A Fee Based IMO?

[irobbins]

Just curious what everyone's thoughts are on a fee based IMO? What I mean by a fee based IMO is an IMO that charges a fee to the agent and then passes along not only the agents commissions but also the override from the carrier that the IMO would have received. The fee paid would be less than what an agent would receive in the extra override.

Example, agent does $1million a year in annuities. He/she would pay a $5,000 fee to the IMO. Then the IMO would pass along an extra 1% commission to the agent or in this case an extra $10k.

So everyone comes out a winner. The IMO gets money upfront (instead of waiting for cases to be submitted) and the agent makes a significant amount more money.

Thoughts?

 

[Josh]

I believe there are a handful of shops doing this, but the reality is that for most cases you can get pretty high contracts without a fee. Not sure the incentive is there.

 

[irobbins]

Josh-

I was unaware of any IMO's out there that operate this way. I do know as an agent you can not go direct to the carrier unless you do a substantial amount of premium (some even then, will not let you go direct.)

In my experience traditional IMO's do not like to give away their override to the agent. Even if it is 25bps or 50bps. Let alone trying to get an IMO to give away 1% or more!

Have you had, as a producer, a different experience?

 

[Josh]

IMOs don't like to give away their override, but an agent can get pretty high contracts by just shopping with different IMOs, especially if you're talking about trying to justify a $5,000 fee.

 

[Mattschmidt]

Just curious what everyone's thoughts are on a fee based IMO? What I mean by a fee based IMO is an IMO that charges a fee to the agent and then passes along not only the agents commissions but also the override from the carrier that the IMO would have received. The fee paid would be less than what an agent would receive in the extra override.

Example, agent does $1million a year in annuities. He/she would pay a $5,000 fee to the IMO. Then the IMO would pass along an extra 1% commission to the agent or in this case an extra $10k.

So everyone comes out a winner. The IMO gets money upfront (instead of waiting for cases to be submitted) and the agent makes a significant amount more money.

Thoughts?

Brokers alliance would be a good fit for you ...contact them and ask for information on the elite producers program

 

[nathan.lee]

Josh-

I was unaware of any IMO's out there that operate this way. I do know as an agent you can not go direct to the carrier unless you do a substantial amount of premium (some even then, will not let you go direct.)

In my experience traditional IMO's do not like to give away their override to the agent. Even if it is 25bps or 50bps. Let alone trying to get an IMO to give away 1% or more!

Have you had, as a producer, a different experience?

So let's do the math and I'll use your numbers to keep everything simple.

Producer pays IMO $5,000 upfront.

Producer writes $1,000,000 in annuity premium with IMO.

Let's say the IMO receives a 2% override. Of course this depends on carrier, product, age of client. That equals $20,000.

IMO passes 1% or $10,000 back to the agent.

Producer subtracts original $5,000 fee from $10,000 and nets an additional $5,000.

IMO subtracts $10,000 from original $20,000 override and adds $5,000 fee and thus nets $15,000.

This entire process results in a 0.5% reimbursement to the producer which is pretty standard for many IMOs. (When dealing with the most profitable carriers/produtcts)

Now where it gets really interesting for the producer is when that producer starts issuing $1MM+ with that IMO.

Let's do the same math with $2,000,000 in annuity production.

$5,000 fee to IMO

$40,000 override to IMO

$20,000 "reimbursement" to producer

Producer nets $15,000 and IMO nets $25,000

This represents a 0.75% "reimbursement" to the producer.

What happens at $10,000,000 in annuity production?

$5,000 fee to IMO

$200,000 override to IMO

$100,000 "reimbursement" to producer

Producer nets $95,000 and IMO nets $105,000

This represents a .95% "reimbursement" to the producer.

 

[Josh]

Brokers alliance would be a good fit for you ...contact them and ask for information on the elite producers program

I get the impression he's looking to start it, not participate in it.

 

[CALTCAgent]

So everyone comes out a winner. The IMO gets money upfront (instead of waiting for cases to be submitted) and the agent makes a significant amount more money.

Thoughts?

Why pay the IMO up front?

How about the agent does the production and they pay him retroactively the increased commission. Its still a win-win.

This way the IMO still has incentive to help the agent produce, rather than the numbers game we currently have and would have with that plan.

 

[Mattschmidt]

I get the impression he's looking to start it, not participate in it.

Oh, my bad...Interesting to see how this kid gets this thing off the ground

 

[irobbins]

Nathan Lee-

The 1% was an example. If the override is 2% than that is what's passed along. What ever the override is to the IMO, it is passed along. So I see where you were going with the example I gave. I was trying to keep it simple for discussion purposes.

So Nathan, in your example a $10 million a year producer would pay a $5k fee and if the override was 2% the would receive a net $195k on top of their commissions. It sounds like a great deal to me.!

I am trying to figure what the negatives and the positives are on a program like this would be.

And please, if you wouldn't mind. I'm not a kid, as you suggested. I've been in the finance industry for over 12 years.

From what actual producers are telling me is that a chance for them to participate in the full commission / override, even for an upfront fee, would benefit them greatly.
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Oh, my bad...Interesting to see how this kid gets this thing off the ground

I'm actually older than you Matt!