An Open Question for Certified Financial Planners[?]

[Tahoe Ray]

If they could only figure out how to get their fee off the cash value inside a life insurance contract every year they'd sell record amounts.

Record-breaking amounts.

They could do that just by charging a fee if they wanted to. Shoot, there are hourly planners out there that just charge retainers like attorneys.

Most planners don't sell cv life insurance b/c they don't believe in it and/or haven't been shown how it can help their clients.

 

[DHK]

If they could only figure out how to get their fee off the cash value inside a life insurance contract every year they'd sell record amounts.

Record-breaking amounts.

There are fee-based VUL contracts out there.

 

[Tahoe Ray]

There are fee-based VUL contracts out there.

And FIAs/VAs...more and more options coming to market as well.

I'm not sure it will matter though. It will move the needle, especially if the carriers launching these products have a field force. But, at the end of the day, there is still a huge belief that CV LIFE and ANNUITIES = HUGE FEES and EVIL INSURANCE AGENTS so it would really require a fundamental shift in industry philosophy.

 

[DHK]

If I was to go down that route (and it wouldn't be hard to do), I'd just charge a retainer fee out of pocket rather than against an insurance contract.

 

[Tahoe Ray]

If I was to go down that route (and it wouldn't be hard to do), I'd just charge a retainer fee out of pocket rather than against an insurance contract.

Exactly. Charge 10k-20k/yr to manage all assets, insurance policies, taxes, everything. Go get 100 clients.

That's how I would do it as well. You can even hire other professionals to do the work that you're not qualified/don't want to do.

Basically, a financial general contractor. Rather than the client having to find CPAs, attorneys, insurance agents, etc, you just do it all for one fee. Everyone wins.

 

[marindependent]

Ah. You're talking about investment advisors who happen to hold CFP marks

ahhh, yes - that is why I named the Post "An Open Question for Certified Finanacial Planners"

 

[davephx]

Ah. You're talking about investment advisors who happen to hold CFP marks and primarily do asset allocation and perhaps some distribution strategies. And since they get to use the term "fiduciary" with their Series 65/66, what they do appears to be "real" planning.)

Huh? There is no fiduciary with any securities license 65/66/24/7 That is why E. Warren seems to think all securities folks are crooks and now are required to do Customer Relationship disclosures, and new Reg BI.

The only legal Fiduciaries are RIAs. But they have far regulatory oversite than securities reps from FINRA etc. While RIAs are fiduciaries by law that only helps if you hire a lawyer and file a suit. Vs simply file a customer complaint with FINRA and security requirements are far greater in practical terms than for an RIA.

As a CFP I have ethical fiduciary-like responsibilities but not the same legal status as an RIA - which I am also.

For a long-term investor, a fee-only RIA is the most expensive way to get investment advice unless doing lots of other work besides investments and financial planning. A 1%/annual RIA fee is equivalent to a 9.1% sales load on a mutual fund over 10-years if the value does not go up. If there are investment gains the RIA fee becomes far more expensive than the typical 2%-4% one-time spread (sales charge) buying an A-share mutual funds with break-points.

I give advice with extensive RIA analysis on any investment I recommend and charge a one-time $500 for life RIA fee. Because it's in the best interest of clients for long-term growth investment objective I implement via the securities side.

I have a CPA background and 40 years in the business, owned a B/D, a CFP etc.

I sometimes (but rarely) use insurance products. Most of my clients are older and have little or no need for life insurance. I like the idea of max funding UL under the MEC limits but usually, the insurance cost at older ages makes it not feasible when the main interest is tax-free growth and access via loans and other advantages. I agree it is more like a Roth with much higher contribution limits but with the added higher costs of the wrapper.

I have used fixed annuities to take some large investment gains and set aside for safety in an annuity - however with today's low rates that is not attractive to most clients.

Before 2008 I used variable annuities with the great guarantees that were worth the high costs - such as max anniversary value, 5% annual increase in value without having to take a low payout rate, etc. You could be very aggressive in the investment subaccount selections since you had such strong guarantees. However, that all changed after the 2008 crisis. Investment choices more limited and no good guarantees any more other than if you slow distributions to like a 3% rate or something. Haven't recommended a VA since then. For younger clients with limited resources, I use term to cover the period when having family needs but for most clients insurance is a minor need after kids are gone and have built their wealth by good investments.

 

[DHK]

I sometimes (but rarely) use insurance products. Most of my clients are older and have little or no need for life insurance. I like the idea of max funding UL under the MEC limits but usually, the insurance cost at older ages makes it not feasible when the main interest is tax-free growth and access via loans and other advantages. I agree it is more like a Roth with much higher contribution limits but with the added higher costs of the wrapper.

Take a look at a 10-pay whole life sometime.

Amazon product ASIN 1495830713

 

[walthamny]

Going back to the original question, some CFP's sell insurance because they do not want another life insurance agent to mess up their financial plan. And their financial plan always calls for BTID, no exceptions. SO they will pitch term insurance either on a commission basis, or refer it to these high cost fee only insurance IMO's. It simplifies the financial plan if everything is term insurance and more time can be spent with the client talking about other financial planning topics.

 

[Stephanie F]

I don’t personally have the knowledge to answer that myself ( I’m just a new employee at a local FMO) but could it have anything to do with the fact that whole life can be utilized like a “self bank” and compounding debt? Maybe not as the main reason for many CPAs but I wonder if that could be the reason for some?