If you want to break into wealth management, you’ve got a few different options. You can work at a small independent brokerage firm or a large wirehouse like a Morgan Stanley and UBS. Or, as a third option, you can turn to a life insurer that provides money management as more of a supplementary service.
Like big banks, insurers have been investing more resources in their wealth and asset management tools. The business comes with little risk yet offers safe, reliable returns, especially considering the success of the market over the last 18 months.
But the question remains: from an employee perspective, where do you want to be? Recruiters and current financial advisors tell us that the cache and ability to make big money still lie with big banks. However, insurers may provide a better breeding ground for young advisors and salespeople who tend to struggle building sustainable books of business early in their career.
Feelings are a bit mixed when it comes to how life insurers are viewed by money managers and those who recruit them.
“In years past, you were perceived as a second-class citizen if you were working at an insurance company,” said James Cox, managing partner at Harris Financial Group, a Virginia-based financial planning firm. “The world has changed – there is no stigma anymore,” he added, noting that the Fed now covers both types of firms, putting them more on equal ground.
Others disagree, at least when it comes to the views of high earners. “When producers make a move to something non-traditional, there’s usually a back story, and they’re usually not a top 10% producer,” said Scott Witkin, managing partner at Elevation Search, a wealth management recruiter. “It’s almost like imagining Derek Jeter going to an expansion team.”
A current broker who is employed at a large wirehouse, but has worked with several people who have come over from insurers said the main issue is the reputation of the businesses among wealthy prospects.
“Some couldn’t hack it because of the stigma,” he said, talking on the condition of anonymity. “There’s no doubt big clients would rather have money with wirehouses than insurers.”
You see that distinction as people get wealthier, he said. “They’ll get plenty of people with $200k [in liquid assets] but it’s tough for them to recruit $5 million to $10 million.”
And the positives
If you want to be more of a holistic manager of the financial well being of clients, rather than just managing their money, working at an insurer can actually pay better, said Bill Willis, chief executive of financial adviser recruiting firm Willis Consulting.
Brokers at wirehouses won’t get paid nearly as well selling annuities and other insurance products, even though they also have the capability. The wirehouse broker who spoke to us anonymously said that he will often sell insurance products through a third party, rather than through his firm, as he’ll get a better price for the client and a greater commission for himself. Each business structures their commissions to push their firm’s particular focus, he said.
Young wealth managers have told us previously the difficulties of starting out at a wirehouse with no experience. Recruiting a person’s life worth as a twenty-something-year-old with no track record is a mighty feat. The attrition rate for entry-level financial advisers is lofty; experts speculate that only 10% to 20% stick. One adviser told us that he came in with a class of 30 recruits. Before he left three years later, he was the only one remaining.
Insurers, on the other hand, tend to offer an easier transition for those with minimal experience. Another adviser we spoke with struck out after a year working at Wachovia Securities, now Wells Fargo Advisors, spending most of his days and nights cold-calling to no avail. A year later, he moved to an insurance company and began selling annuities and life insurance products, only later to use those relationships to start managing clients’ full portfolios. He felt it was a much easier transition.
“You get a lot of information from life insurance contracts – their net worth, their yearly income,” said Cox. “You can tease out areas where products and services can be unique to these people.” Younger advisors especially would find insurance an easier road to hoe, he said.
But to make it big, traditional brokers still offer the best opportunity.