Charging a Fee for Insurance Advice

Yagents

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Arizona
Does anyone know if I can legally charge a fee for individual health insurance in AZ and FL? (I'm not so good at comprehending state legislature language.)

I am an RIA, and can legally charge a fee for any advice I give. But I'm sure it becomes an issue when I'm also receiving a commission. Double dipping is not my first choice and all comp would be fully disclosed to the client. But, with comp reducing by 50%, I'm just trying to figure out a way to keep my compensation level without having to double production (still 24 hrs in a day), and be paid an appropriate amount for my time and knowledge. Otherwise, the client loses with lower service levels and a churning mentality.

Plenty of people out there willing to pay good money for good advice.

I see comp coming in 4 forms:

1. Commission only - compensation is high enough for the time allocated.

2. Fee only - no commission available, fee for advice.

3. Fee/commission combination - collect on both sides to equal the amount to match the price of our service

4. Fee offset - Set a predetermined level of compensation, and reduce the fee by the amount of commission received.

I prefer #4, and is how I ran my RIA practice. I offset my planning fee by any insurance commissions I received.

Any useful insight from anyone?
 
As a consumer, I'm willing to pay for advice, can't get by the conflict of interest though. There is no way that you could advise me on a subject, charge me for the advice and turn around and charge me a comm. also, would have to be an arms length transaction.
 
I know that RIA's, who are fiduciaries to begin with, also have insurance licenses, and collect a financial planning fee and the insurance commission with full disclosure to the client.

I know lawyers, who are sick of farming out their estate planning life insurance to outside agents, are now getting licensed and also playing both sides of the fence, in full disclosure.

I think even doctors charge a fee for their advice, AND get compensated by RX companies in one form or another for recommending their product.

I just don't see how we are different from these other professions.
 
I know lawyers, who are sick of farming out their estate planning life insurance to outside agents, are now getting licensed and also playing both sides of the fence, in full disclosure.

I think even doctors charge a fee for their advice, AND get compensated by RX companies in one form or another for recommending their product.

I just don't see how we are different from these other professions.

And you don't see how that is going to come back to haunt them? The lawyers might skate by, but most big name estate attorneys I know of don't do the insurance. Now, they do have a very good relationship with a "captured" agent, but they don't do it personally.

As to the doctors, I believe the lawsuits over this are just around the corner. Attorneys have made a living suing the drug companies when a drug gets pulled. I'm surprised some smaller ones haven't gone after the doctors who were getting kickbacks on the same drug. It has to only be a matter of time.

But yes, there are plenty of RIAs that do fee based planning and then sell the insurance. However, all the IARs I know leave their planning general in nature when it comes to product. They then clearly communicate to the client they are taking off the planner hat and putting on the agent hat when they start talking product. The client always has the opportunity to let someone else do the product, of course had they disclosed that on the front end, the IAR wouldn't have done the plan to begin with.
 
I suppose most states have rules on this sort of thing. Georgia has a counselor's license that allows individuals to charge a fee for advice.

The problem with charging a fee is like internet sites wanting to charge for access to content. There is so much free stuff out there people balk at paying for access to information on the web.

Same would be true here.

The model is, you can get information for free. How valuable and useful that information is remains to be seen.

If you and I are competing and you are charging $250 for advice I will offer for free, who wins?

You can try to charge a fee, and can get away with it in the large group market. But if you are wanting to charge a fee for advice on individual products you are probably barking up the wrong tree.
 
As to the doctors, I believe the lawsuits over this are just around the corner. Attorneys have made a living suing the drug companies when a drug gets pulled. I'm surprised some smaller ones haven't gone after the doctors who were getting kickbacks on the same drug. It has to only be a matter of time.

I bet that we will see huge class action suits against the drug companies over this.

The bribery among some pharma reps and doctors is most certainly criminal.
 
If you and I are competing and you are charging $250 for advice I will offer for free, who wins?

You can try to charge a fee, and can get away with it in the large group market. But if you are wanting to charge a fee for advice on individual products you are probably barking up the wrong tree.

You said it!

And I will throw in 10 "3 day 2 night" mini getaways!
 
And you don't see how that is going to come back to haunt them? The lawyers might skate by, but most big name estate attorneys I know of don't do the insurance. Now, they do have a very good relationship with a "captured" agent, but they don't do it personally.

Lawyers have enough to do during the estate planning process; and most do not want to become insurance experts if they dont have to.
And why would they want to when they can take referral fees from the agent?
Its a win/win; the lawyer gets paid on both sides, he doesnt have to learn the insurance side, & he has an expert on the insurance side who is more than happy to be handed the business.
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But yes, there are plenty of RIAs that do fee based planning and then sell the insurance. However, all the IARs I know leave their planning general in nature when it comes to product. They then clearly communicate to the client they are taking off the planner hat and putting on the agent hat when they start talking product. The client always has the opportunity to let someone else do the product, of course had they disclosed that on the front end, the IAR wouldn't have done the plan to begin with.


Heres the thing, it depends on how much "planning" is involved.

I have a client right now whom I am not charging a fee, but I am still creating what is a comprehensive retirement plan for what his situation is.
Why no fee? Because his situation is not very complex and the planning did not take very long.

Conversely, I am helping a friend with a case where a fee is being charged for the planning process. Its a very complex situation to say the least.
There will be product to be sold to create the solutions formed by the planning process; what we usually say is that "hopefully" they will trust us enough to place those products with us.

The planning process/presentation process for the plan has taken a good amount of time, and the many hours spent we most certainly deserve compensation on; why wouldnt we?

At that point, if the client agrees with the plan and wants to act on it, they need product solutions.
If they want to act on our plan, they obviously trust us.
If they trust us, why would they not want to place their products with us?
About the only reason is if they have an exceptionally strong relationship with another agent.

Ask yourself this; If you trust someone enough to pay them $1k-$4k for a comprehensive financial plan, why would you not trust them to place you in the products to finalize that plan??

Someone is reaping commissions from those products one way or another, its not reducing the cost of the products for the client so why would it matter if the planner gets the commission?

I have found that planners/agents get hung up over the fee/commission structure a lot more than the clients ever do.

If you do a comprehensive fee based planning process correctly, and at the end you tell the client they need x amount of LI, or x amount of LTC, or that they need to create x amount of $ per year, etc, etc; they usually will look at you and say "great, make it happen". They dont care how you make it happen, as long as you use the same professionalism as you did in the planning process....
 
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The model is, you can get information for free. How valuable and useful that information is remains to be seen.

If you and I are competing and you are charging $250 for advice I will offer for free, who wins?

But if you are wanting to charge a fee for advice on individual products you are probably barking up the wrong tree.

What would you do with this scenario:

Low income client, eligible for exchange subsidy and needs insurance. Exchange does not pay any commish. No cross sale opportunity. But the client is confused by the complicated system that's been created, and has health problems/takes meds. Would you take the time, everytime, to do this for free? I want to serve these clients, and figure out a fee based/pay pal model.

Information may be for free on the internet, but applying it to an individuals' situation is sometimes impossible. I can read the tax code, but I still pay a CPA for advice. I could short sale my home, but the internet does not answer my specific situation, so I hire a realtor. Same with BK and a lawyer, ch 7 or 13 eligible?

When you're dealing with the 2nd biggest expense behind their mortgage payment, and dealing with the most important facet of their life, their health, people will seek expert advice.
 
Lawyers have enough to do during the estate planning process; and most do not want to become insurance experts if they dont have to.
And why would they want to when they can take referral fees from the agent?
Its a win/win; the lawyer gets paid on both sides, he doesnt have to learn the insurance side, & he has an expert on the insurance side who is more than happy to be handed the business.
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Heres the thing, it depends on how much "planning" is involved.

I have a client right now whom I am not charging a fee, but I am still creating what is a comprehensive retirement plan for what his situation is.
Why no fee? Because his situation is not very complex and the planning did not take very long.

Conversely, I am helping a friend with a case where a fee is being charged for the planning process. Its a very complex situation to say the least.
There will be product to be sold to create the solutions formed by the planning process; what we usually say is that "hopefully" they will trust us enough to place those products with us.

The planning process/presentation process for the plan has taken a good amount of time, and the many hours spent we most certainly deserve compensation on; why wouldnt we?

At that point, if the client agrees with the plan and wants to act on it, they need product solutions.
If they want to act on our plan, they obviously trust us.
If they trust us, why would they not want to place their products with us?
About the only reason is if they have an exceptionally strong relationship with another agent.

Ask yourself this; If you trust someone enough to pay them $1k-$4k for a comprehensive financial plan, why would you not trust them to place you in the products to finalize that plan??

Someone is reaping commissions from those products one way or another, its not reducing the cost of the products for the client so why would it matter if the planner gets the commission?

I have found that planners/agents get hung up over the fee/commission structure a lot more than the clients ever do.

If you do a comprehensive fee based planning process correctly, and at the end you tell the client they need x amount of LI, or x amount of LTC, or that they need to create x amount of $ per year, etc, etc; they usually will look at you and say "great, make it happen". They dont care how you make it happen, as long as you use the same professionalism as you did in the planning process....

I agree with everything you said. My point was, they make it clear when they move from the "plan" to the sale. But I never saw a client that didn't follow the plan and buy the products necessary. Sometimes you do see a client take the plan to their buddy who sells insurance, but doesn't do planning. Often their bud with a State Farm or Allstate agency. It isn't often, but it does happen.

And you're exactly right about the attorneys, it is better for them not to do the insurance. It gets them out of all the service work, and let's them avoid the appearance of a conflict of interest, something they always like. The last thing an attorney needs is a client to start questioning if they are getting billed for calling in for service questions on the life policy.
 
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