Lady is Thinking About Putting $20K into a CD

[Full Throttle]

If someone wants truly objective "advisor" action - they've got to go fee-based.

Even that isn't close to a panacea. No one really knows what a "financial planner" is anymore.

Fee-Based Advisor - many manage assets for 1% of the assets under management and are ignorant to annuities and life insurance strategies. Definetly some disincentives to not be objective when you make your money charging fees on an investment base.

Fee-Based for an Hourly Rate - not many of these around, the reason, it's not economically realistic for the advisor to make a living on hourly rates alone (there may be some exceptions, but not many, and certainly not with your average middle class population). Many "fee based advisors" will only work hourly if they have other assets or business with the client.

The method of compensation doesn't determine ethics, you are either ethical or not ethical.
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As Newby said, a knowledgable life insurance agent is probably the best thing for 80% of America. Why?

Wirehouse / Investment Reps / Fee Based Advisors - they really can't afford to work with anyone with under $100,000 in investable assets.

Hourly Financial Planners - as stated, not many around due to being unprofitable. Even so, if one could be found, most needs for middle class families are fairly simple and every dollar paid out comes directly out of their pocket.

Life Insurance Agent (may or may not offer securities via a B/D or RIA model): they can afford to do the "planning" for the insurance commission. The client would have to pay for the life or DI coverage anyway, so why not get more for their money.

There are a lot of people I help to save without much in the way of assets that I couldn't afford to service if I wasn't going to get the insurance sale to be profitable. You can't make much money setting up $300/month Roth IRAs into an A-Share or advising them to build up their bank savings. Someday they will make good clients if they get the proper advice and attention. Who can afford to give them that advice and attention other than the life insurance agent?

P.S. The key is knowledgeable and ethical life agent, no some yahoo slamming everyone into WL insurance and disregarding the rest under the guise of financial planning.

 

[scagnt83]

I agree with what you said except a fixed or indexed annuity is NOT considered an investment. To be an investment your principle amount MUST be at risk.

This may sound like I am splitting hairs again but it is EXACTLY what will get you into trouble. Never call ANY insurance product an investment including fixed and fixed indexed annuities.

Yes, im aware of the naughty "I" word for insurance products.
Technically a fixed annuity is not an investment.
In the same sense an CD is not an investment.

They are technically savings vehicles. But go tell a client that an annuity or CD isnt an investment. To a layman anything that they put money in and it grows is an investment!

But I was speaking in more general terms and a clients frame of mind. Its a financial vehicle that grows your money...

But saying that annuities are an investment is not necessarily a misstatement... VAs put your principle at risk... so if it ever came down to explaining a statement I could probably get by on semantics... lol
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Even that isn't close to a panacea. No one really knows what a "financial planner" is anymore.

Fee-Based Advisor - many manage assets for 1% of the assets under management and are ignorant to annuities and life insurance strategies. Definetly some disincentives to not be objective when you make your money charging fees on an investment base.

Fee-Based for an Hourly Rate - not many of these around, the reason, it's not economically realistic for the advisor to make a living on hourly rates alone (there may be some exceptions, but not many, and certainly not with your average middle class population). Many "fee based advisors" will only work hourly if they have other assets or business with the client.

The method of compensation doesn't determine ethics, you are either ethical or not ethical.
- - - - - - - - - - - - - - - - - -
As Newby said, a knowledgable life insurance agent is probably the best thing for 80% of America. Why?

Wirehouse / Investment Reps / Fee Based Advisors - they really can't afford to work with anyone with under $100,000 in investable assets.

Hourly Financial Planners - as stated, not many around due to being unprofitable. Even so, if one could be found, most needs for middle class families are fairly simple and every dollar paid out comes directly out of their pocket.

Life Insurance Agent (may or may not offer securities via a B/D or RIA model): they can afford to do the "planning" for the insurance commission. The client would have to pay for the life or DI coverage anyway, so why not get more for their money.

There are a lot of people I help to save without much in the way of assets that I couldn't afford to service if I wasn't going to get the insurance sale to be profitable. You can't make much money setting up $300/month Roth IRAs into an A-Share or advising them to build up their bank savings. Someday they will make good clients if they get the proper advice and attention. Who can afford to give them that advice and attention other than the life insurance agent?

P.S. The key is knowledgeable and ethical life agent, no some yahoo slamming everyone into WL insurance and disregarding the rest under the guise of financial planning.

All good points.

Plus, most fee based advisors have minimum net worths for the clients they work with. Many will not work with you if you dont have over $1mill in net worth... some go by asset size as well...

 

[padthaiforlunch]

Actually, if it's health insurance related she should speak to a health insurance agent. If it's investment related she should speak to...a life insurance agent? Ummmm, no. I'm trained to handle all of her health insurance concerns. Can you please tell me how a life insurance agent is trained to give financial advice?

Your posts in this thread are venturing into Yoda/ Troll territory.

 

[Crabcake Johnny]

Noted. But I wonder what the discussion would sound like if the carriers compensated me for having my HSA clients fund the HSA - maybe I also got 20% commish on that (remember, just theory.)

Now I'm looking at my client's investments; stocks, CDs, etc...and offering advice to move money into their HSA account.

All of a sudden that's a different picture. I'm now giving them financial advice with no formal training. If you have that training I have no issues.

 

[Full Throttle]

Noted. But I wonder what the discussion would sound like if the carriers compensated me for having my HSA clients fund the HSA - maybe I also got 20% commish on that (remember, just theory.)

There will always be amateurs that make recommendations based on how to maximize their compensation. Increase comp on a product, more of it will be sold. Period.

 

[scagnt83]

Can you please tell me how a life insurance agent is trained to give financial advice?

Many who do are not.
But there are many avenues to do so through the carriers. For both indy and career agents.


- When I started at NYL I went through a week and a half of classroom training from 8:30-5.

This was a comprehensive overview of the fundamentals of life insurance, annuities, and investments. Along with the client acquisition, evaluation, sales/implementation process.

We also had ongoing training once or twice a week about various subjects. Annuities and the theories behind their appropriateness where covered fairly extensively. Along with retirement planning theories and asset distribution theories.

This is one of the possible benefits of starting out at as a captive agent. It really depends on the office your at though...


As an indy agent the training might not be as convenient, but its out there. Plenty of professional insurance designations include retirement planning theories.

There are also carriers that provide access to courses (CE and otherwise) that cover many different advanced topics.
I have seen courses covering:
Retirement planning
Financial planning theories
Asset distribution
Asset allocation
financial products and their purposes
life insurance planning
long term care planning
etc, etc, etc....


You forget that insurance carriers that are serious about selling annuities need to provide some type of avenue to indy agents so that they may appropriately sell their products. It doesnt benefit the company to have a bunch of agents selling products when they dont fit. Granted it happens, but it still benefits them to do what they can to hinder it.

Also, most major insurance carriers are also B/Ds. So they want to try to get agents more and more into the "financial planning" (just using that as a broad term) side of the business.


I find that most ethical agents who prospect for annuities on a regular basis try to make an effort to learn about the product and its appropriateness. Those who dont shouldnt sell annuities.

 

[MaineMan]

It seems we all have ideas, but without a good fact finder we are all just guessing. Here's my 2 cents......

Where does she want the money to go?
What other assets does she have?
Is she already working with someone?
Hows her health?
Any family to care for her, so she can stay in here home when she needs help.
Does she want to leave money to kids,church?
Does she have life insurnace?
Any loans?

 

[ksigmtsu]

Noted. But I wonder what the discussion would sound like if the carriers compensated me for having my HSA clients fund the HSA - maybe I also got 20% commish on that (remember, just theory.)

Now I'm looking at my client's investments; stocks, CDs, etc...and offering advice to move money into their HSA account.

All of a sudden that's a different picture. I'm now giving them financial advice with no formal training. If you have that training I have no issues.

Gonna sound funny but I actually have a bank I can refer people to open their HSA in for a 50 cent per month commission per account. Goes higher based on deposits.

I do show people their info because they have lower fees than all the local banks and allow securities trading inside the accts.

 

[retread]

It seems we all have ideas, but without a good fact finder we are all just guessing. Here's my 2 cents......

Where does she want the money to go?
What other assets does she have?
Is she already working with someone?
Hows her health?
Any family to care for her, so she can stay in here home when she needs help.
Does she want to leave money to kids,church?
Does she have life insurnace?
Any loans?

Glad you brought this up. Most of my Annuity products have just such a "consumer suitability" questionaire as this. Some comments in this thread make me think they come from agents that have never seen an Annuity application.

And to those who are taking pot shots at life agents selling annuities, why is it that the state provides licensure for them to sell annuities to begin with? Annuities are NOT rocket science... IMO I think health insurance is more complicated. The key thing for annuities is appropriateness. Suitability is the word most often used, but I think in terms of appropriateness.

True, there are agents out there banging on doors trying to sell Final Expense policies, or a health plan, etc... and that mind set usually is not prepared to seek suitability or appropriate placement of client money. Selling a policy that costs $60/month to provide a $10K death benefit is one thing, but helping a client think through the suitability of buying a $50,000 or more annuity OR NOT, is quite another. If that agent is simply out to sell an annuity, he is just another insurance salesman. The best agents will walk away from a commission because they know the urge to sell must be tempered with the conviction that you must do the best thing for your client. If an annuity is not appropriate under the circumstances, then seek other needs, such as health or life, or resolve to just ask for a referral. If you keep in touch, they won't be going to someone else because they realize you are doing your best for their benefit. Sell your professionalism and the sales will come.

Furthermore, most (if not all) of my carrier's applications makes me attest to the statement that I agree to keep my needs analysis form along with the reason for my recommendation on file for at least 5 years.

 

[scagnt83]

Glad you brought this up. Most of my Annuity products have just such a "consumer suitability" questionaire as this. Some comments in this thread make me think they come from agents that have never seen an Annuity application.


Furthermore, most (if not all) of my carrier's applications makes me attest to the statement that I agree to keep my needs analysis form along with the reason for my recommendation on file for at least 5 years.

Exactly.
It is very clear that most of the people arguing against this have never filled out an annuity app. Because most of the answers to their objections are part of the application process.
Since they do not know this they assume no one else does...