Captive Rep Confused About Breaking Contract

[Sunder]

I'm new to these forums. After searching for a couple of hours, I haven't found the answers I'm searching for (perhaps I have poor questions?), so I'd like to post here. Before I begin, I appologize in advance for being obtuse.

A bit of background:

I've been in the business for 6 years. I'm Series 6, and 63 licensed, and I sell Life Insurance and Annuities. I work for one of the big box captive agencies. I have a non-compete as most captives do, and I have a General Agency that I'm allowed to use to place business outside of my primary company.

My problem:

I'm leaving the area that I work in about 8 months. I'll be moving to the area that I'm from to start from scratch. When I place my business through my General Agency, it takes about 2 months to get paid through my captive company, and I'm getting a bit tired of that. As it stands, anything I sell at this point I won't be completely compensated for, as I won't be here a full year to receive all the compensation. I'm a bit jammed.

My questions and concerns:

If I go independent, I'm lost, as I have no idea how that works. Many of the other top reps in my office broker life insurance or fixed annuities outside our company in violation of their non-compete. If they get caught, they get canned. At this point, I'm not concerned with getting canned. Usually the manager looks the other way. However, I don't know if that's legal or not. I have E&O obviously, but if I go directly to a carrier to sell life insurance and my primary company doesn't get their cut, is that legal?

For example. If I sell a Prudential term policy through my GA, I get paid my grid % of what Prudential sends to my company. Currently I get 63% of the 117% GDC. I've been led to believe that I could go directly to Prudential, leaving my captive company in the dark, and there'd be no middle man. Am I thinking correctly, or criminally?

Everyone mentions independents need to find a GA, or clearing house, or something to place their business through. Why? Can you not go directly to the carriers you want to sell and get the appointment? I'm looking for any advice I can get on this. I'd like to make the most out of my next year. I do enough variable business that I must do through my captive anyway. The mother ship will still get hers. I'm just looking to help my clients and still get paid to do that.

Thanks in advance.

 

[uoduck]

I am in a similar situation and do not have any real world experience so I am going to try to pass on what I have found in my research. I am sure someone will correct me if I am wrong. Anyways I believe the reason you need to find a GA or clearing house is due to how hard it is to appoint directly with most companies. You will need to be able to promise them a lot of business upfront. Most people work with a clearing house for a few years till they can build up a big enough book of business to get directly appointed. Perhaps if you have enough experience you can appoint right away. Check the commission rates if you do, i have heard sometimes you do better going through a GA or Clearning house because they are able to negotiate a rate better than you. Hope this helped

 

[Sunder]

yes that does help. I've been confused on the captive vs independent part for a couple years now. I get my SS matched, and my 401k matched, leads provided and basic 5% cash balance plan retirement, being captive.

Most clearing houses that I've seen pay anywhere from 80-90%. If I float anywhere from 63-64% plus 4%+5%+7.5%, I'm at that 80% mark right there with no headaches and leads provided by the company.
I guess I'm confused how getting appointed directly with a carrier can be so tough. I'm no big shot, but I do around 200KGDC a year, that should count for something.

How much do you make if you go direct? If I wanted to get directly appointed with Prudential, how do I even do that? In my GA I just call them up, and fill out their paperwork. Is it the same?

 

[DavidD1]

I'm new to these forums. After searching for a couple of hours, I haven't found the answers I'm searching for (perhaps I have poor questions?), so I'd like to post here. Before I begin, I appologize in advance for being obtuse.

A bit of background:

I've been in the business for 6 years. I'm Series 6, and 63 licensed, and I sell Life Insurance and Annuities. I work for one of the big box captive agencies. I have a non-compete as most captives do, and I have a General Agency that I'm allowed to use to place business outside of my primary company.

My problem:

I'm leaving the area that I work in about 8 months. I'll be moving to the area that I'm from to start from scratch. When I place my business through my General Agency, it takes about 2 months to get paid through my captive company, and I'm getting a bit tired of that. As it stands, anything I sell at this point I won't be completely compensated for, as I won't be here a full year to receive all the compensation. I'm a bit jammed.

My questions and concerns:

If I go independent, I'm lost, as I have no idea how that works. Many of the other top reps in my office broker life insurance or fixed annuities outside our company in violation of their non-compete. If they get caught, they get canned. At this point, I'm not concerned with getting canned. Usually the manager looks the other way. However, I don't know if that's legal or not. I have E&O obviously, but if I go directly to a carrier to sell life insurance and my primary company doesn't get their cut, is that legal?

For example. If I sell a Prudential term policy through my GA, I get paid my grid % of what Prudential sends to my company. Currently I get 63% of the 117% GDC. I've been led to believe that I could go directly to Prudential, leaving my captive company in the dark, and there'd be no middle man. Am I thinking correctly, or criminally?

Everyone mentions independents need to find a GA, or clearing house, or something to place their business through. Why? Can you not go directly to the carriers you want to sell and get the appointment? I'm looking for any advice I can get on this. I'd like to make the most out of my next year. I do enough variable business that I must do through my captive anyway. The mother ship will still get hers. I'm just looking to help my clients and still get paid to do that.

Thanks in advance.

I've been in the biz for a while and started as captive. Everything seemed easier then, leads sometimes, 60-70% contract, given what to sell with updates.....spoon fed. But I left a lot of money on the table for other agents. Goin indy was not difficult and thru the right GA you can still get leads, advances with several products to sell. They want to make money also...but the contracts are way, way higher. Doubled income the 1st year...and I would guess most "Guru" people are indy...worth the effort

 

[brookfieldpartners]

I was once captive and went independent. I enjoyed the move, and the flexability. Cases also got placed and paid faster on your own I have also found.

If you are getting leads and are in a good situation then it might make sense to stay.

If you are doing everything on your own as is, I would leave. I found that I can better manage my expenses.

Let me know if you have questions on the broker-dealer side. I have work with many different reps that work for different broker-dealers, and I might be able to give some good insight.

Before going full-time with my business, I used to travel around the country and do seminars at broker-dealer meetings. From that I can tell you a little about each one.

Feel free to contact me at: brad @ brookfieldpartners dot com

 

[Sunder]

Thanks for all the help guys. From what I've gathered, everyone needs to be a part of a GA. Is there no way to go it alone? Direct sells to the company. I mention me being stubborn, as I don't know if this is an invalid question. Perhaps you can't sell directly to the companies?

Legality wise, can I sell to outside carriers, knowingly breaching my contract? Non variable that is, I know selling away is illegal. I'm willing to create my own transition if I have to. I'm not concerned with being terminated.

As part of an independent GA, what am I paying for with the portion they keep?

Thanks again.

 

[pomfin]

Thanks for all the help guys. From what I've gathered, everyone needs to be a part of a GA. Is there no way to go it alone? Direct sells to the company. I mention me being stubborn, as I don't know if this is an invalid question. Perhaps you can't sell directly to the companies?

Legality wise, can I sell to outside carriers, knowingly breaching my contract? Non variable that is, I know selling away is illegal. I'm willing to create my own transition if I have to. I'm not concerned with being terminated.

As part of an independent GA, what am I paying for with the portion they keep?

Thanks again.

If you are talking about securities, you always need a broker. If you are talking about the insurance, you may be able to contract directly with limited companies, like Midland National, Jackson National etc. Most carriers do not contract directly with agents. They contract with IMOs with over one million dollars premium. They contract with recuritors, not producers. That is why you have to find a GA to be contracted with.
With your sales volume, a GA will determine what contract you are qualified to. Most IMOs are very flexible so you may get top street contract. Ask around or search for the forum you would find the grid. Prudential does not give high commission to independent agents so you won't be surprised to find out that your IMO may give you only 70% contract to Prudential.

 

[xrac]

If you produce enough business you can have as good a payout through a FMO as you do direct. The advantage of a FMO is you can let them shop your cases among several companies and then pick the one you want to use. This will potentially make you more competitive and save you a lot of time.

 

[Norwayguy]

Thanks for all the help guys. From what I've gathered, everyone needs to be a part of a GA. Is there no way to go it alone? Direct sells to the company. I mention me being stubborn, as I don't know if this is an invalid question. Perhaps you can't sell directly to the companies?

Legality wise, can I sell to outside carriers, knowingly breaching my contract? Non variable that is, I know selling away is illegal. I'm willing to create my own transition if I have to. I'm not concerned with being terminated.

As part of an independent GA, what am I paying for with the portion they keep?

Thanks again.

Sunder just a quick and dirty tip for you...If you are selling insurance products not through your B/Ds approved GA then you are engaging in an Outside Business Activity. All outside business activities must be approved by your B/D. So if you get caught not only will you be canned but they might not give you a clean U5 meaning it might be more difficult to get registered with a new B/D....You might think about looking for an Independent B/D if you produce 200K plus of GDC your payout could range from 70-100% (100 is with a monthly fee) and even though you still must disclose your outside business activity it shouldn't be a big deal.

 

[Franz Kafka]

I'm new to these forums. After searching for a couple of hours, I haven't found the answers I'm searching for (perhaps I have poor questions?), so I'd like to post here. Before I begin, I appologize in advance for being obtuse.

A bit of background:

I've been in the business for 6 years. I'm Series 6, and 63 licensed, and I sell Life Insurance and Annuities. I work for one of the big box captive agencies. I have a non-compete as most captives do, and I have a General Agency that I'm allowed to use to place business outside of my primary company.

My problem:

I'm leaving the area that I work in about 8 months. I'll be moving to the area that I'm from to start from scratch. When I place my business through my General Agency, it takes about 2 months to get paid through my captive company, and I'm getting a bit tired of that. As it stands, anything I sell at this point I won't be completely compensated for, as I won't be here a full year to receive all the compensation. I'm a bit jammed.

My questions and concerns:

If I go independent, I'm lost, as I have no idea how that works. Many of the other top reps in my office broker life insurance or fixed annuities outside our company in violation of their non-compete. If they get caught, they get canned. At this point, I'm not concerned with getting canned. Usually the manager looks the other way. However, I don't know if that's legal or not. I have E&O obviously, but if I go directly to a carrier to sell life insurance and my primary company doesn't get their cut, is that legal?

For example. If I sell a Prudential term policy through my GA, I get paid my grid % of what Prudential sends to my company. Currently I get 63% of the 117% GDC. I've been led to believe that I could go directly to Prudential, leaving my captive company in the dark, and there'd be no middle man. Am I thinking correctly, or criminally?

Everyone mentions independents need to find a GA, or clearing house, or something to place their business through. Why? Can you not go directly to the carriers you want to sell and get the appointment? I'm looking for any advice I can get on this. I'd like to make the most out of my next year. I do enough variable business that I must do through my captive anyway. The mother ship will still get hers. I'm just looking to help my clients and still get paid to do that.

Thanks in advance.

Currently you're employed by both your captive company and their B/D. They are not one and the same. Any outside business activity must be reported to your B/D not your insurance co.

The fact that you can use another GA (of your company's choice) tells me that the co. allows outside brokerage work. This means you can use any GA of your choice. It doesn't have to be your company's choice. This has nothing to do with Non Compete. None of your buddies are breaking any rules as long as they offer the client the captive products first. I do a lot of brokerage work outside my captive but never tell anyone about it because THEY DON'T WANT TO KNOW. If you use their GA they know everything.

The real chain around your neck is with your B/D because that business is never yours, you have to disclose all your outside activities and you have to comply with what they allow you to sell and not sell. If you break off that chain, you can sell whatever you want and never have to report anything to your captive carrier.