Client asking about commission

[goillini52]

How do you handle a client asking about the commission you're making from selling the client an annuity?

Whether it's a SPIA or DIA with a 2-4% commission or a FIA with a 5-7% commission.

Tell them that it's none of their business.....unless you're required by law to do so.

 

[Tahoe Ray]

There are people who have been a bit brainwashed into thinking that earning a commission is evil and not in their best interest. The fee-only financial advisors market this angle a lot.

However, sometimes a financial issue/problem can only be solved with a financial product and not a stock market investment strategy. And a commission is paid on financial products.

If someone asks, then just take the trail option w/ the FIA.

Now you're paid like a financial advisor.

Problem solved.

 

[DHK]

And the trails don't come out of the product... unlike with an investment advisor.

 

[JJ2713]

To me, there is a significant difference between the sale of an annuity and these other products. In each of these above scenarios the customer is paying for an identifiable product or outcome. With an annuity sale the customer is giving a set amount of dollars in return for a payout. The more dollars that go towards commissions, the less the eventual payout. In the scenario of a car or home insurance, the amount of dollars paid does not change the eventual payout.

The advisor/insurance agent doesn't set the commission, the insurance company does.

And some clients simply want certain products that pay a higher commission.

The advisor/insurance agent simply finds the best strategy for the client, and if it involves a financial product (e.g. an annuity, life insurance, etc.), then so be it, and a commission is paid to the advisor.

 

[JJ2713]

Again... why are they asking that question... to me this must be understood first in order to properly answer the question... the real question they may be asking you is "can I trust you?"

Some clients are simply anal-retentive or inquisitive and want to know everything about the product, including the commission paid to the advisor.

 

[Life Hawk]

If you begin to smell that up front... you might want to have a plan to answer the question before it is asked, a simple one liner might do it, but as you stated sometimes you run in to the hard nose one's... they are by far the hardest to deal with and often you make the least.

 

[TomZack]

Interesting topic. Especially in lieu of the fact that Clark Howard just about weekly says how HUGE the commissions are for cash value life insurance policies are.

I enjoy seeing the responses given. Here is another take on the question that I have used:

I guess I am wondering why (or…Is there is reason why) you are asking that question.

(Maybe they say: I just heard that the commissions are really high. Maybe they just say, I'm just asking.)

I respond with: Good question. Let me put it this way. Statistics show that the average life insurance agent that has been in the business for 3 years makes about $67K. That doesn't sound like we are living on Easy Street to me. Does it to you? And to make it in this business is extremely hard. Most never make it to 3 years.

I would say most people that go into this business do it to help people and because they believe in the products themselves. They/we want to help people create a better financial future and to plan for their loved ones and businesses if they are no longer there. That is extremely satisfying to me. I go home feeling like I have really helped someone when they have decided to accept a solution that I have provided for them.

In addition, the price to you is the same whether you buy from me or buy directly from the company. What they would have paid me in commission would have had to have gone for additional marketing, advertising, customer service people and online licensed agents to get your attention and business directly. Instead, I replace all that. And, of course, I have my own similar costs of doing business, as you can expect.

I wish I could write a few policies every year and retire to my yacht, but alas, contrary to what you might hear, such is not the case.

That is how I handle it.

OTH….if you want to tell them …the truth….I believe you should also enumerate the costs of doing business and time required, knowledge required, licensing required. Otherwise they will think it is like a weekly salary where all you do is show up without any other responsibility. Easy peezy. Not so.

Hope this helps. You can trim the answer down as needed per each situation. Only address what is needed to satisfy your prospect. When they are okay, move on to addressing their needs.

 

[nugget1tau]

I live in NY so I'm required to tell them if they ask. So on the very very rare occasion that some asks, I tell them the truth.

 

[Stephen]

How about countering with this:

Mr Client, do you ask that question of your auto insurance agent? Your homeowners insurance agent? When you buy goods and services do you ask the providers how much profit they are making off the sales? Or how much the salary is of the individual you are dealing with? Mr Client, you work for the XYZ Widget Company. When you sell widgets do you tell your customers how much profit you make from the sales or what your salary is? Mr Client, I make a living selling these products and you are getting good value for your money. My commission is not really something you need to know.

OTOH, Leveena has a good idea, too.

I'll take "how to lose a sale for $100" Alex.

 

[Stephen]

If you begin to smell that up front... you might want to have a plan to answer the question before it is asked, a simple one liner might do it, but as you stated sometimes you run in to the hard nose one's... they are by far the hardest to deal with and often you make the least.

If you are selling financial products you always need to be prepared to answer this question,