Captive Rep Confused About Breaking Contract

[Sunder]

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.

I think I understand what you mean. A friend of mine recently resigned as his selling of EIA's outside our GA became a problem. Our manager told FINRA. He received a letter from FINRA saying he was terminated for doing that. Now he has to explain to them what he's been up to. That U-4 is a nice little insurance policy of it's own for the mother company, as they can inforce our contract pretty well even though what he did isn't securities related, due to his not disclosing it on the OBA. Kinda crappy of the new manager if you ask me.
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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.

First of all, you guys are great! I searched the net for a while before I finally was wise enough to type 'Insurance Forum' in the google search. You've all been a big help. I've been unable to ask many I work with about this, as I felt they'd get the wrong (right) idea.


GA is General Agency, I got that one. What's FMO, and IMO?

Frank,

My GA is owned by my parent company. I work for 'X' and it's the 'X GA'. There is about 50 companies in it that I can sell through. If my company won't work, I'll go through them, but it takes forever to get paid on anything. I'm pretty sure I'm only allowed to use our own GA to sell other business. Everything I do through our GA comes back through my own grid rate and I get paid that way. It's just non-benefitable pay.

 

[Norwayguy]

My GA is owned by my parent company. I work for 'X' and it's the 'X GA'. There is about 50 companies in it that I can sell through. If my company won't work, I'll go through them, but it takes forever to get paid on anything. I'm pretty sure I'm only allowed to use our own GA to sell other business. Everything I do through our GA comes back through my own grid rate and I get paid that way. It's just non-benefitable pay.

And the company owns the client...The biggest advice I can give is to run not walk to an attorney and have him/her review your contract and to not sugar coat it...You might be surprised my contract is terribly worded...Their is a whole section for a non-compete which includes non solicitation/ non contact of clients and non-compete with the companies business in a 6 state area IE the entire northeast however if I resign not for cause that portion of the contract is not enforcable and only have to worry about a seperate section that deals with non-piracy...meaning I can't go in an rip out existing business so I can sell other products to the client and get referrals the only thing vague about the contract is their seems to be no time limit to the non-piracy while the non-compete has an 18 month limit...my attorney is currently researching it due to the contract being subject to another states laws (yeah I signed a clause that makes me subject to the jurisdiction of another state). Its always amazing how we think about these contracts...It things don't work out quickly its a no big deal your not leaving anything behind....Its when thing work out initially and things change after building a nice income due those contracts haunt us.

 

[Franz Kafka]

I think I understand what you mean. A friend of mine recently resigned as his selling of EIA's outside our GA became a problem. Our manager told FINRA. He received a letter from FINRA saying he was terminated for doing that. Now he has to explain to them what he's been up to. That U-4 is a nice little insurance policy of it's own for the mother company, as they can inforce our contract pretty well even though what he did isn't securities related, due to his not disclosing it on the OBA. Kinda crappy of the new manager if you ask me.

Thus the chain around your neck and the reason why I gave up my own securities licenses. My suggestion is to focus on one or the other, securities or insurance and if you want to focus on securities look into becoming an RIA or an IAR instead of RR. If you want to focus on insurance say bye bye to FINRA and you'll never be told what to do.

My GA is owned by my parent company. I work for 'X' and it's the 'X GA'. There is about 50 companies in it that I can sell through. If my company won't work, I'll go through them, but it takes forever to get paid on anything. I'm pretty sure I'm only allowed to use our own GA to sell other business. Everything I do through our GA comes back through my own grid rate and I get paid that way. It's just non-benefitable pay.

Most big captives have their own GA but I don't know of any that forces one to use it exclusively. Check your contract. If you use their GA and leave the co. the GA will mostlikely terminate your contract. If you use an outside one and leave the co., you continue your business as usual. Again your insurance co. has no means to make you tell them what you do outside. It's your B/D that has that power.

 

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[scagnt83]

Most big captives have their own GA but I don't know of any that forces one to use it exclusively. Check your contract. If you use their GA and leave the co. the GA will mostlikely terminate your contract. If you use an outside one and leave the co., you continue your business as usual. Again your insurance co. has no means to make you tell them what you do outside. It's your B/D that has that power.

The captive contracts vary. At NYL I was forced to use crump as a GA, and it was only for noncompeting products or only after NYL wouldnt take the business. This changed after year 3, then I was free to use any outside brokerage I wanted to. My B/D was locked into NYL for ever. Older contracts allowed agents to use a B/D of their choice, but I came along too late. I know the managing partner at the local Mass office and they are the same way. Mass on a corporate level has stoped utilizing a specific GA, and have left the decision up to the local managing partner...at least in my area they have. My firm is actually the GA for the local Mass office, its an arrangement that has started to really work out well for us...and them.

The noncompete is more for after you have terminated your contract. I had to wait 9 months after leaving NYL to be able to broker their products and utilize them again...lucky for me I didnt really need them, lol. They also sent me a few letters complaining about me replacing old NYL business I had written, since they saw my old cients as "their clients"!! lol. fortunately my clients dont see it that way!

If your agency catches you using a non approved GA or just appointment they will most likely just make you cancel it. Ive never seen someone get canned just for that.

You can always get directly appointed with a company and broker their products. If you team up with a local GA, you might be able to get office space, admin support, etc. depending on their set up. If your not worried about any of this then just go directly to the companies you want to use. Your comp overall will be higher than what your used to now. And most companies have pretty good sales and case design support for their products for brokers.

Dont let the independent world scare you. At NYL they made it seem that you would wither up and die without them. Its just not true. Independent will actually give you a better platform to bring solutions to your clients. PM me if you need guidance with appointments with companies, or just what companies are competetive where. Our firm calls the independent side the "real world"...lol.