As Earned Commissions Vs. Advanced

[Newby]

I have always felt that companies should pay higher commissions to agents who take as earned than the ones who need advances. But none of them do. For that reason I feel that agents who take as earned are being penilized for trying to be responsible.

If you get paid the same both ways, it doesn't make mathmatical sense to take as earned. It's harder to track, the company might have problems and quit paying commissions (didn't Shenandoah do this for a while) and you can manage your own money just as well as the insurance company can.

If you want to have the steady income of as earned, why can't you have ALL your commissions advanced to a reserve account that YOU set up and own and pay yourself 1/12th of that account each month?

As earned WOULD be better IF it paid better. Since it doesn't, it's not better. IF you are financially responsible enough to reserve your own money.

 

[steveadlman]

I have always felt that companies should pay higher commissions to agents who take as earned than the ones who need advances. But none of them do. For that reason I feel that agents who take as earned are being penilized for trying to be responsible.

If you get paid the same both ways, it doesn't make mathmatical sense to take as earned. It's harder to track, the company might have problems and quit paying commissions (didn't Shenandoah do this for a while) and you can manage your own money just as well as the insurance company can.

If you want to have the steady income of as earned, why can't you have ALL your commissions advanced to a reserve account that YOU set up and own and pay yourself 1/12th of that account each month?

As earned WOULD be better IF it paid better. Since it doesn't, it's not better. IF you are financially responsible enough to reserve your own money.

Excellent post. If you are good at managing your money it does not matter if you take advances or as earned. Agents get into trouble with advances because of poor persistency which in most cases goes back to the quality of business they are submitting.

 

[Daytona_Guy]

Agents get into trouble with advances because of poor persistency which in most cases goes back to the quality of business they are submitting.

Right, or the line of business they're putting 100% focus on.
The best agent in the world, working the <$20k final expense target market is going to experience a minimum number of chargebacks. It is inherent to that target demographic.

Conversely, those seniors that are able to afford a Medicare Supplement premium vs. Medicaid or a $0/mo. HMO are more likely to continue paying that premium every month. Hence, a more stable market and a more stable income for the agent writing it. ..And that's if everything else were equal (1 year FE high commission vs. 6 years with a Med Supp sale).

So, I think a lot has to do with what pond you're fishing in rather than just the quality of the fisherman on the shore.

 

[G.Gordon]

(1)I have always felt that companies should pay higher commissions to agents who take as earned than the ones who need advances. But none of them do. For that reason I feel that agents who take as earned are being penalized for trying to be responsible.

(2)If you get paid the same both ways, it doesn't make mathematical sense to take as earned. It's harder to track, the company might have problems and quit paying commissions (didn't Shenandoah do this for a while) and you can manage your own money just as well as the insurance company can.

(3)If you want to have the steady income of as earned, why can't you have ALL your commissions advanced to a reserve account that YOU set up and own and pay yourself 1/12th of that account each month?

As earned WOULD be better IF it paid better. Since it doesn't, it's not better. IF you are financially responsible enough to reserve your own money.

(1) Why in the world should a company pay better for an agent taking his cut one way or another. It doesn't make the company any difference. For those companies that it matters to... they charge a finance fee.

(2) Errors in commissions are extremely rare and if you have so few clients that you can actually track what you're getting paid on them then I understand your need for advances. Just an observation.

(3)Because the majority of agents will not leave money alone. Give them a great week they'll live high on the hog for the next week then it's back to working for the next sale's advances to make ends meet.


Bottom line: The best advise I got from a older agent long ago was don't be enslaved to taking advances. Make building an as earned stream of income your one major goal. Agents that have been in the business for years and years and still depend on making X number of sales per week/month don't have a clue of the joys and freedoms this business brings.

I've watched this mentality time and time again.

Say an agent needs $2000/week to make it. Most weeks he'll stop when he's sold that and maybe a little more. Let an agent with that mentality have a great week, say $3000-4000 in advances in that week... then watch them the following two weeks and see if he reaches that $2000 goal... he won't.

 

[Newby]

G Gordon,
1. Companies have much less risk and expense when they pay as earned. It helps their cash flow (you mail them $100 and they pay you $1,200 Duh!) and when agents are advanced it turns the companies into bill collectors when agents go bad. For that reason I believe companies should pay agents higher for as earned than advanced.

2. It is fairly common for companies to make commission errors. I caught Anthem with $20,000 in errors to me within the last quarter. I have fixed over a dozen mistakes that ForeThought has made to me ranging from $1,000 to $6,000 per occurence. They all make mistakes and getting paid all at once is easier for the agent to track.

3. Just because 85% of the agents are stupid and/or financially irresponsible, I should change MY business model to adapt to that? Ain't happening.

As earned is fine for most agents but I still believe advanced with the agent reserving his own money is better.

 

[JamesCoon]

There is no ansewer to this question. It all depends on the person. I started out getting advances then as my business grew I stopped getting advanced and now I have a higher monthy income. It depends on the person