Advanced Vs As Earned

Nov 19, 2015

  1. jn8691mr
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    jn8691mr Super Genius

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    Haven't been in the business Kong, but the two IMO's I've been associated with have always paid advanced commissions. I decided to check out a new IMO for better payouts and they only pay as earned. They said its common for FMO's to only pay as earned and tat it's never been an issue. I guess I'm just curious what your preference is. I mean it can take a while to get enough business in to start generating enough monthly income to live off of when you're as earned.
     
    jn8691mr, Nov 19, 2015
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  2. DHK
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    DHK "YOU CAN'T HANDLE THE TRUTH!"

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    I would look at it from a risk perspective in terms of your cash flow.

    If 100% of your compensation is based on monthly payments on life policies, you are running a HIGH RISK practice. What happens if just a fraction of these policies lapse their payments? It means a chargeback of the remaining months. As much as we want to believe prospects that they can pay for policies... things happen.

    That's why many companies have limits on how much they would advance you, if they advance at all. If I remember correctly, Assurity limits to $3,500 and Midland limits to $3,000.

    So, how do you help limit your risks? Present more annual payment plans. If they pay annually, you'll be paid based on their annual payment. It's true that not everyone can do that, but it helps to lower your risk in your practice.

    If only 25% of your sold policies are annual pay, then you've reduced your cash flow risk and risk of chargeback by 25%.

    For me personally, when I get a commission check, I like knowing that it's MINE and I don't have to worry about giving it back.
     
    DHK, Nov 19, 2015
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  3. jn8691mr
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    jn8691mr Super Genius

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    Good point. Thank you.
     
    jn8691mr, Nov 19, 2015
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  4. jdeasy
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    jdeasy Guru

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    If you are assigning commissions to the IMO then can decide whether to give advances or not. It's a stupid idea to assign your commissions.

    When paid by the companies almost all of them, if not all of them, will advance. Some limit the advance per case and some limit by total dollars. Most of the companies I have limit the advance per case in the $2500 range.

    One company I have has a $3000 per month advance cap.

    Then most make individual decisions on the limits depending on your credit history.

    As far as preference it's a personal decision. There is no right or wrong. I prefer to be pad as earned. Others want the money up front. Some companies charge interest on the advances. I certainly don't think one should take advances when the company charges interest. And when I changed from advancing to as earned the first ones I changed were ones that charge interest.

    Does seem that you are talking to clueless FMO's. Or, if not clueless themselves, they think you are.
     
    jdeasy, Nov 19, 2015
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  5. LGilmore
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    LGilmore Guru

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    For me the biggest advantage of as earned is it keeps you working while a large advance commission will often put an agent off working for a couple months or more. And as DNK pointed out, when it's as earned, there is nothing to give back.
     
    LGilmore, Nov 20, 2015
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  6. Iwillpay
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    Iwillpay Guru

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    Save and except NSF payments.
     
    Iwillpay, Nov 20, 2015
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  7. jdeasy
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    jdeasy Guru

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    And rescissions.
     
    jdeasy, Nov 20, 2015
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  8. TxJohnny
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    TxJohnny Super Genius

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    Agreed.

    And what happens to the balance first year when the IMO cancels your contract for lack of production?
     
    TxJohnny, Nov 20, 2015
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  9. goillini52
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    goillini52 MAGA...Eat More Bacon & BUILD THAT WALL!!!

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    :bump:......................................:yes::yes:
     
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