What is Far on Splitting Commissions?

[KINGBICHO]

I'm a independent life agent that in some carriers I get from 85-100% commissions on FE carriers with 75% advance. I want to start a program with a couple of P&C agencies that don't do Life/health at all. What is considered fair in a commission split when they let's say give me a lead from their book of business? What should I start with and let's say it develops to a great relationship then what do I increase it to? I believe 50/50 split from advance is too high but correct me if I'm wrong from anyone that is doing this already. I don't want to low ball and same time look like a golden opportunity for the P&C agency to make money as well. Any advice?

 

[WMG]

It's not that far...really...LOL. Just kidding.

Seriously, I do a lot of joint work, all over the country. I play it simple and straightforward -- it's a 50/50 split. However, I've heard there are two schools of thought. One, you bring the prospect/client to the table and that's it, you are entitled to 50%. Two, just bringing the prospect/client to the table and that's' it, you are NOT entitled to 50%. Sounds simple, right?

I've never had a advisor bring me in on a case and then disappear, do nothing, only make the introduction, etc. So, it's most often 50/50. I do all the technical work, design, client consulting, etc. -- but the advisor who brought me in is still doing work.

A guy in my study group follows the following joint-case model:

The introduction is 20%
Gathering data is 20%
Presenting is 20%
Closing the sale/placing the policy is 20%
Service is 20%

I've never tried it, and I haven't really thought it through, but my knee jerk reaction is that it could work with two advisors who work together.

I had one producer approach me once and offered to introduce me to many HNW/affluent/etc., people he knew. He said he would email or write them a letter, call them, get them to take my call and schedule a meeting, and he would not attend the meeting. He was insurance licensed. Never appointed with a company, never wrote a piece of business in his entire lifetime. Was never in the business really. Had an entirely different career. So he offered to do this deal with me -- for a 50/50 split. I immediately turned him down. He then said he'd "do it for a third" -- and again, I immediately turned him down. He then gave me a song and dance, and inferred he'd take 25%. I interjected that I wasn't interested in any deal like this, for many reasons -- which for some reason I decided to take the time and explained to him, LOL.

At the very end, he said he understood my reasons, and but he'd still be willing to do it for 20%. LOL. I said no thank you. LOL.

 

[DHK]

Aside from a 50/50 split, there are other ways to do commission splitting, such as the "MDRT 5 20's":

NAIFA's Advisor Today - Forging a Working Relationship With Bankers

In the sidebar:
I use Norman Levine’s (32-year MDRT member) “five 20s” formula for splitting commissions:
- 20 percent for the lead,
- 20 percent for the opening and interview,
- 20 percent for computer work,
- 20 percent for the closing and
- 20 percent for ongoing service.

The bank has the client and the appointment, and that’s worth 20 percent. They were going to be involved in some of the ongoing service, and if they gave me an office space to use, and set the appointment, it seemed to me that a 60/40 split should be equitable. I take 60 percent; they take 40 percent.

 

[Larry Tew]

Aside from a 50/50 split, there are other ways to do commission splitting, such as the "MDRT 5 20's":

NAIFA's Advisor Today - Forging a Working Relationship With Bankers

In the sidebar:
I use Norman Levine’s (32-year MDRT member) “five 20s” formula for splitting commissions:
- 20 percent for the lead,
- 20 percent for the opening and interview,
- 20 percent for computer work,
- 20 percent for the closing and
- 20 percent for ongoing service.

The bank has the client and the appointment, and that’s worth 20 percent. They were going to be involved in some of the ongoing service, and if they gave me an office space to use, and set the appointment, it seemed to me that a 60/40 split should be equitable. I take 60 percent; they take 40 percent.

That sounds like the Todd Formula (named after John Todd). Looks good on paper but it doesn't work in real life. Nobody can agree on their contribution to the case (present and future) and even if they agree, it still has problems.

For example, another agent can't gather facts that I could use. I have to do it myself, because the sale is made in the fact finding and I know what I need to learn about the prospect.

My deal is 50/50 period - assuming I want to do it. The other guy gets 50% of the first-year commission for getting the prospect to the table and I get 50% for knowing what to do with the prospect. I get 100% of the renewals and all the referrals.

 

[scagnt83]

50/50 is usually the best way to do it.

Even for a referral were the other agent does nothing other than getting them to the table. Without that agent already having their trust, you would have nothing. And 50% of something is better than 50% of nothing.

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I've never had a advisor bring me in on a case and then disappear, do nothing, only make the introduction, etc. So, it's most often 50/50. I do all the technical work, design, client consulting, etc. -- but the advisor who brought me in is still doing work.

Exactly. Since they have the trust established just them being present at the meeting is a big contribution to closing the sale.

 

[Tahoe Ray]

I prefer 100/0.

 

[pfg1]

My deal is 50/50 period - assuming I want to do it. The other guy gets 50% of the first-year commission for getting the prospect to the table and I get 50% for knowing what to do with the prospect. I get 100% of the renewals and all the referrals.

Larry, how do you set up to not give them any of the renewals? Didn't know you could do that. Is that a carrier by carrier thing? I've always assumed (maybe incorrectly) that if the case is split 50/50, so are any renewals.

 

[scagnt83]

Larry, how do you set up to not give them any of the renewals? Didn't know you could do that. Is that a carrier by carrier thing? I've always assumed (maybe incorrectly) that if the case is split 50/50, so are any renewals.

He probably just 1099s them the FYC.

 

[Larry Tew]

Larry, how do you set up to not give them any of the renewals? Didn't know you could do that. Is that a carrier by carrier thing? I've always assumed (maybe incorrectly) that if the case is split 50/50, so are any renewals.

If we're both appointed with the chosen company, we can't alter the split on the renewals. In that case, we split the renewals as well. If not, like Tyler said, I pay them and 1099 them at the end of the year. Occasionally, the other guy pays me and 1099's me, but usually it's the other way around.

Also, if someone brings me in to an existing client rather than a new prospect, I don't hold a hard line on the referrals either. But when someone calls me and says "I just met this guy..." that's when I hold to my original statement.

 

[pfg1]

Ok, gotcha. I wondered if you might be 1099ing, didn't see any other way that I knew of to do it. Thx