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According to a Harvard Business School study, the most profitable option for financial advisory firms looking to grow their business is diversification. “Advisers focusing on funeral cover should therefore consider diversifying their product range by adding life insurance. This will help them grow both their client base and income,” says Kobus Wentzel, Executive Head of Distribution and Sales at 1Life Insurance. He looks at the benefits of diversifying and how advisers can add life cover to their product mix.
The opportunity in the lower and mass market is significant, with many employed in the public sector where average salaries are higher than in the private sector. An average monthly public sector salary is 53% higher than the national average monthly salary, according to the 2024 Medium-term Budget Policy Statement. Although not every client will be interested in or find life insurance affordable, there will be many who have stable incomes and sufficient funeral cover who are looking to ensure their families are financially protected when an income earner dies. These clients will buy life cover – either from you or another provider. Let it be you and your client numbers and sales will increase.
The benefits of diversifying your business
There are three clear benefits of diversifying your product offering.
Diversifying products brings income stability
By adding another product you are creating a new, alternative income stream to your revenue, which should mean more income stability in future. You should also be able to structure commissions to suit your cashflow needs with the addition of extra revenue.
Diversifying meets clients’ needs
Individuals are increasingly interested in a one-stop holistic experience when it comes to financial advice, according to the July 2024 World Economic Forum’s (WEF) Future of Financial Advice white paper. Offer more products and your clients' needs are being met.
Adding more products to your offering saves clients money
Clients are not only looking for a one-stop shop because it is convenient, it also saves them money. The WEF study quantified this at as much as 7.5% of total income, while the Harvard Business School study found that holistic financial advice saved clients in the US over US$4,000 per year!
How to add life cover to your offering: licencing and accreditation
When you have made the decision to add life cover to your product mix, you need to:
Ensure your licence, category and subcategories, allow life cover to be sold
Long-term insurance products such as life cover fall within the scope of a Category I or II licence, sub-categories A,B and C.
Sub-category A and B FSPs can sell long-term insurance products with limited underwriting. This includes funeral cover and life cover products with lower sums assured, such as 1Life’s My Life Plan. My Life Plan offers up to R400 000 life cover and a funeral benefit, with no HIV or medical tests.
Sub-category C FSPs can sell fully underwritten life cover products such as 1Life’s Pure Life Plus. Up to R10 million life cover can be taken.
In addition, sub-category C FSPs, Key Individuals (KIs) and representatives, need one year’s experience whereas sub-category A and B KIs and representatives need six month’s experience.
You can apply for a Category I, sub-category C licence on the FSCA website. Your compliance officer can assist with the completion and submission of forms, as well as advise on experience, qualification and if necessary, supervision of representatives.
Important: If you are moving from a sub-category A or B to sub-category C licence you will need professional indemnity or fidelity insurance. Your compliance officer is best placed to advise and assist with this.
Ensure you have the required product accreditations
Your broker consultants can set up training for you, your representatives and support staff.
Talk to us
Your business and your clients will undoubtedly benefit when you add a product to your offering. Businesses that don’t consider growth opportunities may face shrinking client bases and bottom lines. Consider your options today and plan to grow your advisory firm in 2025.
For 1Life brokers, your broker consultant and the 1Life Insurance team are ready to help you grow your business! Talk to us about increasing your product offering so you can build a sustainable, profitable business and service more clients more effectively.