First teh ML Rule, next Full Commission Disclosure

[Fee-Only Guy]

1. Stock portfolios are also more volatile compared to bonds, and as such, could hurt the portfolio with would reduce AUM fees, therefore this is not in the advisors best interest. It is in the advisors best interest to create a diversified portfolio, combining negatively correlated, risky asset classes, to create a portfolio that has a smooth upward pace over time.
2. Recommending various insurances is part of the advice requested by the client. To ignore this fundamental part of the relationship would be ludicrous! It does not hurt a fee-only advisor to recommend this. It protects the client’s assets. This advice would be contained in a plan that is paid for by a fee. Some do the plan as part of AUM fees. Either way, risk management is part of the equation, however not so for the salesman. Poor argument.
Mode of compensation is directly involved. The commission salesperson has no interest seeing the assets of the client grow, only that they will buy more funds/annuities/insurance.

Are you kidding me? How can you say that commissions are small when more than 100% of the first year premium is being paid out to the master agent, and selling agent? We still debate on the merits of the no-load products. No one has offered a direct analysis yet. No-load products are in their infancy. I assure you that as the fee-only model grows, so will the need for no-load products. With a larger distribution channel of fee-only advisors, the products will get better and better and the loaded ones will become the minorities. To think otherwise is being in denial of the future.

The commissions are a cost that is transferred to the policy holder. To say that equal policies would cost the same if one had a commission and one didn’t is laughably ridiculous. I don’t know what universe allows 100 + 10 to = 100? It ain’t this one!

So wait. You are telling me you would charge a fee for a plan, and then earn a commission for selling the insurance? You are double dipping. And don’t try to tell me it’s cheaper for the client. I thought we were talking about the commission agents who want deserve to earn huge commissions because so many people waste their time. Now you are telling me you get both? And you’re gonna say you’re not impartial? Riiiiiighht….

Putting the clients interests first has nothing to do with mode of compensation. It is the conflicts that exist, and you have done a very poor poor job or argueing the conflicts that exist for fee-only advisors. The fact still remains that commission salespeople have more conflicts. Gee what should I sell this person? An annuity at 8.5% or a mutual fund at 5%? This basic conflict never exists for a fee-only planner. EVER. Want to minimize conflicts of interest, stop selling products where the commission varies by product type!

Bluemarlin08, I never say that fee-only is the only “honest” way. I am saying it has less conflicts of interest. Try reading my posts and you will see that. There are dishonest fee-only advisors, and there are honest commission salespeople. Still doesn’t change the fact that there are more conflicts when selling. I know because I have been on both sides. I sold product and I didn’t like it. I didn’t like putting a plan together and having my income dependent upon the client purchasing a product. I get this from experience. So I have seen both sides. How many commissioned people here were fee-only and then went back to commissions? Right, none. Or how many started out fee-only and went commissions? Right, none. And it is true that you can make much more money starting out by earning commissions than earning fees. It takes years to get a practice profitable earning fees. Lookup the definition of “objective.” It means unbiased, without conflict. So my “perceived” view is based on experience of both worlds and the fact that there is basically only one conflict as a fee-only advisor yet there are multiple conflicts for a commission salesperson constantly.

Observer,
And many planners charge a flat % of AUM, some charge hourly, some charge retainer. We set our prices based on the value of the service. Greater assets, income, and networth generally indicate more complex and time consuming issues to deal with. There again lies a fundamental difference between a financial advisor and a products salesperson.

Bss,
Thank you for your point. Well said. Commission salespeople don’t have to worry about putting their practice on the line for selling mutual funds as long as they are suitable. So yes, those of us that have a legally defined fiduciary duty will do what is in the best interest for the client. Commissioned salespeople don’t have this requirement, only that the recommendation is suitable.


So where are all the rest of the fee-only advisors on these boards? Did the not participate anymore? And why?

[the observer]

Jeremy,

I have a problem basing a fee on the client's net worth simply because, in your words "Greater assets, income, and net worth generally indicate more complex and time consuming issues to deal with."

I've often seen financial planners formulate exceedingly complex estate plans for clients and charge 2-4K for the job. However, no estate planning lawyer worth his salt would ever accept the recommendation of a financial planner, so, the lawyer charges his fee for performing an analysis, which may or may not draw the same conclusions. I do see a double dip here though unless the planner is a lawyer.

Same goes for the exceedingly complex tax planning some planners undertake before referring to a CPA, who files the forms an d takes responsibility for the numbers, meaning he does his own calculations and charges for them as well, another double dip unless the planner is a CPA.

Planners without a license to practice law or without an EA or CPA license should agree that they are only performing certain tasks in order to make themselves look attractive to manage the assets. It's all about the money and gathering assets, should they really charge so much based on net worth, or is this dipping too far in the client's pocket?

And as far as double dipping on the insurance, and as you know because you've read my article, it's perfectly legal in CA to provide free insurance planning as part of a comprehensive financial plan as a licensed insurance agent and earn a commission, it's illegal for fee only planners to provide the same advice for free as part of a plan when they don't have a license. I'm not sure I concur with a double dip there, unless I missed your point?

I also disagree with your statement "The commission salesperson has no interest seeing the assets of the client grow"... In fact, I worked on commissions for 15 years and no matter what, i always tried to maximize client returns because it got me lots of referrals, which meant I didn't have to spend money marketing. You don't get jack from unhappy clients, just another reason to do the right thing. I still have a book full of insurance and brokerage clients going back to 1986, some have transitioned to frees, others didn't but give me referrals still, good business practices are good business practices.

Finally Jeremy, and think about this, just because a conflict "exists" it doesn't necessarily follow (other than in the mind of a fee-only planner) that this conflict will prevent the planner from doing the right thing. Too many fee planners jump to the conclusion that conflict of interest equals misconduct... it doesn't. And let's be honest, some of the largest fraudsters in our business over the years have been RIA's with custody and discretionary authority.

And when it comes to written disclosures, you wrote: "those of us that have a legally defined fiduciary duty will do what is in the best interest for the client." If a commissioned sales person truly decided to do exactly this and ran the text by his 24 at the B/D, he'd almost certainly be forced to write "those of us that have a legally defined fiduciary duty "may" do what "in our opinion" is "considered" in the best interest for the client. WHY, because nobody's perfect and B/D's recognize that even fiduciaries can screw up. :-)

BSS, in order to stimulate discussion it's good to look at things from all sides and as far as disclosure is concerned, if one reads the kind of disclosures Brokers are forced to make regarding conflicts, I do think fee only planners need to disclose more of their own conflicts. I could argue and have argued positions from both the commission and fee side, it makes for interesting conversation and discussion... not forgetting and despite all the passion displayed here, we are all only yakking, the States and the Fed don't really care what we think and they'll continue to do what they want anyway.

[orrgroup]

Exactly.

Precisely why I charge based on someone's financial position, not whether they have money with me or not. This is the best way to go, but you end up with more of a "fee-conscious" problem that you have to manage.

[orrgroup]

We are not just selling any product like cars or shoes. We are talking about a public health issue. Financial health.

Food and drugs must disclose contents, side effects, calories, etc etc. Because it is a public health issue.

When I buy a ceramic coffee mug, I have no disclosures to look at. It could be ceramic, it could also be reconstituted plastic. Who cares? Its only a coffee mug. Yes, its a product, bjt its only a coffee mug.

When I put my life savings into an EIA from Safety harbor Life Ins Company from Nowhere Good, USA, its not just my life savings. Its far more important than the coffee mug and, thus, I should be told in very clear terms all about that product inclusing the compensation that is incenting the agent. Yes, its a products, but its one that has tied to it a very real and important public health issue attached.

[orrgroup]

Fee-only is not the abscence of conflict. Just less or the least.

Not recommending insurance is unethical, irresponsible, and subject to malpractice.

[orrgroup]

There are very few fee-only advisors on these boards. Or anywhere for that matter. Its a fairly rare thing.

[Fee-Only Guy]

I agree Andrew. And the fact that there are so many commissioned brokers/agents out there means there is a greater possiblility for misconduct and abusive sales practices. We see this often as the big firms are constantly fines for abusinve sales practices and a variety of other unethical practices. The great potential for misconduct means that there will be a greater number of those who do in fact engage in illegal and/or unethical activity.

Hey this world isn't perfect nor is this business. All in all, I have found the fee-only method to have the least conflicts of interest, better client relationships, greater trust in the advice, creates a revenue stream that has value, and I just feel better about it. I don't feel like I am having to convince people of things they don't want to be convinced of. i find people are more willing ot act upon advice they pay for directly. Otherwise they just feel they are being sold something. Certainly not everyone agrees with the fee-only way.

We will never agree which method is better for the client, cheaper for the client, or more ethical. However, One thing is for certain. The media and the public are becoming more aware of the fee-only method and it's benefits to consumers. More and more people are being drawn to this way of doing business and for good reason. This may be a small percentage, but it is growing, and it is growing rapidly. Over time, whether people like it or not, will become the majority, and those still on commission will find it harder and harder to do business their way eventually causing many to make the switch. This will happen. It will be a business decision many of you will eventually have to make if you want to continue in this business. You can deny it all you want and go on and on of the merits of commission based financial planning, but hte consumer is getting wise, and doesn't want to be sold anymore.

Plus this will never become a true profession if we still earn commissions on product sales. It will only be a profession when the standard is charging fees, just like accountants, lawyers, doctors, etc.

[the observer]

Andrew, you make a good point and since there are, to my knowledge, only 2 pure fee-only "comprehensive" financial planners that are licensed to offer all aspects of advice including on insurance matters for a fee in California right now, I'm wondering why there is such a big fuss to protect "fee-only", a term already deemed generic and not worthy of protection under US Trademark law and a term that can be used according to States and the SEC by Registered Investment Advisers in public practice when handling regulated securities.

Not forgetting, consumers are for the most part completely ignorant of our compensation practices and those who insist on fee-only have no real idea that their planner in CA is probably breaking the law.

[anonymous]

"You are telling me you would charge a fee for a plan, and then earn a commission for selling the insurance?"

Sorry, Jeremy, I got bored with the thread, but I will address your question since it was directed at me.

The answer is "yes". The more complete answer is that after putting together a plan for a fee, I give them the choice of implementing with me, with someone that I can refer them to, or the person of their choosing.

They always implement with me. The reason is that it's much easier for the client since they are already in my office, thus it saves them a couple hours of time and I know all of the information for the application.

You need to stop talking about no-load insurance products. It simply makes you sound unintelligent when it comes to insurance. Stop asking for an analysis. I challenged you before and I'll challenge you again. Make-up any scenario that you would like, and I guarantee that the best insurance for your client won't be a no-load product. I'll go first and you tell me about the competetive no-load product.

Scenario: Lawyer makes $150,000. He has group DI that is company paid for 60% of his salary. He works because he needs his income. My recommendation: Guardian with all of the important bells and whistles. What no-load product beats this?

[nedbenz]

It happens quite frequently. Often don't have a clue if a client needs additional product but charge a fee then often implement product

[mattengelmann]

Here's what I still don't get. The original point of the thread was mandatory disclosure of commissions.

How does a consumer determine if product A or B is better for their situation when they know the amount of compensation (commission or fees) an adivsor will receive?

Will the lower commission or fee product always be better for the consumer?

[ross.lipman]

John wrote:

> Here's what I still don't get. The original point of the
> thread was mandatory disclosure of commissions.
>
> How does a consumer determine if product A or B is better for
> their situation when they know the amount of compensation
> (commission or fees) an adivsor will receive?
>
> Will the lower commission or fee product always be better for
> the consumer?

No.

[anonymous]

"But full disclosure of total fees, including commissions will allow a fair analysis." It's the total fees that matter. The commission doesn't. It is impossible to tell the client the total fees of a participating life insurance policy because it is impossible to know this information in advance.

Jeremy, I'm still waiting for one example where a no-load insurance product is best. If you can't come up with one, it's awfully tough to buy your view that no-load is sometimes the best.

[the observer]

Jeremy, you wrote:

"But full disclosure of total fees, including commissions will allow a fair analysis."

Sorry, but that's rubbish.

There are far more important factors to consider when looking at an insurance product of any kind and frankly, even total cost is irrelevant to many other factors. I couldn't give a damn about the total cost if the company isn't going to be there to pay up 20 years from now... Those who have watched disability or LTC companies come and go and leave their policyholders holding worthless policies know exactly what I mean. To know so little about the topic and yet demand so much of what is truly irrelevant is an affront.

It's a pity that many of the powers at be on the CFP Board of Governor's just don't understand the business of insurance... Oh, the theory of insurance and needs analysis maybe, but the business, NO. Furthermore, they should not be making such incredibly misguided demands on disclosure, while at the same time accepting the very meager disclosure contained on an ADV form Part II as being sufficient for a RIA.

It violates the very tenets of the CFP Board code of professional responsibility to develop regulations for CFP® Certificants without the necessary expertise in the subject matter. What's needed is a few more 20 plus year veteran insurance agents on the Board of Governors to guide and assist them in creating policies that will not decimate the ranks of CFP® Certificants, thereby severely damaging the CFP® Marks and its standing as a distinctive and famous Mark of Choice.

[Fee-Only Guy]

There is no rubbish in my statement. This isn't about the merits of all possible aspects of an insurance policy. It is about the disclousre of the commissions. True the commissions don't matter by themselves, however they must be looked at as part of the total fees paid by the client. This is assuming that all other factors including the strength of the company are all the same. If one company is stronger than another, it is likely to have a different cost. But that is where the flexibility comes in. The same arguement could be used in the case of a captive agent. A cative agent of company X can only sell company X insurance. They are not even able to consider another company's product for the client. Simlilarly a commission agent who can shop companies will not even consider a no-load policy. There is no reason to.

So to answer your question anonymous, I don't need an example. There will always be different variables. But the question I have to you is are you even willing to look at a no-load policy and consider it's various merits against a commission policy? I would suspect not likely since you don't have a financial interest in doing so. You will find a commission policy, albeit the best and most cost effective for the client, without considering the posibiility that a no-load COULD be better.

As I have stated previously, I am not suggesting no-load is best hands down in all types of insurance. I am suggesting that if we are doing what is best for the client than we will look at all possible options regardless of compensation. I am willing to look at all options, are you?

BTW. I have seen analysis of commission policies vs no-load. When the internal fees and costs are all broken out, the comparisons I saw, the no-loads were better. I unfortunatley do not have these analysis' which you will likely attack me for. I was a member of the Fee Advisors network for about a year. This group specializes in fee insurance design and analysis. If you are curious go to the website http://www.feeadvisorsnetwork.com/ and see for yourself.

[mattengelmann]

James-

You are asking anonymous if he would consider a no-load policy. Even if it did have a slight edge, would you work for free?

Would your clients have more money if you worked for free instead of charging a fee?

There are 100 cents in every dollar whether it's fees or commissions. Unfortanetly, there is a difference in cost vs. value, therefore the disclosure of commissions doesn't prove anything of value to the consumer.

[bss]

If it could be said that every agent always picks the best policy for the client, regardless of the commission; then and only then would there be no merit in disclosing commissions.

The fact of the matter is that every day an agent chooses policies based on the commission. My experience in seeing many, many cases tells me that the commission is the overriding factor for most agents.

I can't think of very many industries where so called professionals tout themselves to be unbiased and are exactly the opposite. To make things worse, the laws are written to protect them.

A fiduciary standard of care-BACKED BY THE LAW-is needed for all planners, registered reps, and agents.

[asa]

I could not disagree more strongly with the idea that financial advisors as a group are more conflicted/less ethical than other professionals. Let me give you a current example from the wonderful world of medicine. Hopefully it will inject some badly needed perspective into this boring, stupid, commission/fee debate that refuses to die.

The March 29, 2007 New England Journal of Medicine has a review article (Withdrawal of Albuterol Inhalers Containing Chlorofluorocarbon Propellants by Leslie Hendeles, Pharm.D., Gene L. Colice, M.D., and Robert J. Meyer, M.D.) that blesses the criminally stupid FDA decision to replace CFC propellent with HFA propellent in the albuterol rescue inhalers used by 25 million asthmatics and other respiratory patients.

This was mandated by an international treaty designed to protect the ozone layer (I kid you not) by eliminating all CFCs. The lead author, Leslie Hendeles, recently admitted that CFC albuterol inhalers NEVER posed a threat to the ozone layer by the way, but the FDA never tried to prevent the CFC albuterol ban, which will undoubtedly result in many unnecessary deaths.

The problem is that two of the three HFA inhalers (IVAX PROAIR HFA- a subsidiary of TEVA, and PROVENTIL HFA- from Schering Plough)use ETHANOL as a dispersing agent. Ethanol causes BREATHING PROBLEMS as a common side effect, believe it or not. I have an on-line petition with literally hundreds of comments from people all over the country talking about how they themselves, their children, or other loved ones are now suffering terribly and deteriorating badly, requiring ER visits, from severe uncontrollable asthma as a result of these new inhalers that are NOT as safe and effective as the old CFC inhalers. (Only VENTOLIN HFA, by GlaxoSmithKline uses NO ethanol, something worth remembering if you have any family, friends or clients who have asthma, COPD, or emphysema.)

Here's the point: this is the disclaimer at the end of the article that discloses the conflicts of the three authors:

"Dr. Colice reports receiving lecture fees from GlaxoSmithKline and consulting fees from IVAX/Teva and
Schering-Plough. Dr. Hendeles reports receiving a research grant from GlaxoSmithKline and consulting fees from
AstraZeneca. No other potential conflict of interest relevant to this article was reported.
Dr. Meyer's participation in this article represents his personal views and does not necessarily represent the views of the
FDA."

I've read plenty of medical literature- and this is how M.D.s disclose their conflicts. They disclose the fact that they are PAID by their drug company sponsors- but they never disclose how MUCH they were paid to render their 'unbiased, objective' professional opinions.

Something to keep in mind the next time you are tempted to go on a moral crusade against financial advisors who disclose the FEES that a client pays rather than the PERCENTAGE of the fee/commission that the advisor earns. If this level of disclosure is good enough for academic M.D.s whose published articles really ARE matters of life and death, I think it should be more than good enough for financial advisors, who, on all of their worst days combined, probably haven't killed anyone.

[anonymous]

"True the commissions don't matter by themselves, however they must be looked at as part of the total fees paid by the client."

All that matters is the cost that someone pays for what they receive. The breakdown of the cost is meaningless. My client doesn't care that term policy "A" pays me $500 commission and policy "B" pays me $400. He cares that policy "A" is $800 and policy "B" is $900.

"So to answer your question anonymous, I don't need an example. There will always be different variables. But the question I have to you is are you even willing to look at a no-load policy and consider it's various merits against a commission policy?"

The answer is "no"...for now. The reason is not because of my lack of compensation. I would have no problem working on fees. Rather, the answer is "no" because I have yet to see any set of facts that would ever cause a no-load policy to be the best for the client. Jeremy, this is why I am giving you free reign to make up facts of your choosing. If you can come with a scenario in which a no-load policy is the best, I will start considering them for my clients. You seem to be unable to do so.

I am willing to look at no-load. Are you willing to stop looking at no-load if you can't come up with a scenario in which no-load is best?

"BTW. I have seen analysis of commission policies vs no-load. When the internal fees and costs are all broken out..."

Please explain how you can see the costs all broken out in a participating whole life policy? You may have seen this with a UL policy, but not with participating WL. I say this because there's no way to know what the actual costs will be.

bss, I'm curious. What exactly would I say to disclose my commissions? Seriously, in exact words, how would I disclose what I make?

[the observer]

Jeremy,

You've often mentioned "no-load" insurance products, I've yet to find one, nearly all the so called no-loads have a load of some kind. If you can provide a list of TRUE no-load products, I'm sure we'd be interested in reviewing them. There are a couple of companies that don't pay a commission and let you choose your own compensation, but these aren't available in many States because each State's insurance laws are different.

BSS

You write: "A fiduciary standard of care-BACKED BY THE LAW-is needed for all planners, registered reps, and agents."

It's an "ideal", but totally impractical at this time and, as such, regulations developed by the CFP Board should reflect current laws in America, not "ideals" that we may want to strive for many years from now. How would you personally reconcile an agent's fiduciary duty to the client under the law of contracts when he already has a fiduciary duty to the company he represents? It would require total independence for all agents, the elimination of all minimum production requirements, costs to the policyholders would skyrocket. It would be next to impossible given current technology and the lack of available comparative analysis (similar to Morningstar and Value Line for Mutual Funds) for any agent to stay on top of multiple lines from multiple carriers all the time and the liability that attaches to a "fiduciary" obligation in a "product sale", since there are so many products out there that could be utilized, would probably be uninsurable.

Also, you would immediately place ALL the captive companies outside the law, because you can't be a fiduciary with one arrow in the quiver.

BSS, If you'd like insurance agents to have a fiduciary duty under the law, then please first explain in detail how you would go about creating a framework for change within the insurance industry that would, by its very creation eliminate the life agent license nationwide in favor of independent life broker license only, the creation and introduction of thousands of new product choices that meet the requirements a fiduciary broker would expect and most of all, a framework that the industry and its all powerful lobby would accept. Also explain why the vast majority of CFP® Certificant, insurance agents would buy into this at the CFP Board level when the law of the land and each and every agency contract signed by the CFP® Certificant directly conflicts with any such CFP Board rule created.

What any kind of move by the CFP Board in this direction would achieve is an probable 50% reduction in fee income for the Board, (after all, there's no point in maintaining a CFP® Certificate if the insurance carriers won't let you display it) the loss of their "influence" based on a reduction of licensed professionals and the reduction of FPA members once again, in favor of other organizations that are prepared to work within the current legal framework as they seek change for all. Frankly, I just can't see how this benefits consumers.

[Fee-Only Guy]

bss,

I agree with you. There should be clear disclosures that explain the agent is PAID by the issuing company for “unbiased” advice. And to go a step further, not only could one show the difference in cost of the policy but could also show if they happen to make more money on a higher cost policy? But why invite client skepticism if you can just avoid it altogether.


Anonymous,

How can you dispute the fact that a higher commission will affect the cost of a product? It’s ridiculous to think it doesn’t. Surely there are other factors, and commission is one of them.

How will you know if the no-loads are decent or not if you won’t consider them? How can you tell me that all no-loads suck and commission are better if you won’t consider them? Sounds more like you are the one making up facts. Facts you can’t know because you don’t look. As I said, many times, I refer to insurance specialists that DO look at both the no/low-loads and loaded policies. I have been told that many cases of term that the no/low-loads are not always the best, however in the case of permanent, the no/low-loads beat the pants of commission. Either way, they consider ALL available options on a case-by-base basis, which you do not, to determine what is best for the client. You are leaving out a complete segment of policy type simply because you THINK it’s not good, but you won’t look. Perhaps you should take another gander. Go to the Fee Advisors Network website. There are some comparisons there. Call them and ask yourself.


Observer,

Some are true no-load, and some are considered low-load. Ameritas Direct is one provider that I know of that offers no-load. I hear about many other companies developing similar products to cater to the fee-only advisors. It’s happening, slowly but surely.

Which brings me back to a previous point. Take any insurance policy and simply strip the initial and on-going commissions. It WILL be cheaper. 100-10=90. Plain and simple. If anyone thinks that 100-10 is anything other than 90 then they should go back to 2nd grade math class.

This fee vs. commission debate will never be settled because there is no right answer. The recent article in the Journal of Financial Planning makes great points on all sides. Take a look. http://fpanet.org/journal/articles/2007_Issues/jfp0507-art7.cfm

[anonymous]

"How will you know if the no-loads are decent or not if you won’t consider them?"

The problem is that you (or anybody else) can't point to any situation where a no-load product is the best. Give us an example of when you recommended that a client buy a no-load insurance product. I guarantee that I can find a load product that is better for that client. If I can't, I will start considering no-load products. Are you up for the challenge?

"Take any insurance policy and simply strip the initial and on-going commissions. It WILL be cheaper. 100-10=90. Plain and simple. If anyone thinks that 100-10 is anything other than 90 then they should go back to 2nd grade math class."

You need to see the bigger picture. This isn't 2nd grade math. It is advanced economics.

Let's look at a couple of examples that show the fallacy of your thought pattern.

#1) The commission is stripped from the term policies in a no-load product. Why is the price more expensive?

#2)The Boston Red Sox cut their payroll next year by 30%. Do ticket prices drop by 30%?

#3)Saturn Car dealerships start no haggle pricing and pay their sales people salaries instead of commissions. Are the salaries more or less than they had to pay in commissions?

#4) XYZ Mutual Insurance hires Jeremy as CEO and the company decides to stop paying commissions. What happens to the price of their whole life insurance policies?

Let me make this as clear as possible. There is a reason why insurance companies pay large commissions. Paying commissions is the least expensive distribution method for the insurance companies. They would get rid of commissions tomorrow if it would increase profit.

In 2nd grade math, getting rid of commissions, lowers cost. In advanced economics, getting rid of commissions increases cost. This is because the commissions will be replaced with a more expensive and less effective distribution method. This would hurt the consumer and not help them.

Jeremy, I really hope that you're up for my challenge. Client comes first, so I'll be happy if you can show me the error of my ways.

[Fee-Only Guy]

I told you, I refer it out. How many times do I need to say the same thing? The same thing? The same thing?

Go to the Fee Advisors Network. Look for yourself. I'm not going to spend the time looking for an example for anyone. Go to the Fee Advisors Network. See for yourself. And how can you gaurantee if you are open to the possibility of being wrong. Why don't you just look for yourself before you make the judgements and gaurantees?

The error of you ways is the same here as it is in a number of your other posts; YOU DON'T LISTEN. You also tend to twist every idea and avoid answering the simple and conceptual questions posed to you.

Does 100-10=90 in your world? I don't care about advanced economic. I'm talking concept. Sure commissions are an effective means for distribution because there are few other distribution channels. Well what happens when the fee-only community grows and the insurance companies have alternate distribution channels? The answer is that they will offer the same commission policies and simply take out the commission thereby reducing the cost. Hence 100-10=90.

This might take some time, but it is happening and all the commission guys don't want to accept the inevitable. But don't listen to me, I'm retarded!

Oh and BTW, go to the Fee Advisors Network!

[Riddler]

Jeremy....I have a 2 questions for you....And a request

Repeatedly, you have said you refer out to Fee Advisors Network...I happen to know Keith and Judith and first met them 14 years ago at a 2 day workshop in Clearwater they sponsored when Keith was a partner in another company called Fee For Service...

Are you referring out the product solution or are you referring out the total life planning design for each client?...Will you ask Fee Advisors to also disclose how they are paid as well in the planning process so the client knows all fees/compensation?

The request is to ask Keith how many companies are in the low/no load life business today vs 14-15 years ago..Additionally, ask him to run the spreadsheet that shows all planner fees/premium costs amortized and compare them to total gross costs of commission products...Thanks man

PS...Remember the first rule of sales 101....Never ask a question you don't already know the answer to..:-)

[anonymous]

Jeremy,

You have clients with no-load insurance policies. For just one client, give the insurance details of the no-load policy that they just bought.

I'm not asking you to spend time. If you have clients and you recommend that they buy insurance, this should take about 30 seconds of time. You know what your clients buy, don't you?

When I go to the Atlantic Ocean, I always head East. I'm open to the possibility that in the future, it might be quicker for me to head West. It makes no sense to me, but I understand that it may be possible. As soon as someone can give me a specific example of how heading west first will be quicker, I'll look into it for my next trip.

Your simple question is anything but simple. "Does lowering commissions lower the price?" The answer is "no", but you simply don't want to accept the answer.

I'm not arguing whether this will be the case in the future. You may be right, but we're in the present and in the present, we must do what is in the client's best interest.

Also, if a no-load insurance company is a stock company, isn't their priority to make money for the stock holders? Why would they pass cost savings onto consumers? Don't they price the product to maximize profit?

I also don't think that you have any idea how low commissions really are in the grand scheme of things. I'm going to compare Ameritas to Northwestern Mutual since someone mentioned Ameritas and Northwestern sells the most whole life. Ameritas expenses are 11.8% of their income. Northwestern Mutual's are 5.3%. How can a company compete if their expenses are twice as much?

The fact is that commissions are probably well under 2% of their assets if not under 1%. See, if you look at the numbers, it should be pretty easy to understand that getting rid of commissions, won't lower prices.

Jeremy, if you believe that insurance is an important component of finanical planning, you owe it to your clients to become an expert. You don't have to sell it, but your belief that commissions are important when it comes to price simply has no basis in reality.

Please take 30 seconds to take me up on my challenge.

[anonymous]

I don't think that Jeremy is an idiot. I just don't think that he is dealing with enough knowledge and doesn't realize it yet. He's at the dangerous stage of not knowing what he doesn't know. This is why I keep asking him to present a real case. If he does, he'll see that his no load solution isn't the best. This is also the reason why I think that he won't do it. He doesn't want to find out that he's wrong. It will go against what he's been telling his clients.

[Fee-Only Guy]

OMG! I can't even believe this. Can anybody here follow a conceptual discussion?

How can you say that if you take one commission policy and deduct the commission that it won't be cheaper? In the simplist sense of the concept. If the cost is $100 and the commission represents $10, then if we take the commission out, the cost of the policy is then $90. A company could deduct the commission and still sell it at the ssame pricce or even hihgher, but I doubt that would happen. Think of it as buying wholesale. If you buy something wholesale you are getting it cheaper because you are eliminating the middle man, or the end distribution channel. Which in this case is the insurance agent. I'm being accused of not knowing what I don't know, but at least I understand basic arithmetic. Maybe some people here should go on that show "Are you smarter than a fifth grader?"

This is conceptual. And I have repeatedly said that one is not necessarily better than the other, that is must be looked at on a case by case basis. If anyone in isterested, look at it yourself. I'm not going to spend my time looking for an example. The Fee Advisors Network is a group a Fee Insurance Specialists, the do not sell any product. This is where you can learn the difference between commission policies and no/low loads. Look there yourself.

Nothing is perfect today. Some commission policies are better than others. This is the same as no-load. And sometimes, a no-load would be better and sometimes not. The difference here is that some people won't even look. Don't leave it up to me to do what is in the best interests for your clients. Look yourself.

Anonymous, your analogy of the ocean is not an accurate use of an analogy. It's not even close to the same thing. Here's a real world analogy. Grocery store #1 has good prices, however Groceryt store #2 claims to be cheaper. You shop at store #1 because you just don't believe the prices on ANY of the items in the store could ever possibly be cheaper, therefor you don't shop there. However in reality, store #2 has SOME items that are cheaper, not all, but you don't know that because you won't shop there yourself.

Or take a generic item and compare it against it's brand name. The ingredients are all the same except it doesn't have the brand anme packaging. In fact, the generic is made by the same company, just packaged for the store. Oh and it happens to be cheaper than the brand name.

This is the same point I am trying to get across that everyone thinks I'm dangerous because I'm young and it's ridiculous. If NWM took a UL policy and took out the commission in order to market it to fee-only advisors, don't tell me that it won't be cheaper. What are they going to raise the price instead? The commission goes to the agent anyways and has no impact on the profitability of the company.

Riddler,

I am referring out the product solution to Low-Load Insurance Services or Ryan Insurance Strategies. The Fee Advisors Network is like the FPA for example. It's where one can go to learn about fee insurance design. I will do my best to get an example. But my guess is that someone here would find a way to still justify why it's not better.

[Fee-Only Guy]

Take a look at Jefferson national. It's a Flat fee annuity designed for fee-only advisors. give them a call and ask why it's different and hwo it's cheaper for the client. http://www.jeffnat.com/index.cfm

and for a case study: http://www.jeffnat.com/articles/casestudy_howardsmith.pdf

[dan]

Jeremy:

I'm a little disappointed in your recent posts. You have stated repeatedly that low-load/no-load insurance can be a better deal for a client than a commissionable policy. Yet you are unable to come up with one single example where this is the case (judging from your posts, you obviously have a lot of experience with life insurance, particularly on the low-load side of the business, so this shouldn't require much effort. List the specifics of just ONE low-load policy that any one of your clients has purchased during the past few years.

Coming up with a no-load annuity, as you just did with your Jefferson example, is not sufficient, as we've been talking about FIXED products (not variable products). How about a term policy, or UL, or WL, or DI, or LTCI?

- DDB

[Fee-Only Guy]

I was referring to no or low load in general. We just happened to be talking specifically about insurance. But this was an easy example. so I guesss so far I have VA's covered. This is just a small example of the benefit of using a no-load product vs. a loaded one. And gee what do you know, it's a whole lot cheaper than the loaded one. 100-10=90.

Unfortunately I do have a business to run and bills to pay so I can't drop all that I am doign to find you a written example but I am working on it. I do not have a lot of experience but I know enough to know that there is a difference. I am young and openminded to all possiblities. That is how I came to learn of fee only. I looked at the merits, the differences, and explored the no and low load products and I was convinced by what I saw. I also know that there are always pros and cons to any choice and I am willing to look at both.

Now in the meantime, have you gone to www.feeadvisorsnetwork.com and looked a bit yourself instead of relying on me?

[anonymous]

Jeremy,

If nobody can follow your conceptual discussion, might the problem be you?

Conceptual discussions must have a basis in fact. Since commissions cost a company less than 2%, getting rid of them doesn't make a big difference.

This also assumes that a company can stop paying commissions without having to pick up other distribution costs. This simply isn't realistic. It also assumes that getting rid of commissions won't effect sales volume. This also isn't realistic.

You simply are failing to understand that there is no cheaper distribution channel than commissioned sales people. If a company gets rid of commissions, distribution expenses will increase and not decrease.

"And sometimes, a no-load would be better and sometimes not."

This is where you are talking without sufficient expertise. I have sold thousands of insurance policies and have never seen an instance where a no-load would be the best. This is why we are asking for a specific example.

Look at your grocery analogy. It's not a refusal to go to store #2. Rather, nobody can name a single product that is cheaper in store #2, thus I don't go. As soon as someone can tell me about a cheaper product, I'll go.

Generic vs. name brand analogy doesn't work either. It's cheaper because its distribution cost is less. It doesn't get advertised. With insurance, as has been mentioned many times, getting rid of commissions does not lower the distribution cost.

I'm clueless as to how you are having trouble finding an example of when you have used a no-load insurance product. This seems like it would only be the case if you ignore insurance solutions.

I'll start. Let me give you an example of the last sale that I made. The client is a 29 year female in great shape. She needed $1,500,000 of coverage. Money is tight, but it won't be in a few years. We wanted a product that was inexpensive, but convertable to a quality Whole Life product. She purchased a commissioned product that cost her $285 this year and will increase slowly each year. The cost will be $360 in year 5 and $510 in year 10, but we expect to convert within 5 years. Do you have a no-load that competes?

Please tell us about the last time that you used a no-load so that we can see if it is the best.

You say that no-load is sometimes the best. I say that load is always the best. All you need is one example to show that you're right. It is really looking like you've learned to trust others without learning for yourself.

"I will do my best to get an example." Jeremy, I'm anxious to be proven wrong on this.

[anonymous]

Jeremy, I did look at the site. The fact that no-load UL/VUL policies can be more minimally funded is being touted as a positive. Load or no-load, these products need to be overfunded. Here's a question for you: Look at the last policy that your client purchased. What is the cost of insurance at age 70? Age 75? Age 80? Age 81? etc. You need to understand this before you "sell" UL policies. There is a reason why UL/VUL policies lapse.

Insurance is important. Become knowledgeable.

[Fee-Only Guy]

Anonymous,

It’s very realistic to drop commissions as a distribution cost as the fee-only distribution channel grows, which it is. It’s small now, but growing. This is why there are not very many no or low load options just yet, but there are some. As far as I know there are none for LTC and health just yet. There are some for annuities, life, and DI.

How can you suggest that 2% doesn’t make a big difference anyways? This is ludicrous! Save that 2% you are referring to and put it towards cash value or invest it. Over a 30 year period it could be a HUGE difference. You are simply minimizing the cost involved. When most permanent policies pay an upfront commission of over 100% first year, the client is paying for it over time. If a policy has a yearly premium of say $10,000, that cost is absolutely passed on to the consumer in the form of internal fees. The company makes it back over time, hence the reason for long surrender periods so they can make enough money back to cover what they paid the agent. Now if we took that commission out, all else being equal and assuming there are plenty of people willing to recommend it, the policy would be undoubtedly cheaper. The company wouldn’t have to make up the cost of paying the commission, and they would have no need for the surrender period. Why else are the surrender periods in your opinion?

And you are failing to understand that the fee-only distribution channel is growing. Why else would companies start offering it. Obviously they see some potential in the distribution channel. As it grows, they won’t have to pay the commissions for these policies and they will come down in cost. Supply and demand.

You haven’t seen an instance when no-load would be better because you have no incentive to compare. Next time you are recommending a policy, call Ameritas direct and Low Load Insurance Services. Ask for the comparison. See what happens. Do this a couple of times and you will see. The problem is that since you earn your keep on insurance you have a conflict because you won’t earn anything selling the no load. So why bother? Aren’t you even open to the idea that no-load might be better in some instances? Doesn’t the possibility require you to get a fair comparison so that you can act in the best interest of your client?

Well I’m telling you it’s cheaper and that should be enough for you to at lease check it out and give it a fair shake instead of blindly shooting me down and referring to my level of experience.

I told you, I refer it out. I don’t personally deal with it. Why is that so hard for you to understand? But like I said, I’m going to get you a fair current comparison. Just be patient.

What does a 29 year old need $1,500,000 of WL? Why not the UL? Why not term and invest the difference? Anything to do with the difference in commission between the policies?

I am anxious not to prove you wrong, but more to open your eyes to another possibility. Life is about possibilities, this as I have learned at a young age. Those who will ignore certain possibilities will loose many opportunities in life.

And why is everyone here so closeminded and think that there is only one right way to something? I don't get that. There are more ways than one to skin a cat. At least I am openminded enough to explore possibilities. Geez.

[anonymous]

"It’s very realistic to drop commissions as a distribution cost as the fee-only distribution channel grows, which it is."

You may be right. Time will tell. However, the fee-only channel has to grow first.

"There are some for annuities, life, and DI."

Name one quality no-load DI contract.

"How can you suggest that 2% doesn’t make a big difference anyways?"

2% can make a difference, but you have to make three assumptions. 1)2% is accurate. I think that it is on the high side. 2)This savings will be passed on to the consumer. A company's top priority is to make a profit. A company will only lower prices if they believe that it will lead to higher profits. 3)A company can get rid of their salesforce and not lose sales without adding costs somewhere else. Can you name one company in any industry that has succeeded in doing this?

"The company makes it back over time, hence the reason for long surrender periods so they can make enough money back to cover what they paid the agent."

Very true. It's not an issue in term insurance. Whole life, on the other hand, is a long term proposition. Cash, or lack thereof, in the early years just isn't that important. If it is important, there are policies in which an agent can take a levelized commission which keeps the cash value high in the early years.

"Now if we took that commission out, all else being equal and assuming there are plenty of people willing to recommend it, the policy would be undoubtedly cheaper."

This is just silly talk. All else can't be equal. There are not plenty of people willing to recommend it.

"Why else would companies start offering it."

A company will offer it if they believe that this is the way that they can be most profitable. For now, very few companies feel this way.

"As it grows, they won’t have to pay the commissions for these policies and they will come down in cost."

Companies don't care about prices coming down. They care about profitability going up.

"You haven’t seen an instance when no-load would be better because you have no incentive to compare."

Jeremy, this is your opportunity to shine and show us JUST ONE EXAMPLE of a no-load being better.

"Aren’t you even open to the idea that no-load might be better in some instances?"

I'm very open to the idea. Please show JUST ONE EXAMPLE. Jeremy, with all due respect, I have a guy who doesn't sell insurance trying to get me to check something out. I have never had an experienced rep tell me that no-load policies are competetive.

You are so caught up in commissions that you can't see the forest through the trees. Expenses are important. How can a company that has double the expenses be competetive? The answer is that they probably can't. Ameritas' expenses are more than twice that of Northwestern Mutual. How can they possibly compete? The specific breakdown of the expenses doesn't matter.

"What does a 29 year old need $1,500,000 of WL? Why not the UL? Why not term and invest the difference? Anything to do with the difference in commission between the policies?"

She wants the coverage forever. Do you understand UL? Let me quote myself: What is the cost of insurance at age 70? Age 75? Age 80? Age 81? etc. You need to understand this before you "sell" UL policies. There is a reason why UL/VUL policies lapse.

BTID? This is a different conversation, and I don't want to cloud the issue here. Nor, does it appear as if you have enough insurance knowledge to have a serious conversation about this. I'm guessing that you have never sold a WL policy.

If I was concerned about commissions, do you honestly think that I would have sold a policy with a $285 premium?

"And why is everyone here so closeminded and think that there is only one right way to something? I don't get that."

Jeremy, we're not closeminded. In fact, it's just the opposite. Many of us have been selling insurance for a long time. I can't tell you the countless times that someone has touted no-load. We're still waiting for just one example where no load is best. I gave you a real case of a 29 year female. It's not as if I changed the facts to make it a 53 year old male, that all of a suddend no-load would be better.

In order for a no-load Whole Life policy to have a chance of competing with the major Mutual companies, the expenses would have to be in the same ballpark and the profits would have to be paid to the policy owner.

This is going round and round. I can't prove my point because I'm saying that one way is always best. You, on the other hand, can easily prove yours since you need just one example.

I still don't understand why you just can't randomly open a file and tell us what a client purchased.

[the observer]

Jeremy,

A discussion, much like an argument (according to Monty Python, God rest their immortal souls) is "a collected series of statements intended to establish a proposition. It's not the automatic nay saying of everything the other person says." Kindly note, the mind is like a parachute, it must be open to work. Right now you seem to be at terminal velocity.

It seems that no matter who asks you to provide information, you jump down their throat, intimate that they are ignorant of the facts because they draw different conclusions than you, and worst of all, in a couple of cases above, you make assumptions and draw conclusions that have absolutely no basis in fact. For example you write to Anonymous;

"You haven't seen an instance when no-load would be better because you have no incentive to compare. Next time you are recommending a policy, call Ameritas direct and Low Load Insurance Services. Ask for the comparison. See what happens. Do this a couple of times and you will see. The problem is that since you earn your keep on insurance you have a conflict because you won�t earn anything selling the no load. So why bother?"

Or how about this Gem: "OMG! I can't even believe this. Can anybody here follow a conceptual discussion? How can you say that if you take one commission policy and deduct the commission that it won't be cheaper? In the simplist sense of the concept. If the cost is $100 and the commission represents $10, then if we take the commission out, the cost of the policy is then $90.

Or another priceless comment "I am anxious not to prove you wrong, but more to open your eyes to another possibility."

This ASS U ME 's and you've obviously concluded that all the people TRYING to have a "discussion" with you here would sell the 1.5 million of WL or UL instead of term, and that they REALLY CRAVE your wisdom (even at your tender age) in showing them the way, a new way to a better tomorrow where life is beautiful, the birds sing and everyone's happy and gives each other back rubs... This ASS U ME 's that the insurance companies would ALL cut their rates in unison and pass on those wonderful savings to the clients, it also ASS U ME 's that any licensed life agent out there in the 32 States that require it, would get a life counselor or analyst license to recommend product on a fee basis. This ASS U ME 's that insurance (though important) wouldn't just slip away into insignificance if there weren't licensed life agents out there trying to impress on families the need to protect themselves and their families. Methinks though dost ASS U ME too much.

This belongs on "So you wanna be a comedian", except, there you'll want people to laugh "with you" not "at you".

You thrash around in topics you seem to know just a little about and make assumptions, draw conclusions and present them here as absolutes as if you've had an epiphany and this is information none of us can live without. You do all this without providing any statistical analysis that people can review to support the position you seek to impose on all here... well, at least you make mention of some but can't produce it and furthermore refuse to delve into client files and quote examples because you don't want to do the work and why don't we do it for you? I'm puzzled, you have time to preach here for hours on end but no time to find those statistics using Google that you so often bring up. Stop bloviating and start discussing for a change, you could learn something.

You have absolutely no idea how other people run their business so you ASSUME... and like most others, you make an ASS of U.... mostly.

[nedbenz]

Well said Grasshopper!

[Fee-Only Guy]

I would never sell WL because it sucks. Hoow bout that for an ASS U ME on my part eh? WL is the most expensive and least performing type of policy. But gee from what I've been told it's the highest commission hence why it is so well loved by insurance agents.

Look the benefits of no-load outweigh the negatives in my opinion. And I am entitled to my opinion. Those benefits being, no surreneder, higher cash values, and the COMPLETE ELIMINATION of the conflict of interest inherent in selling life insurance. Yes fee-only planners still have one or two conflicts, but there are far less than the conflicts in the commission enviornment and many people find the greater degree of objectivity from someone who has no financial stake in the recomendation appealing. If they have to pay a little more for that, so what, many people are willing to pay more to ensure they are getting completely unbiased advice. In fact, if I am recommending life insurance, that takes away from potential funds they could invest in which I could earn a fee on. Now why would I do that anyways?

I don't need to convince anyone. Even asside from fees, it is been established here on these boards that simply being Fee_only has it's advantages and it's appeal to consumers. There are products that are designed for these advisors and they are not crap contrary to what is being said. It is just that they are a minority and have no tracck record. This is often how minorities are looked at, with skepticism until one day someone says, hey there's another option, and it's decent.

I don't have the details some of you would like because I am trying to get an analysis, one that I cannot produce that fairly compares two similar policies. When I get it, I will be happy to show it. In the meantime I will continue to express my opinion how I wish to. And just because I am young and don't have a lot of experience fleecing others doesn't mean that I don't know anything. I have the advantage of being able to learn from my and other's mistakes. Some people who are old and set in their ways rarely see the progressive views of younger people in all aspects of life. That's just the way it is. Even when I find a great comparison, I imagine that certain people will do everything they can to write off why I am still wrong and my example is invalid. And that's fine. However I will remain committed to providing objective advice as a fee-only planner and I will prosper while others will find it harder and harder to sell insurance, as time goes on of course. The financial services world is changing and people are more educated and aware and they will continue this way.

[the observer]

Jeremy,

I have no problem with you representing your opinion, we've discussed the issue of licensing and the differences between State procedures and I think you understand this position now.

HOWEVER, comments like:

"And just because I am young and don't have a lot of experience fleecing others doesn't mean that I don't know anything."

are what get you into trouble. It intimates you've already concluded there is not one single life agent who is capable of offering clients competent insurance advice without "fleecing them". This is just untrue and insulting to hundreds of thousands of life agents nationwide.

Any good points you may or may not make are then lost because you've alienated yourself in the eyes of competent life agents who try hard to perform their duties responsibly while doing the best thing for their clients.

You forget that the fee-only movement was started by people from all walks of life, most of them insurance agents at one time or another, who were seeking a "different" path. In States like yours, they found their laws made this simple, in States like mine, they dropped their licenses and commit crimes on an ongoing basis to maintain their "fee-only status".

It seems to me as I look at the more radical elements on the bulletin board that it is mostly the young with no history in the financial services sector who came straight in from university seeking fee-only status that tend to shout the loudest. Other long-time planners, as evidenced from posts in various forums here, have a great deal of respect for licensed planners and utilize their services.

The CFP Board code of ethics asks us to be respectful of other professionals, bear that in mind. If you see a crime, report it, that is also your duty, but making assumptions and jumping to conclusions in the way you do sometimes is not beneficial for the profession or for your personal growth. Assume the best in people and root out the few weeds that grow and thrive at the expense of others. Don't kill the grass with the weeds, by over spraying the lawn.

[Fee-Only Guy]

Every single experience I have personally had with life insurance agents and commission brokers, every single one, the person was clearly taken advantage of. I have heard many stories from other people about being taken advantage of by a commission advisor and/or insurance agent. And I have my own experience selling these products and being pressured by management (those who have all the experience and knowledge) to sell the highest commission products regardless of what was in the clients' best interest. This happened frequently especially when a product would be offering a bonus commission or a trip was involved. Management would get up and tell us to sell it. And if we didn’t sell it, we got yelled at. The product didn't change, however the commission did and all of a sudden it was better for the client? I think not. I looked at another B/D and they were the same way. I had several friend go to work for NWM and heard all kinds of horror stories. In fact I think there was a website dedicated to telling horror stories from past employees. So I left the firm I was with because it wasn't right and clearly this firm and others like it did not care about the best interests of the client, all they cared about was the commission I brought in and the cut that they got. I decided to leave because I felt this was not right, and I was learning about fee-only at the same time and I felt it was a better way.

So yeah, based on my personal experience, experiences of clients, family, and friends, ALL had bad experiences with insurance salesmen every time. Even my parents were sold several policies that were horrible; problem is they didn't know any better until their “inexperienced” son who became a CFP came along and showed them what happened. And to make it worse, they were sold these horrible policies by a "friend." And why were the policies so bad you might ask, well the class action law suit that was filed and settled for misleading sales practices, and this was one of the best know insurance companies out there! That should indicate something. Oh and not to forget the commissioned broker who sold them a bunch of tech stocks and other high flying investments in 1999. The first time they decided to invest big money, and we all know what happened after 1999. The broker sold them what was hot to get them to buy, and didn't do a proper risk assessment and financial assessment. Well gee, they lost a whole lot of money. And the real shame is that when I took over in 2002, bottom of the market, they were afraid to fully invest, even though I was properly diversifying them. So obviously they lost out on significant gains. And why, because they had been screwed too many times by commission brokers and life insurance agents. And these guys had plenty of experience.

So, I have formed my opinion from these experiences. From what I have seen and heard the ethical financial salespeople are few and far between, the minority contrary to what has been suggested here. I don’t doubt that some of the few ethical salespeople are on these boards and I don’t mean to offend those who are in fact ethical and put the clients interests first. However, I believe the ethical ones are rare and I have good reason to have this belief.

You are right, that fee-only was started by advisors of all types, but obviously they saw it as a good reason. And more and more it is growing at faster and faster paces because the public is becoming more aware and are gravitating toward a more objective method for providing financial advice. Even if the agent is ethical and truly recommending what is best, many are skeptical anyways because there are so many Low agents out there. People put their trust level of life insurance salesman at the same level as used car salesman, and this comment is based on a survey which asked which professionals they trusted. Life insurance salesman were at the bottom with the used car salesman. Now why would the public have such a perception? Because of personal experience. I wish I had this survey to share because I’m sure someone here will accuse me of not basing this FACT in reality. Although I do recall it being published, I believe in a financial planning publication not more than 5 years ago.

Yeah, yeah, yeah, we know about the “crimes” these ethical advisors are committing. Even though they are providing objective advice, you make it look bad against the salesmen who are selling “legally” but taking advantage of people. We’re talking about people’s financial lives and life savings. I’d rather put my trust in a fee-only advisor with my money rather than be SOLD a product I really know nothing about that the agent gets a big fact commission and has no financial stake in my future. Who cares about the referrals, by the time the client knows that they made the wrong decision, it’s 20 years later and they already gave plenty of referrals and the agent made plenty of money.

The more radical elements on the board comes from the younger crowds like you say, because they ARE formally educated in financial planning, as am I, and are not blinded by the way things have been for years. We have a fresh eye to what is going on in this business and we want to be professionals, not salesmen. Perhaps we are more idealistic, but guess what? We are the future, and the generation that will change this sales industry in to a fully respected profession, just like medicine, dentistry, legal, accounting, etc.

We should be respectful of others, and others should be respectful of me. None of which I have been getting because my opinions and thoughts are accused of not being based in reality and the fact that I am “retarded.” But the CFP code of ethics doesn’t appear to mean much to you Observer because you are admittedly not following their definition of “fee-only” just because you believe they are wrong, so lets keep the hypocrisy in check a little eh?

And I just quit smoking so give me a freakin break if I sound irate and upset. Thank you.

[Fee-Only Guy]

Hey does everyone know who I am? How bout I use this fake name and mask who I am eventhough everyone knows who I am?

And where is VAman/ILoveVA's in all of this? I miss him.....:(

[anonymous]

Jeremy,

You unfortunately don't have requisite knowledge to participate in an intelligent conversation about life insurance.

Do you really believe that companies like Northwestern Mutual, MassMutual, and New York Life have become Fotune 100 companies and have lasted 150+ years by ripping off customers?

By the way, I called Ameritas yesterday. Please explain how there is no conflict of interest. They tried to sell me an Ameritas life policy. They didn't shop the market to give me the best price. They also asked me if I was buying enough insurance. They didn't check to see if I was buying too much. I was also asking about term policies. They tried to up-sell me to a UL/VUL policy. Let's assume that there are 2 Ameritas reps. They each sell 50 policies a week. One of the reps average is a $400 sales. The other has an average of $1000. Which is getting promoted? Which is getting paid more? See, you haven't gotten rid of any conflict, you have just pushed the conflict onto someone else. The job of a no-load Ameritas rep is to help Ameritas make as much money as possible.

You, of course, will think that everyone is getting ripped off since you come in with the perception that WL is a rip off.

[ross.lipman]

Junior wrote:

> Hey does everyone know who I am? How bout I use this fake name
> and mask who I am eventhough everyone knows who I am?
>
> And where is VAman/ILoveVA's in all of this? I miss him.....:(

Honestly....I can't bear to watch Jeremy's career circle the drain, while he spends hours and hours typing up his posts. The last thing a guy with his problems needs is for me to jump in and stir the pot.

Happy selling to all.

[Fee-Only Guy]

anonymous,

You know nothing about my intelligence. And
Yes, that is exactly how those companies get to be so successful. You don't get that big without screwing some people, that's just the reality of big business. And if you are too naive to see that, then perhaps we should be questioning your intelligence. Wake Up.

Of course they would sell you their policy because you called them direct. Would you call Sony and expect them to sell you a samsung? The phone agents are on salary, and that drastically reduces the conflict. Sure they still need to produce to justify their salary, but any employee of any company is supposed to do their job. So I don't know why you are so surprised.

See I have two options, I can work with a company like Ameritas Direct and make sure my client is getting the right policy. They will keep the advisor in the loop as much as they want to be. Or I can refer out to Low Load Insurance Services, or Ryan Insurance Strategies. They go out and shop the market for me. They then pick which is best for the client. They will recommend the commission policy if it merits, or a no or low load if that merits. But they do shop it. And I can be kept in the loop and informed of the status in every step of the process. Flexibility is the key here.

You have your perceptions and I have mine. However I don't make assumptions about your intelligence. I am trying to have an intelligent discussion, however certain people would rather do everything they can to put me down and insult me. I am starting to see why some previous posters would get frustrated with this and stop posting. I am shocked at the low level of professionalism on these boards.

And VAman, what makes you think even for a second that my career is circling the drain? This is a completely false assumtion, is quite rude, and makes me look bad for no reason. My career is strong and growing rapidly. Maybe it takes you hours and hours to write three unthoughtful sentences, but it doesn't take me that long to express my opinions. I don't have any problems and I don't care if you stir the pot, because based on nearly all your posts, you genereally have nothing productive to say.

[anonymous]

Now I am forced to question your reading comprehension. I did not question your intelligence. I questioned your insurance knowledge.

I'm an intelligent guy, but can't speak intelligently on many subjects. I am sure that the same can be said about you. It just so happens that insurance is one of those subjects in which you are unable to speak intelligently. I don't question your ability to learn more if you so desire.

[nedbenz]

Jeremy,
You say you send clients to Ryan Insurance Strategies and they shop it for you whether it a no load or load whatever is best. I went to their website and had some quotes for term, disability and LTC and guess what, they all were full commission companies. Then I went to the companies they represent and guess what, there aren't any no load companies just all the
full commission companies that most of us use.
You are beating a dead horse and still don't get it. I tell you what, send the prospects to me and I will shop the same companies and split the commissions with you and service the h--- out of the policies and you will get compensated. Commissions are going to be paid to someone, why not you.I have many CFP's I do this type of work for, one generated an additional 60,000 of income last year from our arrangement.
These types of discussions are one of the reasons many have left this site, nothing really usefull. For some interesting helpfull discussions, visit the insurance forums.

[anonymous]

P.S. I'm not surprised that Ameritas would try to sell me an Ameritas policy. I'm not surprised that they would try to sell me a bigger policy. I'm not surprised that they would try to sell me a UL/VUL and not term. All of that simply makes one of my points. The fact that there is no commission doesn't make them any more objective. Their job is to make as much money as they can for Ameritas. Incidentally, one of the nice things about participating whole life policies is that the more money that the company makes, the better the policies perform since it is the policy holders who own the company.

[ross.lipman]

Jeremy wrote:

>
> And VAman, what makes you think even for a second that my
> career is circling the drain? This is a completely false
> assumtion, is quite rude, and makes me look bad for no reason.

I've seen your ADV. It speaks for itself. You have between 11 and 25 clients and you work out of your house. I had that many clients after 3 months in business. I have nothing to do with your looking bad. You do that. I just make you aware of it. If you ever want some pointers, shoot me an email. I'd be glad to help. ross.lipman@hotmail.com

Ross

[Fee-Only Guy]

anonymous,

You say that I don't have the requisite knowledge to have an intelligent conversation about insurance. I read it an understood it. My question to you is does one need to know EVERYTHING about insurance to have an intelligent conversation about it? I don't know EVERYTHING there is possibly to know about insurance, however this does not preclude me from having an intelligent conversation about what I do know. I try to have intelligent discussion, but I am shot down from every angle and accused of being ignorant about the subject. I don't know everything, but I know enough to discuss it, and unlike some people, I am open to suggestion. In this issue, I have been on both sides of the issue as a commission agent and as a fee-only advisor. So I have a view from both sides. Who else can say this. Seriously, if there is anyone else here that can say they have dealt with the insurance issue from both a commission perspective and also as a fee-only advisor, then please, speak up. Any one go fee-only and then go back?

Ross,

My ADV speaks nothing of the sustainability of my practice. I am only 28 years old so no I don't have a huge client base. I work from home because I don't see the need to pay rent for an office. Without high overhead, I don't need to take every client that comes along. I have the ability to select only the clients I want to work with. I have complete control of my business and will continue to do so, instead of my business being in control of me. I have no children to support, and low housing expense. This gives me more freedom to pursue the business I want instead of constanly looking for new client.

You may have had that many clients within 3 months, however your business is very different from mine. You sell only or primarily annuities isn't that true? If so, you sell your product, earn your commission, and then move on the next sale. So naturally you will accumulate a number of "clients." I on the other hand, work with clients on an ongoing basis. I only plan on having between 50 and 75 clients at most. The client provide a predictable annual revenue for my business. There will come a point where I will be "done," and will not accept new clients. Can you say the same for your business?

Number of clients really means nothing, it's how much is earned by those clients. I make decent money, especially for my age. I have several accomplishments at my age such as having an independent fee-only RIA, I have a CFP(r), AIF(r), and I am a member of NAPFA. Certainly this is not a long list, but again, I have this at only 28, so I don't think I look bad.

You make yourself look bad by describing how you sell everyone a VA and other comments you make. You stated that I have problems and my career is circling the drain. Without knowing about me, you statement makes me look bad. I am doing just fine, I am happy, and I don't have any use for tips from an annuity salesman. I do however welcome tips from sucessful fee-only advisors.


Bluemarlin08,

I am surprised you looked. Two things to consider. You only used an online quote generator. Also as I have stated several times previously, there are no no/low load insurance policies for LTC to my knowledge. There are DI options, but basically only for affluent, that I know of. Term Life has very small commissions and are so competitive that again, as mentioned before, are not always the cheapest. Which is an interesting side question. Why are the commissions so much greater on permanent insurance policies? Does it have anything to do with the company making more money on those policies? The difference again, is that John Ryan at Ryan Insurance as well as Low Load Insurance Specialists will look into all available options including no and low load and will recommend what is best. If they didn't, they wouldn't be so successful working with NAPFA members. No load insurance is still in it's infancy so there are not many options, but more are being offered as the companies see the need to offer it for fee-only advisors. The biggest difference found is with permanent insurance policies. Compare some comission policies to an Ameritas policy. Get actuall illustrations and keep the variables the same.

When working with a client, an independent agent can shop around. If he/she decides Ameritas is the better option, then it's fine. In the advisor is competant, then any upsell recommendations are futile because the decision has already been made.

You are right I am beating a dead horse because it appears that those participating in this DISCUSSION have their minds made up and will say whatever they can to discredit my thoughts and suggestions. And that is fine. Everyone has the right to run their business how they choose. But when more an more no-load options appear, and the fee-only movement grows and becomes the preferred method by the public, don't say I didn't warn ya!

[ross.lipman]

Junior wrote:

> anonymous,
>
> You say that I don't have the requisite knowledge to have an
> intelligent conversation about insurance. I read it an
> understood it. My question to you is does one need to know
> EVERYTHING about insurance to have an intelligent conversation
> about it? I don't know EVERYTHING there is possibly to know
> about insurance, however this does not preclude me from having
> an intelligent conversation about what I do know. I try to have
> intelligent discussion, but I am shot down from every angle and
> accused of being ignorant about the subject. I don't know
> everything, but I know enough to discuss it, and unlike some
> people, I am open to suggestion. In this issue, I have been on
> both sides of the issue as a commission agent and as a fee-only
> advisor. So I have a view from both sides. Who else can say
> this. Seriously, if there is anyone else here that can say they
> have dealt with the insurance issue from both a commission
> perspective and also as a fee-only advisor, then please, speak
> up. Any one go fee-only and then go back?
>
> Ross,
>
> My ADV speaks nothing of the sustainability of my practice. I
> am only 28 years old so no I don't have a huge client base. I
> work from home because I don't see the need to pay rent for an
> office. Without high overhead, I don't need to take every
> client that comes along. I have the ability to select only the
> clients I want to work with. I have complete control of my
> business and will continue to do so, instead of my business
> being in control of me. I have no children to support, and low
> housing expense. This gives me more freedom to pursue the
> business I want instead of constanly looking for new client.
>
> You may have had that many clients within 3 months, however
> your business is very different from mine. You sell only or
> primarily annuities isn't that true? If so, you sell your
> product, earn your commission, and then move on the next sale.
> So naturally you will accumulate a number of "clients." I on
> the other hand, work with clients on an ongoing basis. I only
> plan on having between 50 and 75 clients at most. The client
> provide a predictable annual revenue for my business. There
> will come a point where I will be "done," and will not accept
> new clients. Can you say the same for your business?
>
> Number of clients really means nothing, it's how much is earned
> by those clients. I make decent money, especially for my age. I
> have several accomplishments at my age such as having an
> independent fee-only RIA, I have a CFP(r), AIF(r), and I am a
> member of NAPFA. Certainly this is not a long list, but again,
> I have this at only 28, so I don't think I look bad.
>
> You make yourself look bad by describing how you sell everyone
> a VA and other comments you make. You stated that I have
> problems and my career is circling the drain. Without knowing
> about me, you statement makes me look bad. I am doing just
> fine, I am happy, and I don't have any use for tips from an
> annuity salesman. I do however welcome tips from sucessful
> fee-only advisors.
>
>
> Bluemarlin08,
>
> I am surprised you looked. Two things to consider. You only
> used an online quote generator. Also as I have stated several
> times previously, there are no no/low load insurance policies
> for LTC to my knowledge. There are DI options, but basically
> only for affluent, that I know of. Term Life has very small
> commissions and are so competitive that again, as mentioned
> before, are not always the cheapest. Which is an interesting
> side question. Why are the commissions so much greater on
> permanent insurance policies? Does it have anything to do with
> the company making more money on those policies? The difference
> again, is that John Ryan at Ryan Insurance as well as Low Load
> Insurance Specialists will look into all available options
> including no and low load and will recommend what is best. If
> they didn't, they wouldn't be so successful working with NAPFA
> members. No load insurance is still in it's infancy so there
> are not many options, but more are being offered as the
> companies see the need to offer it for fee-only advisors. The
> biggest difference found is with permanent insurance policies.
> Compare some comission policies to an Ameritas policy. Get
> actuall illustrations and keep the variables the same.
>
> When working with a client, an independent agent can shop
> around. If he/she decides Ameritas is the better option, then
> it's fine. In the advisor is competant, then any upsell
> recommendations are futile because the decision has already
> been made.
>
> You are right I am beating a dead horse because it appears that
> those participating in this DISCUSSION have their minds made up
> and will say whatever they can to discredit my thoughts and
> suggestions. And that is fine. Everyone has the right to run
> their business how they choose. But when more an more no-load
> options appear, and the fee-only movement grows and becomes the
> preferred method by the public, don't say I didn't warn ya!

Junior, why are you answering for Jeremy? Has Jeremy used up his lifetime allocation of keystrokes?

[anonymous]

Jeremy/Junior,

My complete guess is that you are anti-commission because you started your career pushing crappy UL/VUL policies on people regardless of the appropriateness. You realized that you were being pushed to do the wrong thing, so you quit. I commend you.

"but I am shot down from every angle and accused of being ignorant about the subject."

Do you think that there might be a reason for this? You are having a conversation with someone who will sell more policies this year then you will "sell" in your entire career. You suffer from not knowing what you don't know.

Things like focusing on commissions instead of total expenses is just a rookie mistake. No-loads can only be expected to be better if their expenses are lower. The problem is that the total expenses of no loads are higher. Look at this way: The guy answering the phone when I called Ameritas probably makes more money than the average insurance agent, thus all else being equal, the no-load will be more expensive since the "salesman" gets paid more.

I'm telling you, Jeremy, that if you just think that whole life "sucks", you don't understand it. There are times that it is not appropriate and is often inappropriate sold. This doesn't change the fact that there are times that owning whole life insurance is part of what a client should be doing.

I still have NEVER seen a circumstance where a no-load product is better. Jeremy, I am open minded and I would use no-load if it was ever the best.

Your thoughts and suggestions are getting discredited because you don't have the ability to back them up. You won't find anyone else to back you up on this subject because you're wrong. This is why you won't be able to give us a real case example. This is not "everybody gang up on Jeremy". We're all here to learn. I would love to find that there is a better way for my clients.

I know that you think that you understand the view of a commissioned agent. You don't have the view of a quality commissioned agent who only wants to do what is in the best interest of their client. There are thousands of us out here. We don't push for the highest commission. We push for the best product for the client.

You absolutely owe it to your clients to find the best insurance solution. As long as they go the no-load avenue, you can keep your "fee-only" mantra alive, but your "best interest of the client" won't survive.

The future might be different, but for now, "fee-only" and "best interest of the client" are mutually exclusive.

Please prove me wrong with one example.