The Real Costs of Fractional (Modal) Premiums

If a professional trade association can impose a legal fiduciary requirement, why can't someone who sets up their own business licensing and other forms and self-imposes their fiduciary status with others?
 
The term Fiduciary is a legal term. It is a regulated term by state and federal regulators. Calling yourself a Fiduciary, contract or no contract, does not make you a Fiduciary in the eyes of the law.

It might cause you to be held to a higher standard in a court of law if you happen to get sued. But it does not make you a LEGAL Fiduciary in the eyes of the US Government.

It is also illegal to imply that you have a state or federally regulated title when you do not....

So, let me see if I get this. You're saying that its okay for me to commit myself to a fiduciary engagement, but it's not okay for me to call myself a fiduciary? Or to use that word in my brand?

Is that what you're saying?
 
If a professional trade association can impose a legal fiduciary requirement, why can't someone who sets up their own business licensing and other forms and self-imposes their fiduciary status with others?

That pdf is just an overview of the Fiduciary Duties that all Real Estate Agents have. It is not exclusive to Realtors, they are just informing their members of their duties to clients per the legal regulations.

6 Fiduciary Duties of a Real Estate Agent - dummies

----------

So, let me see if I get this. You're saying that its okay for me to commit myself to a fiduciary engagement, but it's not okay for me to call myself a fiduciary? Or to use that word in my brand?

Is that what you're saying?

I am not a lawyer so I am not telling you anything. Do your own due diligence. But I do have years of experience dealing with ERISA law and their regulations surrounding what is and isnt an ERISA regulated Fiduciary, the rules pertaining to that term, and what that means for me and my clients.

But I can find a lawyer who will tell me the sky is green if I pay them enough. All that matters is case law or regulatory guidance when things blow up. What case law or regulatory guidance do you have supporting the title you are holding yourself out to be?
 
Last edited:
If you really think I'm twisting, I really want to know how you got there. That's a pretty serious allegation.

By definition:

Twisting- The act of inducing or attempt to induce a policy owner to drop an existing life insurance policy and to take another policy that is substantially the same kind by using misrepresentations or incomplete comparisons of the advantages and disadvantages of the two policies.

When you use these tables in front of a client with an existing policy. That is exactly what you are doing.

When you post backlinks to your site and articles on your site referencing this and receiving economic gain from it, you are engaging in false advertising.

False advertising- Misrepresenting any of the following:

Terms, benefits, conditions, or advantages of any insurance policy

Your compensation arrangements are rebating, there are two examples below.

Furthermore, if at any time if you should reconsider the fee-only arrangement and decide that you would like us to serve as your commissioned agent of record on a transaction, any commissions we receive will reduce your bill dollar-for-dollar up to 100% of your invoice. Or better yet, you can maintain the fee-only compensation arrangement and we’ll donate those commissions, or surplus commissions, to a mutually agreeable charity.

Remember when you said this about non-fiduciary agents?

Last but certainly not least, agents operating under a suitability standard have no obligation to quote the entire market on your behalf. Thus, the range of companies quoted is frequently limited to the companies who A) pay the most commissions, B) provide the best spiffs, C) provide the sleakest technology to make it easy (for the agent) to sell their policies, or D) all of the above.

But wait, you compare and evaluate 100's of companies every time you run a quote?
We distill all of your underwriting details into a succinct yet dense underwriting profile for the marketplace of insurance companies to consider and informally price before you submit any formal applications....we prepare and submit your Request For Informal Offer (RFIO) without any of your personally identifiable information.

Yet you also said you do this for each client. I personally thought that was a cool idea, but I contacted several carriers that said they won't be bothered with this. That pool of a hundred companies must be shrinking pretty quickly.


And finally

Our unapologetic inclination towards term life insurance means that you needn’t worry about your clients being sold cash-value products that might impede contributions to (and/or siphon investments away from) your assets under your management. Furthermore, our comprehensive replacement analyses can help support the liquidation of poorly designed and inefficient cash value policies and annuities in your client’s holdings – held away assets that are cumbersome to monitor and drag down the efficiency of the financial plan you’ve worked hard to build.

You pretend to be a fiduciary because your real clients are fiduciaries.

Do you give the clients they send you a nice big, bold disclosure with this statement on there for them to review and sign? :nah:
 
Last edited:
That pdf is just an overview of the Fiduciary Duties that all Real Estate Agents have. It is not exclusive to Realtors, they are just informing their members of their duties to clients per the legal regulations.

6 Fiduciary Duties of a Real Estate Agent - dummies

----------



I am not a lawyer so I am not telling you anything. Do your own due diligence. But I do have years of experience dealing with ERISA law and their regulations surrounding what is and isnt an ERISA regulated Fiduciary, the rules pertaining to that term, and what that means for me and my clients.

But I can find a lawyer who will tell me the sky is green if I pay them enough. All that matters is case law or regulatory guidance when things blow up. What case law or regulatory guidance do you have supporting the title you are holding yourself out to be?

This sounds like the sort of question that could have me paying my lawyer for advice that I think I already bought! So I can't give you technical answers. But I can tell you the way it works out and what I understand from how I've been counseled:

1) I have a right to bind myself to a fiduciary standard of care if I want to do so. And as far as I know and have been counseled,

2) when I do so, that makes me a fiduciary in that particular capacity.

Now, I'm not sure if its a fiduciary with a capital F, as in a "title." But as a pure noun, it's what I've bargained for, and what I've built my practice around. That process is ongoing, of course, and unfortunately, since its so new, I'm admittedly operating with some blind spots. And frankly, that's where I'm trying to spend my time and energy: actually building the resources and tools that help me render advice and services at the highest level. I think this will be a better protection against the **** hitting the fan than trying to make sure I have the right legal "title," or whether finding out whether or not I can capitalize the F in fiduciary.

Clearly you are uncomfortable with this and think I'm a bonehead for doing it. That's fine. You could be right.

But I'm not hoodwinking anyone. The commitment I make and provide has legal teeth. It demands a higher level of care. And truthfully, I underestimated the nature of how much I would need to do to meet that standard. But I'm all in, baby. Gonna ride this hand out!

Wish me luck.

Or don't.

Your call.

Good night.
 
Last edited:
Your compensation arrangements are rebating, there are two examples below.

Nope. Two separate professional services, and his offer to reduce up to 100% of the fee is his professional prerogative.

Ed Morrow would not recommend reducing your fee or taking reduced commissions as a result of your planning and analysis services.




If MDRT Top of the Table members can charge planning, analysis, and retainer fees... so can you, AS LONG AS you are doing it properly and legally.

BTW, a fee for consulting and analysis for a plan (not including securities analysis requiring a Series 65) and a fee to analyze a policy are two different things.
 
Last edited by a moderator:
Nope. Two separate professional services, and his offer to reduce up to 100% of the fee is his professional prerogative.

One of the main reasons we get commission as life agents is to be able to provide an affordable service to our clients. If I am a client and I ask him to represent me on a fee basis but rack up too many fees to pay I can simply switch to commission basis to pay the bill off. That's an inducement for me to take out a new insurance contract with him.

If I know that paying him a $62.50/hh(first 30 mins free) for his service will allow me to donate $1000 to my favorite charity when I was going to buy life insurance anyway, that's an inducement. Since he discloses his commission levels I know exactly how much insurance I need to buy to get the desired donation and I have an incentive to not use someone else who will not provide the same donation.

Furthermore, if I was Hillary Clinton, I would take out a huge policy and my charity of choice would be the Clinton Foundation, spend it on "admin", then I would cancel my policy after the first year and do it again next year. It's the best income money could buy.
 
The economics of commissions of life insurance is based solely on this:
- How much death benefit
- Guaranteed for a particular period of time
- Health risk of the proposed insured.

If you place a $250,000 20-year term policy on a standard risk, you earn that compensation based on your compensation plan.

If you place a $750,000 max-funded permanent policy on a preferred plus, you earn that compensation based on your compensation plan.


You are paid by the companies to SELL PRODUCT (ethically, morally, and legally), NOT to provide advice. Notice that your license says AGENT or PRODUCER... not advisor.

Most agents (myself included) provide advice that is "incidental to the product sale". However, you don't have to do it that way. You can charge a separate fee, IF you are properly set up to do so. You would need a legal entity, engagement agreements, and a way to accept payment. If you're going to analyze existing contracts, you need an analyst license. If you're going to analyze and give recommendations on securities, you need appropriate licenses.

Granted, I do believe that if you charge planning fees, that you are doing so at your own peril as your market shrinks. But that doesn't mean you can't do it.

I also believe that it can become nearly impossible to sell larger policies without providing SOME kind of advice incidental to the sale, but we are paid purely to place product... not for advice.
 
By definition:



When you use these tables in front of a client with an existing policy. That is exactly what you are doing.

If I were using the table as the sole basis for advising a client on an insurance purchase or surrender, what you said would be true. But this is only one extremely small facet of the insurance purchase. I think it's important. But I never once said that it should be the basis of making an insurance purchase. I don't know how you could possibly have read my articles and inferred that I would use a fractional premium APR table as a sales tool, anyway. It's not a sales tool. It does nothing to help close a sale. It is a post-sale education for the client, to help the client determine his/her best way to pay for the product. This might be the most grotesque example of a strawman argument that I have ever seen in my life.

When you post backlinks to your site and articles on your site referencing this and receiving economic gain from it, you are engaging in false advertising.

What in the holy fvck are you talking about? This is absurd. Posting links to my blog posts is false advertising? What is false about it? That you don't like my pitch? Or my marketing?


In no way has anything I've presented been a misrepresentation of anything. To the contrary, these tables provide valuable perspective to customers. Not decisive, "which company should I choose?" perspective. I never claimed that. You have grossly misrepresenting my position. I defy you to show me an instance where I've used or encouraged anyone else to use this table to twist someone into another product or go with another company. This is a very serious and baseless accusation.

I defy you to show a single instance of an untruth in what I've written elsewhere. Your beliefs are based on the misguided, baseless assumption that I'm using these tables to actually steer a client away from one carrier to another. I am doing no such thing. I am, however, calling certain companies out on what I believe is unfair consumer exploitation. And I'm not ashamed of that at all. I'm proud of it. It is not just about being a good professional. It's about being a good American and taking advantage of my blessed right of free speech.

And by the way, you sound like a god-damn fascist nazi. And its scary. Truly scary. But I'm not going to sit here and let you bully me. Not for a minute.


Your compensation arrangements are rebating, there are two examples below.

Neither of those instances are rebating. One is a fee-offset. The other is a benefit that I don't receive. In no case am I paying the client out of my commissions to induce a sale, which is what rebating is.

Remember when you said this about non-fiduciary agents?

Those are grim legal realities of the business, man. And it is the legal reality of the lack of consumer protection that exists in this industry. Most people think that the suitability standard applies to the insurance business. But the reality is that even that anemic standard is not present for non-variable products. There is nothing noble about stuffing the truth about the consumer's exposure under the rug so no one can see it. I am only making it clear what exposure consumers have.

I am NOT, and I repeat NOT, stating that everything bad is going to happen to every client because they don't have someone serving them in a fiduciary capacity.

I am merely pointing them out that legally, there are substantive, practical differences in the level of care that is demanded of a fiduciary. If anything in those descriptions, I have been generous towards the industry, because for most transactions, even the suitability standard doesn't apply. So if you're going to accuse me of misrepresentation, that is where you'd take your best stand.

I have a legal right to advertise the distinctives of my practice. The only reason I can imagine that you think its wrong is that you think I'm lying about those distinctives.

But I'm not.

And if you want to go talking about law-breaking, let's talk about slander and libel. Because if you don't have a factual basis for making these accusations (and you do not, I assure you), then I want to be very clear that I take this very, very seriously. That's my name by that avatar. And that avatar is my company logo. You are not slinging s**t on some nameless or faceless person. You are volleying public and extremely serious, baseless accusations against a real human being with legal rights. I cannot stress to you enough how seriously I take this.



But wait, you compare and evaluate 100's of companies every time you run a quote?


Yet you also said you do this for each client. I personally thought that was a cool idea, but I contacted several carriers that said they won't be bothered with this. That pool of a hundred companies must be shrinking pretty quickly.

Here again, the underlying assumption that I am lying. Only this time you didn't say it overtly.

There is no magic to doing this level of work. It involves 1) paying for good quoting software, 2) being willing to slog through some phone calls and web-site quoters, and 3) establishing relationships with a handful of captive agents who don't mind taking a flyer and quoting rates to see if they pick up a case. You figured out through your "few phone calls" that its a pain in the ass and that companies don't make it easy. Congratulations. You have a experienced a taste of why you don't want to commit yourself to this standard of care. That's fine by me. Your call. But don't go blowing me out of the water or insinuating that I just decided to lie about something because you found it to be too cumbersome to pursue to its conclusion. The reality is that if you want the information, there are ways to get it. That extra effort is the very real and tangible cost of fiduciary labor.

And for what its worth, the universe of companies is indeed shrinking. And when it shrinks below 100, I'll amend my website accordingly.


And finally
You pretend to be a fiduciary because your real clients are fiduciaries.

There is no pretense of fiduciary responsibility. It is a real contract, I assure you. And there are real consequences and liabilities I assume for both signing it and holding myself out in that capacity.

And yes, I do market to fiduciaries. I'm not ashamed of one aspect of the value-add I provide in those relationships. Nor am I ashamed that I believe that term life insurance is the best solution for most people. It is a bias I openly disclose, for which I am to be commended. Far too many life insurance professionals conceal their product biases. Mine is right out there for all to see. I cannot see how there is any shame in that at all.





Do you give the clients they send you a nice big, bold disclosure with this statement on there for them to review and sign? :nah:

A great deal of what I disclose is right on my website for all to see, including my commissions, which is a great deal more than any other professional I've ever located or seen. Show me the website of someone else who is disclosing more, and I'll gladly send you a digital gift certificate for $25 to the website of your choice. Then you can actually dig around on the web or someone's site, and actually have something to show for it. Right now, you're working for free. Or worse, you're digging yourself into a very expensive hole.

Originally, I found value in what you had to say and thought you were just trying to thump your chest with the closing remark. Now I experience you as a truly scary fascist bully.

It is one thing for all of us to agree, which I think we all do, that there is a dishonesty problem in our industry. It is quite another thing to recklessly assault the character of a singular person just because you "suspect" he's lying or behaving unfairly. For what reason you would choose to do this, I do not know. I can only imagine you feel threatened. At least that is my hope.

If that is the case, please accept my apologies. In what I've said, I meant no individual attack on you or anyone on this site. I believed what I was posting would be of help and interest.

Rest assured, I will think twice about taking any such initiative in the future.
 
Last edited:
Why are you even here? You cannot ask me to explain what I said, and then threaten legal action because I explained it. Don't get into your feelings.

I have said repeatedly throughout that you are introducing unnecessary complexity into the transaction. I do not think you are some evil person trying to get over on all your clients, however from how I see it, if you are offering them options of companies, then at some point you will show them the chart with these fractional APR's. Why would a client pick the ones with the highest APR's? Don't you think some clients may feel you are more trustworthy for giving them this information?

Posting links to your blog is not false advertising, but the article itself to me is misleading. It's the content, and you present it as fact that the consumer is being mislead by not disclosing this. For the companies that don't disclose, has it been proven in court that its misleading? Do you think that a consumer will have a negative or positive reaction to reading about a company charging a 42.8% APR? What do most consumers associate with APRs?

You never answered me if you had checked with the compliance departments at all the insurance companies about disclosing these APR's.

I want to make clear that I do not think you are lying I think you are misguided. You are on a crusade like the good folks over at Primerica that you called out. You provided a lot of transparency on your site and made a lot of claims and you left me with a lot of questions.

The part about not selling cash value products and providing an analysis to move them away from such products if they have them really struck me off though I do have to admit. That just seems like a conflict of interest to me. Specifically because you mentioned you are protecting the advisor's assets under management. Can you explain how that is not a conflict of interest?
 
Back
Top