Insurers that have traditionally been involved in financialplanning are expanding into a more comprehensive version of thatrolewealth management. The term has become one of the latestindustry buzzwords, designed to address investors overallinvestment management needs from a broader perspective.

In the insurance world, wealth management has become linked toadvanced-planning concepts. This type of planning may use suchproducts as extension IRAs, estate tax planning, and businesscontinuation planning. Youre looking at a very flexible picture ofthe clients planning horizon based on his cash inflow and outflow,which yields the clients net worth. You can then use the clientsnet worth goals to support retirement planning, college funding,estate planning, and estate distribution goals, says Lisa H. ODay,vice president of advanced sales/program development and managementat Jefferson Pilot Financial, a life insurance and annuity companybased in Greensboro, N.C.

Insurers in general are making use of more IT tools such ascontact management and other customer relationship management (CRM)programs in gathering information about their insurance clients andin making better use of the information they already have.Assimilating otherwise outsourced banking or financial planningservices, insurers take advantage of these opportunities tocross-sell. They use contact management programs to createdatabases of customer information to implement more efficientcustomer interactions. One of the challenges insurers generallyface is having to append the sparse data they have on customersfrom outside sources so they can get a better sense of whats goingon [with that customer], says Kathleen Khirallah, senior researchanalyst at TowerGroup.

Technology within the insurance arena is focusing more on CRM,according to Khirallah. Companies are approaching it from twosides: customer interaction and the development of decision-supportcapabilities for building customer strategies. To date, theindustry has spent more IT dollars around the customer interactiontechnologies that are used in the call center and on the Internetthan in decision support for CRM purposes, she adds. The insuranceindustry has developed some phenomenal skills around decisionsupport generally, but it hasnt necessarily used them in terms ofcustomer strategy.

By contrast, insurers in-volved in financial planning take adifferent approach. The process of financial planning inherentlyrequires more extensive data gathering on customers. They look atthe customer a bit more holistically, Khirallah explains. Thebroader scope of services these insurers provide also requiresbroader capabilities on the technology side.

To accommodate this need, an entirely new suite of softwarecapabilities has become available to help brokers, agents, andother insurance producers show how wealth management techniqueshave filtered down from the wealthy to the middle-level investor.These tools are primarily in the form of illustratingadvanced-planning concepts. Information provided by the client isinput by producers, and an illustration based on that clientsparticular circumstances is generated.

Whos the Right Provider?

According to Cindy Saccocia, senior analyst at TowerGroup, thereare three primary competitors providing wealth management software:Financial Profiles in Carlsbad, Calif.; Financial Engines in PaloAlto, Calif.; and netDecide in Falls Church, Va. Firms really arestruggling with the Whos the right provider for my business?question. I think insurers are uniquely challenged because theyretrying to offer a host of products that in-clude insurance. Banksor wire houses tend to leave the life insurance component out, butthat really rounds out the wealth management element, sheexplains.

Theres such a wide variety not only of the [wealth management]tools available, but also of the flexibility within each of thetools. They can be used for doing customized client design so theclient can appreciate his situation and look at the consequences ofmaking certain planning decisions, adds ODay.

Most people believe they dont have enough money to implement anysort of planning, ODay continues. Weve found the software does agreat job of answering client objections. We can do projections asfar out as the client is comfortable. [By using wealth managementsoftware], they get a real understanding they can afford to do thethings they want to do.

Jefferson Pilot is using a product called Wealth Strategies,licensed from Advanced Impact, a brand of Impact TechnologiesGroup, Charlotte, N.C. The product is intended to discover needsand planning opportunities. It can probe into problem areas withina clients existing financial plan and help develop goals.

Taking the Baton

Insurers are the logical sequential handoff for the wealthmanagement baton, says Jamie Bisker, research director ofTower-Groups insurance group. The insurance industry is wellpositioned because it has been talking about financial planning forsome time. It just needs to add a couple of tools to its toolkit,which its doing as a result of the financial services convergencethats going on. [Insurers are] well placed to move ahead with theirperception of being the trusted adviser in the financial servicesarena, he says.

Organizations involved in the process of financial planning havean understanding in terms of cross-selling or getting a largershare of the customers financial wallet. They have real input fromthe clients themselves, says Khirallah.

Wealth management extends the financial planning process andopens the insurer to a variety of distribution channels such aswire house brokers and independent advisers in addition to theirown agents. Technology used to support these functions is moreadvanced as well. Khirallah says the legacy systems in these firmsthat have been used strictly to support the sale of insuranceproducts have either been done away with or limited to performingonly basic types of functions.

Clients not only want to know what they can expect to happen tothem if their wealth management plan indeed goes as planned, butthey also want to know the likelihood that something might not goas plannedand what they should do about it.

Lifes uncertaintieslosing your job to a disability, the death ofa spouse, having to deal with a long-term-care situation, as wellas economic conditionsplay against your entire cash flow, explainsJ. Maxey Sanderson, vice president of product development forImpact Technologies Group. Most of our insurers use the WealthStrategies software to analyze the investors situation to see wherethe weaknesses are, he adds. If something goes wrong, the clientcan know what he can realistically expect. Then he can adjust hisplan accordingly.

Hitting the Target

ODay concurs. Obviously, any of us who are involved in financialplanning for a client also knows that any long-term planning is afiction, that youre lucky to hit the broad side of a barn with yournumbers. Impacts system allows you to save the clients data fromyear to year. Our recommendation is that producers use that data togo back and revisit their clients each year to see if they are ontarget or if they need to make any adjustments to their goals.

Jefferson Pilot also has agents who are running completelyelectronic offices. The software streamlines the process offunctioning electronically for them. They have the data file, andthey can create PDF files for their client presentations, thenarchive them so they have everything they need electronically, ODayadds.

The software also integrates with a software program calledProfiles, distributed by Financial Profiles. Impact Technologieshas a strategic relationship with Financial Profiles that allows adata feed accessible over the Internet. Our producers have usedFinancial Profiles for longer than they have used Advanced Impact,says ODay. The data feed allows producers to have all the casesthey did on Financial Profiles fed into the Advanced Impactprogram. This enables producers to have the information they needfor the advanced planning illustrations right at theirfingertips.

Other firms use wealth management software as a supplementalresource for decision support. According to one such firm [namewithheld by request], From the limited facts the broker has givenus, we can put together an illustration of a concept that mayapply, and the broker can use that illustration in educating theclient in that particular strategy. Then the broker, along with theclients legal and tax advisers, can make the ultimate decision onwhatever strategy is implemented.

Educational Tool

This kind of software also can work as an educational tool forproducers. The company above educates its representatives onadvanced planning strategies using the software. It is thenutilized to promote the use of financial products in estateor_business planning strategies. Jefferson Pilot uses Impactssoftware in a number of educational venues. We have recordedWebcasts on each of the modules of the software so our producerscan literally see, step by step, how to use it, explains ODay.

Her company regularly sends out e-mail to remind producers ofthe firms resources that are available to help them in their wealthmanagement practices. Its not focused exclusively on the software,says ODay. We send an e-mail four times a month. Three of those arefocused on sales ideas, and one reminds them of a feature of thesoftware or something that was on our Web site that people tend tobe unaware of.

ODay also creates case studies incorporating the use of thesoftware. This helps producers apply the software capabilities intheir businesses. Software is one of those things thats adouble-edged swordyou have to learn it, and theres a friction pointuntil you spend a little time with it. So you have to be motivatedto use this tool in your practice.

Traditional financial industry services are migrating into theinsurance arena, and progressive companies are adopting thetechnologies needed to support these services. According to Bisker,wealth management as an insurers service offering will continue togrow. Insurers have an advantage. They have what I call deepknowledge of their customers. They know about the things peoplewant to protect in their lives.

Bisker also sees the need for insurers to add both more productand technology tools to meet the upcoming demand from thebaby-boomer generation. 401(k)s, 529 plans, mutual fundswhen youtalk about literally managing the risk, carrying the risk, andunderstanding it, a financial relationship takes time. Insurersalso need automated tools to make sure theyre not missing anythingabout a persons particular lifestyle or goals. We used to rely onthe fact our agents and brokers just knew the solutions, but withthe modern-day complexity of things, its nice to know theressomething backing them up.