I ran into 2 insurance brokers who sell life insurance to fee only advisors. Of course they make it sound like once commissions are removed their prices are better. One of them is DPL financial partners and the other one is LLIS: The Advisors insurance advisor. Just trying to understand if state regulators will allow this sort of advertising if fee only life insurance ever takes off?. Can you really say once commissions are removed our product is better?
Insurance Brokers claiming fee only life insurance is cheaper
- Thread starter walthamny
- Start date
- 11,272
I wonder how well Metlife's PAUL policy is selling since the Metlife divestiture and sales force acquisition and merger to MassMutual?
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Fee-only advisors like this have only one competitive advantage: the hatred towards commissions. That's all they've got. They're comparing products to products and making agent compensation an issue, rather than helping people solve real problems. Of course, they're marketing towards NAPFA-type people who also sing the same song and dance for others - that they are "holier than thou" because they don't take "evil commissions" and give "pure advice".
Such bs.
Here's my take: They can only talk about compensation for specific products - such as Metlife's PAUL policy. So if they want to do it, they have to only talk about specific products, and that would be the only way they would remain compliant.
Would it take off? Never. The value is in the advice and the proper positioning of a quality product, not "product wars".
Even Primerica has a better competitive advantage than that: "Buy (our expensive) term and invest the difference... with us (in our loaded funds)". That's more sustainable and a better slogan than "We charge fees instead of earning commissions!"
Just saw DPL Financial Partners website. Their REAL sales pitch is "We find low cost insurance so you can retain and grow your AUM and not deal with costly and complex policies." Lazy.
And the whole notion of "fiduciary friendly" is bs too. Fiduciary responsibility ONLY has to do with the selection of securities to be for the client's best interest, rather than for commissions earned. Insurance is in a completely different category. However, because of commissions that can be earned from insurance, it's ASSUMED that it's a "conflict of interest". If these RIAs would only grow a spine and just disclose that they are an insurance agent/broker as an outside business activity, it would be fine. But no, they'd rather twist and distort the truth.
Oh well. It won't catch on anyway... except with maybe the 1,000 NAPFA members.
Interstitial Shell
Fee-only advisors like this have only one competitive advantage: the hatred towards commissions. That's all they've got. They're comparing products to products and making agent compensation an issue, rather than helping people solve real problems. Of course, they're marketing towards NAPFA-type people who also sing the same song and dance for others - that they are "holier than thou" because they don't take "evil commissions" and give "pure advice".
Such bs.
Here's my take: They can only talk about compensation for specific products - such as Metlife's PAUL policy. So if they want to do it, they have to only talk about specific products, and that would be the only way they would remain compliant.
Would it take off? Never. The value is in the advice and the proper positioning of a quality product, not "product wars".
Even Primerica has a better competitive advantage than that: "Buy (our expensive) term and invest the difference... with us (in our loaded funds)". That's more sustainable and a better slogan than "We charge fees instead of earning commissions!"
Just saw DPL Financial Partners website. Their REAL sales pitch is "We find low cost insurance so you can retain and grow your AUM and not deal with costly and complex policies." Lazy.
And the whole notion of "fiduciary friendly" is bs too. Fiduciary responsibility ONLY has to do with the selection of securities to be for the client's best interest, rather than for commissions earned. Insurance is in a completely different category. However, because of commissions that can be earned from insurance, it's ASSUMED that it's a "conflict of interest". If these RIAs would only grow a spine and just disclose that they are an insurance agent/broker as an outside business activity, it would be fine. But no, they'd rather twist and distort the truth.
Oh well. It won't catch on anyway... except with maybe the 1,000 NAPFA members.
- Thread starter
- #3
You would love this NAPFA has a group life insurance plan. It is offered by a commission based Guadian agrent. But NAPFA members hate commissions but this one is a saint because he likes to work with fee only advisors. So he sold them group life plan. Any new member is not eligible for the plan for one year.
TERM LIFE INSURANCE
They could have negotiated a much better group life policy from someone just 3 months in the business.
Now lets look at what the fee only NAPFA bought as group disability product. The agent claims this on the website for NAPFA.
Oh well, so NAPFA can not buy a decent group disability policy for themselves but apparently they can give advice on life and disability insurance.
TERM LIFE INSURANCE
They could have negotiated a much better group life policy from someone just 3 months in the business.
Now lets look at what the fee only NAPFA bought as group disability product. The agent claims this on the website for NAPFA.
- Definition of Disability: Own Occupation
- Partial Disability Benefit: Included
- Premiums are 50-70% lower than individual disability policies with similar features from companies like Ohio National, Principal Financial Group and MassMutual
Oh well, so NAPFA can not buy a decent group disability policy for themselves but apparently they can give advice on life and disability insurance.
- 11,272
Based on that... it would seem that every NAPFA member should go on disability claim due to cognitive impairment issues and potential commission/drug withdrawals!
- 1,405
I remain forever amused by "commission free" life insurance products.
Let's all try to remember Rule 101:
"Life insurance is not bought, it's sold"
VERY few consumers initiate a life insurance purchase. Oh there are exceptions to the rule, but it's pretty hard to build a business on an exception. The fact is that it requires a proactive seller to initiate the process of a life insurance sale.
And to make matters worse, I remember when I first sold life insurance 39 years ago, a typical life insurance application with Part II was about 4 pages. Today, you need to complete a small book to apply for a life insurance policy (and don't get me started on overpriced "simplified" life insurance).
So to summarize, there is a LOT of work in order to sell a life insurance policy and whether the seller is compensated by a commission or is paid a salary or wage to do the work, there is no earthly way for a life insurance company to sell their product without paying a lot of money to get it done. That's a fact of life and wishing it were not so does not change the fact.
It is also my experience, having hung around this industry for 4 decades, that the commissioned life insurance agent is the CHEAPEST way to do all this. Companies that "go direct" with commission free products never end up with less expensive products. Funny thing about that.
And from the consumer point of view, how and how much the agent gets paid means absolutely nothing if the product you are buying is actually costing you more than an alternative. Oh there may be a few Hollywood type folks who will pay extra to buy the electric car because they think they are saving the planet, but no one is going to pay more because they are getting a life insurance policy which is commission free. This is not health food.
I see nothing that is going to change any of these realities.
And I even remain amused by agents who tell me that term life insurance is a commodity. A commodity is something that is bought and even term life insurance has to be sold.
Let's all try to remember Rule 101:
"Life insurance is not bought, it's sold"
VERY few consumers initiate a life insurance purchase. Oh there are exceptions to the rule, but it's pretty hard to build a business on an exception. The fact is that it requires a proactive seller to initiate the process of a life insurance sale.
And to make matters worse, I remember when I first sold life insurance 39 years ago, a typical life insurance application with Part II was about 4 pages. Today, you need to complete a small book to apply for a life insurance policy (and don't get me started on overpriced "simplified" life insurance).
So to summarize, there is a LOT of work in order to sell a life insurance policy and whether the seller is compensated by a commission or is paid a salary or wage to do the work, there is no earthly way for a life insurance company to sell their product without paying a lot of money to get it done. That's a fact of life and wishing it were not so does not change the fact.
It is also my experience, having hung around this industry for 4 decades, that the commissioned life insurance agent is the CHEAPEST way to do all this. Companies that "go direct" with commission free products never end up with less expensive products. Funny thing about that.
And from the consumer point of view, how and how much the agent gets paid means absolutely nothing if the product you are buying is actually costing you more than an alternative. Oh there may be a few Hollywood type folks who will pay extra to buy the electric car because they think they are saving the planet, but no one is going to pay more because they are getting a life insurance policy which is commission free. This is not health food.
I see nothing that is going to change any of these realities.
And I even remain amused by agents who tell me that term life insurance is a commodity. A commodity is something that is bought and even term life insurance has to be sold.
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