Which deal is better? Short and Long Term...

[Advisor06]

I have been offered two deals that are based on Life and P&C...

Deal #1 is a P&C shop that offers $24k base only for the first year plus commission at 50% year 1 and 40% renewal with a focus on commercial contractors. They have allowed me to do my life and annuities with any broker I choose to do so with without giving up any comp to the shop.

Deal #2 is a P&C shop that offers $45k for the first three years until my renewals equal the $45k during this time my commission is reduced to 20% but once I go to 100% commission is 50% year 1 and 40% renewal. They do require any of my life and annuities go through them which I am paid 75% of what the house gets from the brokerage firm.

Deal #2 seems give me a decent amount to float myself the first few years but I am concerned the amount I would be giving up on my life and annuity business over the years would be alot. Giving up 25% versus what I am getting now can add up if my life and annuity business continues. Even at $50k per year I am giving up almost $13k annually.

Any advice or feedback is appreciated. I need to make a decision asap.

 

[DHK]

Deal #1 is a P&C shop that offers $24k base only for the first year plus commission at 50% year 1 and 40% renewal with a focus on commercial contractors. They have allowed me to do my life and annuities with any broker I choose to do so with without giving up any comp to the shop.

No man can serve two masters. You may be able to do your life and annuities separately, but you have to feed the hand that feeds you first. That is proper business ethics and relationships with employers. Every week, you should be focused on "house" business, before pursuing the business you want.

Why are you going to a P&C shop when you are mostly concerned about life and annuity commissions?

Here is my thought: You want to use them to do a little bit of business because you psychologically need the salary while you do what you want to do.

At least deal #2 is more lucrative and they will also benefit from your focus in life & annuity. Sure, you may "lose" money long-term, but they are paying you a salary.

If you don't want to "lose" commissions, don't take a salary.

 

[VolAgent]

With Deal #2, you might actually be there in 5 years.

1. You get a much better and longer base, giving you time to build a book of business. Of course I'm sure you will be expected to produce, but it still takes time. Assuming all your CL was at 15%, which it won't be, you'll need $750,000 in premium to net $45,000 in renewals at a 40% split. How quickly can you put $750,000 on the books?

2. The owner won't get pissed watching you spend time writing life insurance outside his agency. One, revenue that didn't come into his agency and two, most of carriers like and/or expect so much life premium. This is not the recipe for a long tenure.