Are You Ready? Convergence of Financial Services John J. Kollar

Paper Purposes JK Vision What is YOUR vision of the financial services industry? How should the CAS meet the needs of members and clients in the future marketplace?

Specifics are not that important. All risks are not the same. Risk is risk. Beware of tradition! Change Some Comments

Some Key Issues Retain good clients –package discounts –longevity discounts –confidentiality of information –(client requested financial strength rating –comprehensive client financial records –integrated financial plan –comprehensive financial solutions Homegeneous group of clients –better client understanding/advice/service

Utopia Finanical Personal Financial Management Program For John Q. & Mary H. Public Account Information as of March 31, 2022 Client Representative: John Doe

Risk Management Pricing Diversity of services/risks risk concentration by client comprehensive client financial information/ single database –multi-disciplinary team –cost of capital analysis –risk securitization –reduced client fraud

Utopia Finanical Personal Financial Management Program For John Q. & Mary H. Public Account Information as of March 31, 2022 Client Representative: John Doe 5. Cash flow Management (banking services) –Checking –bill payment –Credit card –Debit card –product discounts –Line of credit –Savings

Utopia Finanical Personal Financial Management Program For John Q. & Mary H. Public Account Information as of March 31, 2022 Client Representative: John Doe 6. Budget Plan Debt financing Cash expenses Credit cards Capital development Home Career development College tuition Premature death Retirement Estate planning

Utopia Finanical Personal Financial Management Program For John Q. & Mary H. Public Account Information as of March 31, 2022 Client Representative: John Doe

7. Capital Plans 401(k) savings plan – Investment options Estate planning 8. Service Fee - March $1,000

Making of a Financial Services Company Overlapping services –contingent cash flows –investments –credit Cross-selling of services Responding to customer needs process changes tradition? NO technology

Making of a Financial Services Company (cont’d) –Market segmentation Securitization of risk –better risk measurement tools –greater standardizataion of different risks –basis risk managers –risk aggregators –reduced insurer capital –better margins Mutual insurers

Some Observations Small commercial market No fix for heath insurance –24 X 7 (all perils)

Some Observations Risk Management/Pricing –diversity of services/risk –risk concentration by client –comprehensive client financial information/single database –multi-disciplinary team –cost of capital analysis –risk securitization –reduced client fraud

Enterprise Risk Management (ERM) Large commercial risk International Integrated services –large commercial banks –financial reinsurers Alternative Risk Transfer Mechanisms –Self insurance –captive insurers –pools –risk retention groups –risk purchasing groups

ERM Risk Types Hazard Risk Financial Risk Operational Risk Strategic Risk

ERM Process Holistic view of Risk Integrated treatment of risk

Meeting Market Needs Skills Acquisitions Market-segment focused Risk integration Beware of tradition!