RIA Goes Cold Turkey on Life Insurance

[Brian Anderson]

An RIA that offers financial planning and wealth management has decided to no longer sell insurance of any kind. He’s only (passively) sold 2 or 3 life insurance policies per year for the past 7 years, but now says he will refer all life insurance prospects to one of his life insurance agent clients. He mentions 2 reasons for doing this:

“First, because doing so prohibits me from holding myself out as fee-only in the eyes of the CFP Board (to clarify, I do not agree with the Board's position on this issue). The second reason is that being fee-only is a competitive advantage with a large number of clients.”

As he says in his blog post (link below), he thinks it will be a good business decision if he receives more clients as a result of being fee-only and the additional fees are greater than the commissions he would have received from continuing to sell life policies.

What do you think – good call or bad call? (And why?)

Why I Won

 

[Justin Bilyj]

RIA, series 65, bd, all are terms that would make for a good article that explains all the differences, limitations and pros.
I raised the issue in a previous thread, is the market naturally going towards fee-based planning, are "commissions" becoming an eleven letter bad word?
I think its wise for him to refer it out if it continues to help him profit either in referrals or increased persistency with the life agent he refers them to..

 

[DHK]

It's a good call... for him. He stated that he doesn't actively pursue life insurance selling opportunities. Only on a 'needs-basis' - and probably mostly for estate planning purposes, or when the total face amount of coverage is deficient, I would guess.

It's not like we're talking about an MDRT producer here.

Plus, he was purposely trying to place "fee-based" policies... and discovered that commissioned policies have lower premiums.

So, it's a win-win-win for everyone:
- He wins, because now he doesn't have to have a perceived conflict of interest.
- His clients win... because they'll be working with someone that really knows and understands insurance.
- The CFP board wins... because they've convinced another potential insurance producer to give up the 'evil' commissions.
- The agent wins... because he can remain the specialist in life insurance and continue to refer securities accounts to him.


While it was a trend a few years ago for a "one advisor, one plan, one strategy, one roof"... the trend is to specialize in various products & strategies. It's the "Good to Great" concept and knowing what your "hedgehog" is.

Know what you're good at... and delegate/refer out the rest.

 

[bobson]

He sounds like an investment advisor not an FP. How can only 2 or 3 clients of his a year not have plans for premature death?

 

[DHK]

What is "Fee-Only?" Is the CFP Board Taking the Right Approach to Defining it?

A rather disturbing story about the over-arching influence that the CFP BOS has over their certificants. A voluntary inquiry turns into a "cease and desist" action. This is just crazy!

The brainwashing of the CFP to say "fee only" is morally superior... yet look at how they enforce it. And the guy still thumbs his nose against annuities... but doesn't see how the CFP board is trying to get him to "comply" with their non-defined definition of 'fee only'... or to divulge his other business interest.

 

[trustandadvice]

The cost to have an experienced agent search the market for you, to find the best fit, and to help you design your coverage is one years premium (in general). Small price to pay to make sure that you have a program that hits on all cylinders. Plus the insurance company pays the agent. The premium, without paying the agent, would be only a couple percent lower over the long term.

Plus the client doesn't have to pay $400 for the paramed.

If it was fee only then small purchasers would be ignored, young people who need advice.

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He sounds like an investment advisor not an FP. How can only 2 or 3 clients of his a year not have plans for premature death?

Doesn't sound like he is doing any comprehensive planning.

 

[scottstreet]

DHK, I'm not sure that the CFP board thinks commissions are "evil" but rather that non disclosed commissions. The majority of CFP's are not "fee only" - hard to belive a group as money hungry as the CFP board is looking to lose more than half it's annual dues. I think the article is more about the the CFP's confused take on transparency and related businesses. In the end the CFP is not a regulatory agency but rather a business marketing a reasonably difficult designation. If you want to use the marketing firm you have to play by their confused and sometimes asinine rules. It's just up to the producer to decide if it's worth the headache.
Napfa is the "commissions are evil" group.

 

[pfg1]

Might be a good fit for him. I know several folks that have done the same thing and are happy they did, though I personally would not.

Re: the CFP board... not a big fan really. A friend of mine who's got 20+yrs experience in this business went through the classes and passed the CFP exam, and they wouldn't give him the designation because he did not have a 4yr college degree. (This was before it was mandatory - back when they would accept experience in lieu of - they changed the rules mid stream on him).

So you can take and pass everything but if you don't have that piece of paper you're not good enough to be a "CFP"? But if he had a 4yr degree in Opera, then he can be a CFP? Bogus.