverse product line.

"Let's say that a so-called 'elite' producer logs on. We can identify them by classification, and the system can lead them to the specific applications they need," Cornelio says.

Two JPF applications that producers have gotten quite a bit of mileage from are pending policy status and in-force policy inquiry.

Similar to the way a Prudential producer can monitor policy status through Prudential-Xpress, pending policy "captures all of the activity in the administration of a policy, providing a producer with up-to-the-minute status through their Web browser," Cornelio explains. "They can interact directly with the underwriter processing the policy."

Policyholders often change the terms of their life policies or annuities. With in-force policy, "the producer can change the allocation online rather than having to submit a form through the home office," Cornelio says.

"They can also view all the activity that's occurred with the policy in the last year. In-force policy has streamlined our own efficiencies because, over the years, we've acquired various financial service providers. Having the technology enables us to integrate all customer policy data from a merged firm into our proprietary system," he adds.

One of the features that's at the heart of JPF NET is its e-forms capabilities. Similar to many carriers, JPF has experienced chronic problems relating to manual processing.

"There were delays due to human error, expired versions of forms in use by the field, and duplication of effort in the fulfillment area. A number of processes were being performed manually that weren't necessary," Cornelio explains.

Automation of forms

JPF executives found there was no documentation of relationships between forms, products, states and channels. This meant that internal and field staff had to interpret printed, complex matrices to identify product availability by state, subsidiary, product line and marketing channels.

Recognizing the problem, JPF adopted a solution known as FastForms, developed by e-business technology solutions provider InSystems Inc., which is based in Markham, Ont. Since FastForms was adopted in 1999, JPF has reaped ongoing results, including:

* Creation of a consolidated database that serves as the foundation for building an organized forms infrastructure. Now, forms are in one format, and future changes will be quicker due to automation.

* Automatic coordination of forms with product introductions, which greatly increases speed and efficiency when a new product is released in the field.

* Quick return on investment. JPF estimates that FastForms is saving $90,000 annually in labor costs, as well as $18,000 on printing.

With the first phase of the program proven successful, JPF is graduating to the second phase. "We can now refine the process to narrow the choices for forms that users can access," Cornelio explains. "Not only will they be state- and product-specific, they will also be transaction-specific so we can deliver forms that are more tailored to what they need, and identify what is optional."

Third-party predicament

Carriers are laboring to make life easy for brokers, but it's also up to brokers to identify the proper approach to enable them to become adept one-stop-shop financial service providers.

If they don't align with a carrier on a program, one option is partnering with an e-broker. This model enables a broker to meet multiple carriers online and perform side-by-side business comparisons for customers-many of them seeking business owners policies (see story on page 32).

The areas they need to address are plentiful. Although brokers don't need to make significant investments in technology-often requiring only a PC and Web browser since a third-party partner often takes care of Web hosting and technology integration-brokers still "need to get up to speed on technology and connect with multiple carriers," says Karen O'Brien, an industry analyst with Framingham, Mass.-based IDC, an e-business consulting firm.

"There are a lot of stumbling blocks that come into play. But if they can cut out the paperwork by linking up to the right technology partner, this could help take costs out of the system for the carrier, broker and end user," O'Brien adds.

Another challenge relates to the stigma of representation and proper certification. "Anyone can say they're a financial consultant; insurance salesmen do it and stockbrokers do it," says Morningstar's Stevens. "They may not have experience in other related areas, but there is pressure on them to be full-service planners."

There are also crucial decisions to be made about how a producer plans to communicate with customers-balancing in-person interaction with online support.

"Two years ago, I envisioned that the small-business customer would adopt the Web to obtain a business owner's policy, but it hasn't materialized," says Michael Zeldes, senior vice president for Kaye Insurance Group, based in New York.

Kaye Insurance, a unit of Kaye Group Inc., offers insurance brokerage, risk management and underwriting services through traditional distribution methods to small- and middle-market clients. "We thought there would be a surge of online volume, but we found that it's become more of an information-gathering channel," Zeldes adds.

Carriers plan to press on and not be deterred by the myriad of challenges that are a part of the distribution shakeout. Many of them see a light at the end of the tunnel.

That light represents a well-informed broker who can confidently put an emphasis on "the art of the deal" rather than answering to a charge of "buyer beware."

"We have a mission to significantly grow our life insurance business, and PrudentialXpress is a core element to that growth," Schwartz of Prudential says. "While our career producers will eventually gain access to this program some time in the future, right now we have a tremendous opportunity to expand our life insurance lines through the third-party distributor."

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