What Is DPL Financial Partners?

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This is the Transition To RIA Vendor Profile Series where we take a look at the solution providers powering the RIA model. On this episode:

Vendor name:

DPL Financial Partners

Vendor category:

Annuities

Episode host:

Brad Wales

Episode guest:

David Lau

Vendor contact info:

Website, 888-327-0049

Full Transcript:

Brad Wales – Hi, I’m Brad Wales with Transition To RIA, and this is the Transition To RIA Vendor Profile Series where we take a look at the solution providers powering the RIA model. On today’s episode, we’re asking the question, “What is DPL Financial Partners?” And there’s no better person to help us with that than the founder of DPL, David Lau. David, thanks for coming on.

David Lau – Hi Brad, great to be here.

Brad – I appreciate you joining us. I’m looking forward to the conversation and we’ll jump right in. So for those folks that have not heard of DPL before, maybe you could start by giving us that high-level elevator pitch, the 30-second kind of pitch of what exactly is DPL.

David – DPL is an insurance platform for RIAs and independent advisors. And what that means is that we work with carriers to bring commission- free insurance products, primarily annuities. We also have some life policies, cash-based life policies or cash-value life policies, long-term care, disability.

Then we bring technology to help you find the best products. So our technology is a huge differentiator. We’ve invested tens of millions of dollars in tech over the years so that without even knowing anything about annuities, you can utilize our tech to find great fee-based solutions for your clients.

Brad – And I think this is a perfect example of how the RIA model has evolved. As you of course know, David, but for our audience’s sake, you go back for example 10, 15, 20 years ago, this world didn’t really exist. That if you wanted to do fee-based variable annuities, it was very limited in what was available or hard to access. And that was possibly what prevented folks from making that change.

Now, in almost every instance when I’m talking to advisors that are thinking about making the change and we look at the remaining part of their broker-dealer business – whether it’s the use of variable annuities or other type of products – in almost every instance there’s a way to, as I say, solve for that and what DPL has arguably brought to the market, particularly on the fee-based side, has been a big part of that.

Has that kind of been your experience, or maybe what the nexus was, for starting DPL from the beginning? That you saw the need that existed for which there was no available solution then but now, for folks that are just looking at it, it’s available right out there?

David – Yes, exactly. Prior to building DPL, I built a carrier called Jefferson National, which a lot of RIAs have been familiar with, that is one of the only successful carriers in delivering products to the RIA market. In building Jefferson National, I basically understood the needs of the RIA, and we were just a single carrier.

So I thought a better model for serving RIAs was to build a platform instead of always just having our single product and always selling our own stuff. And I saw other carriers trying to get into the market and really not knowing what they were doing, both from a distribution and a product manufacturing design point of view.

So I thought about how to better serve RIAs and their end clients. When you take the commission out of an annuity product, you’re dropping the price by like 80%. It’s massive.

So I thought, let me go work with carriers, help them design products and help them build products that are low cost, fee-based, high value that we can then offer in a marketplace through technology that gets deeply integrated into the advisor’s desktop.

So you start taking away all the barriers to using annuities in your practice. Now you enable RIAs to bring in held-away assets to more holistically serve their clients with insurance needs.

Because again, if we want to dial the clock back 15, 20 years ago, RIAs, their value proposition was managing money, doing it as a fiduciary on a fee basis. Well, pretty much every advisor says that now, right? Regardless of the channel.

So as an RIA, you really need to be able to provide holistic solutions just like wirehouse reps can, just like broker dealer reps can, because at those firms they can provide holistic advice and product solutions.

So delivering insurance for RIAs, I think, becomes increasingly important. Funding a 30-year, ever-expanding retirement is really challenging just out of a portfolio.

So annuities are really important products and I think while most RIAs have never liked them, what they haven’t liked is the commission and the expense associated with those and the lockup periods, the surrenders. When you bring fee-based products to the market you wipe out all of those concerns.

You start building a product that delivers high value that’s valuable for the advisor, for the planner, for the client, and you make it easy to use in a fee-billing way, and it’s just been a great solution for advisors and firms.

Brad – So how do you, for folks that like that message and say, hey, I maybe haven’t used fee-based variable annuities currently. And so in that forward state, okay, this sounds great. And we’ll get into a little bit of the mechanics, and you provide access for all that. But what about the folks that, while that sounds great for going forward, they do still have a meaningful amount of what’s often referred to as legacy positions, whether they’re commission variable annuities type things. What kind of solutions does DPL have to help with that regardless of what might work going forward? You still have those positions to manage.

David – We provide every type of annuity. We’ve brought more than 20 carriers to market and we’ve got 80-odd products. We do variable, fixed, fixed index, BSDs, RILAs, all the alphabet soup, right? We’ve got all of them.

So the market we serve is that traditional RIA who’s never been able to use annuities before without conflict because now they can get paid on them. Before, if you used an annuity as a fee-only RIA, you’re losing money because you’re allocating some of your AUM to a product you couldn’t get paid on.

To your point, we also work with hybrid advisors who’ve already switched their asset management business into a fee-based model, but they have commissioned annuities and they might continue to use commissioned annuities, and they get paid maybe trails on them. Some maybe they don’t get paid trails on, but some of their book, they get paid trails.

One of the great pieces of technology we’ve built is what we call our annuity comparison calculator. So whether you’re an RIA or you’re a hybrid advisor, simply use this tool. Literally, you can take a photo of a statement,  do a look-up on our tool, and we will instantly give you a comparison of your client’s existing product to a new fee-based product.

The comparisons are striking because the value proposition for a fee-based product is so great. So now you can transition those products through a 1035 exchange.

We can also do that in mass. So if you download all of your annuity policies, and we just did this for a firm with over $4 billion of annuity assets, we can run that through our tool in mass and let you know exactly what can be switched into what products and do it on a mass basis.

And then for anything that the last bridge we crossed in solving for advisors was anything that can’t be moved through a 1035 exchange, we’ll change the agent of record and move the assets onto our broker dealer.

So that if you’re leaving a broker dealer or a wirehouse, you’re not leaving any clients or assets behind. We’re helping you transition all of them. Then when we bring them on our platform, we can hire you back as the advisor to manage that account.

We don’t want to get in the way of the client relationship. We want the advisor to maintain the relationship, this just makes it a complete solution for leaving that broker dealer or leaving that wirehouse without having to leave clients or assets behind.

Brad – And that analysis where you’re seeing where it makes sense to do an exchange is not a one-time exercise, right? A one-time exercise might identify all the current annuities that might be held that would be arguably more advantageous, make it some sort of change.

But I assume with time and changes in annuity products and interest rate environments and all that, that what might not be a fit today could be six months, two years from now. So is that analysis something that folks would do more than just once?

David – Yes, exactly. We’ll make the recommendations up front, you know, like these policies can be moved, but one of the biggest reasons that a policy can’t be moved is it’s still in surrender, right? So there’s going to be a big penalty if you move it.

So then we will continually monitor those policies for the advisor and continue to review when it’s appropriate for a 1035 exchange, presuming it does become appropriate. We then will go to the advisor and say, okay, this policy can now be moved. And it’s usually a great story for the advisor. They can show the client where they’re getting a much better value on this product that they own.

So you see that happening in mass when somebody’s leaving their broker dealer or their wirehouse, but then also for the traditional RIA, their clients own annuities.

This gives them the ability to, again, very simply provide a quick technology-driven review of that policy and get a recommendation for the new policy, basically bringing in held-away assets while giving some very good news to your client on a new product.

Brad – We’ll get into how folks can reach out to you and your team. For folks that this is kind of resonating, I like to set expectations of what they could expect with the potential connection with you.

How would you define the minimum kind of size relationship where this maybe makes sense for an RIA to be working with DPL? Is that based on those legacy positions? Is that based on potential for going forward? What does it need to work for both sides?

David – We work with RIAs of all sizes. So we work with small individual practitioners. We work with mega roll-up firms who are acquirers and consolidators. We work with a lot of them because we can help transition blocks for businesses they acquire. But on the individual basis, leveraging our tools is something that anybody can do.

If you have a single policy that a client has, just use our tool to get the comparison and you can get the recommendation, be off to the races with an application all set. The power of the platform is that now we’ve digitized and made easy the comparison and selection of annuities and then digitized the application so that we’re making it very simple.

Part of the advantage of building the marketplace that we have is that, unlike when I was building Jefferson National, we are not a one-trick pony.

Jefferson National had one product that was super cheap, $20 a month, flat-fee variable annuity, but all it was good for was a 1035 exchange to lower cost. But what we ran into, and I found a lot, was that clients bought an annuity because they liked the income feature.

So now we’ve got many, many products that deliver income, products that can deliver principle protection or those simple, Jefferson National-like products that are just cheap tax deferral.

When you use our tools as an advisor, you again don’t have to know the difference between a variable annuity and a fixed-index annuity. You simply tell our tool the goal- my client wants income, my client wants downside protection- and then we will find the right product to match with that client. So, you know, it really couldn’t be any simpler.

Brad – And with all these different solutions and whatnot, everyone wants to know if I’m an RIA, what does this cost me to use DPL, to use this tool, to use these investments or insurance solutions? How do you kind of package it up from a price perspective?

David – We have a platform fee depending on the size of the firm. The entire firm gets access to our tools and our team. We’ve got about 40 consultants who support the firms that we work with. The price ranges from $1,000 to $5,000. It’s a pretty minimal fee for access to the platform.

Brad – How does that new user get trained on all that’s available to them and how to use this conversion analysis and all that sort of thing?

David – We have a team of consultants, again about 40 consultants, that support advisors, product education. We also have tons of online resources for product education.

And again, you don’t need to become a product expert, right? I mean, you probably just want to understand how a fixed-index annuity works, right? Or how a RILO works. But you don’t need to be an expert on Allianz’s product versus Equitable’s product because our technology is going to be the expert.

Our technology is trained on those products. At the heart of our technology, we’ve digitized pretty much every annuity ever sold. Over 3,000 annuity contracts with over 10,000 riders and all these price points. So we can model any annuity, right? So when your client has that old annuity, that’s how we can model it and then compare it to a new annuity.

As an advisor, you’ve got access to our team and our technology, all of our online educational resources. So you’re going to be supported in getting launched, in particular, because one of the big things for firms is this is a new business process.

So they want to know “How does this get integrated into my portfolio management system?” Well, we’re partnered with Black Diamond, we’re partnered with Orion, we’re integrated pretty much anywhere.

We will help facilitate getting the data into your systems, we’ll help you get set up for fee billing so you can get paid. So basically we’re going to handle all the business process consulting for you to get you up and going.

Brad – I’m glad you see it that way because as you know for that breakaway advisor this is just one piece of the equation that they’re solving for so the more resources to make that as easy as possible, obviously the better.

If that potential breakaway advisor does reach out to your team, they do have some legacy positions, they’re maybe interested in whatever going forward, what can they expect on that very first conversation with your team?

David – So where we’ll want to get to is to understand what does your book look like? So if you do have a book of annuities you’re earning a trail on, if we can get a download of the data of those policies, we can run them through our tool and give you an estimate to say, here’s what we think can be moved, and here’s how we’ll handle the rest of the policies.

And we’ll show you the differences in your revenue as well as the clients getting a better product. We’re going to show you how much the product has improved for the client. Then we’re going to show you the differences in revenue.

Because a lot of times, we’re typically seeing that somebody is earning 30, 35 basis points in trail. When we convert this policy, they’re now into a fee-based AUM policy that’s generating 100 basis points or whatever they charge as their advisory fee.

So not only are you increasing the revenue when you’re positioning yourself to be purchased or roll into another firm, you’re going to be more highly-valued because you’ve got more fee-based revenue.

You know commission revenues typically get either completely ignored or you won’t even look attractive to some of the acquirers who don’t want to look at advisors with commissioned revenue, and you know that better than me.

We’re going to turn it into higher quality, higher-amount revenue for the firm, which improves the value. And then we work with many of the acquirers, so they’re going to do it once you move there. So if you’re an individual firm looking to go RIA, do it before you get acquired. So you’re going to get the value from that transition.

Brad – I was just going to say that it’s interesting that yes, it arguably should happen regardless and yet it’s whether you do it and then get the multiple that comes with that or you don’t do it and the acquirer is gonna do it after the fact, oftentimes with your help anyways during the transition process and then they experience that economic upside.

I think that’s great advice indeed. For folks that when they do reach out, again we’ll stay on the breakaway theme, how much time do you typically suggest for that education phase of “Is this even the right solution for me?” How does it work and what all that needs to go into that?

If they like the solution, there’s work to be done, here’s exactly what’s going to happen after you launch and here’s whatever, maybe there’s a paperwork process or whatever that is.

So in an ideal measured approach, how much time would your team typically like to have, again, from that breakaway scenario, from first conversation to when they’re launching?

David – I’ll give you the answer everybody loves. It depends, right? It depends on the size of the block, how many different carriers is it with, et cetera.

But just for perspective, we just helped a firm break away, and they moved over $4 billion of annuity assets, over 26,000 policies, and that process took about seven months. And it could have been probably more compressed but there were a ton of moving pieces that we had to nail down.

We continue to bring additional technology and resources to make this easy for advisors. So I would say with the typical advisor, if they’re engaged and into the process, we can probably get them moved in three to four months, depending on the size. If it’s a smaller block, then it can be a lot faster.

Brad – Yes, certainly you’d love every kind of client of DPL to be the four billion one. Those don’t come along too often.

It’s a nice testament that before we hit record I was reminiscing with David about being the founder, for those that have not followed the very, very successful entrepreneurial story for David and his whole team. I’m sure when you launched it, the thought of bringing on a $4 billion opportunity was a bit far off or seemed far off and congrats on now making that reality.

David – Sure, thank you. I mean, certainly when you first open your doors, you’ll work with anybody. So anybody who’s going to take your call, engage with your firm, you’re very happy and pleased with.

Then over time, you create the capabilities to serve larger firms. And you also create the credibility of being able to serve those firms. So it’s definitely an honor to partner with many of the large firms that we do.

And it’s testament to the whole team here, from the technology we’ve developed to the support we’ve created that those firms entrust us with those kind of assets at this point and those kind of big moves.

When you’re going independent, there’s a lot of moving pieces as you well know, Brad. And having a partner like us who can really handle the annuity side for you is just great value.

Brad – Indeed. With that, I appreciate you coming on. To wrap up, what is the best way for folks that are listening or watching along here that would like to learn more? What’s the best way to reach out to your team?

David – Yeah, reach out, go through our website, DPLFP, DPLFinancialPartners.com. And on there you’ll find our phone number if you want to reach out and get in touch with one of our consultants. Or if you’re a Black Diamond or Orion customer, you can get linked to us from your team at Black Diamond or Orion. Reach out through them. Also a great way of getting engaged.

Brad – To say it again, just for those following along, I’ll put it in the show notes, but DPLFP, DPL Financial Partners abbreviated dot com, get all the info. So David, with that, I appreciate you coming on and helping us explore what is DPL Financial Partners.

David – Awesome, thanks so much for having me, Brad. Good to see you.

Brad – You too.

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