Finance veterans Todd Boehly and Bob Diamond are backing a startup aimed at a niche part of the sector: insurance and annuities sold through registered investment advisers.
Boehly’s Eldridge and Diamond’s Atlas Merchant Capital LLC invested $26 million in equity capital in DPL Financial Partners, the startup said Wednesday in a statement. Representatives from both firms will join a newly formed board of directors.
DPL, founded by David Lau, helps bring commission-free insurance products, such as annuities, to registered investment advisers, a sector of the adviser world that shies away from insurance products that charge commissions. Diamond said the DPL investment allows him to take advantage of trends such as the shift toward independent financial advisers and an increase in fee-based annuities.
“Technology can be really disruptive both in the shift toward independent financial advisers but also in the shift toward fee-based -- not commission -- annuities. Technology is a very big part of this,” Diamond, Atlas’s founder and chief executive officer, said in a phone interview. The investment also plays on another trend, “which is the blurring of the distinction between traditional insurance products and wealth-management products.”
For both Boehly and Diamond, DPL operates in familiar territory. Boehly is chairman of Security Benefit, which sells annuities, and Diamond’s firm teamed up with Cornell Capital and other investors in 2018 to buy a stake in Hartford Financial Services Group Inc.’s old annuity business, Talcott Resolution.
“Insurance is kind of lagging the rest of the world in terms of still being commission-driven distribution,” Lau said in a phone interview. “Our mission is to work with carriers to bring commission-free products to market, and that means repricing.”
The shift away from a commission model was apparent to Diamond when Barclays Plc, the bank he formerly ran, acquired parts of Lehman Brothers Holdings Inc. The U.K. business was far more fee-based than the U.S. one, he said, but now that structure is seeing wider adoption.
“Today it’s the accepted model,” Diamond said, “where it was kind of the emerging model 10 years ago.”