You will love this article!

[James]

Financial Advisor Magazine

If you can actually call this a magazine, more like a dirt bag of a rag! Oh well, here is the take on insurance and how some CFP's view the world of insurance. Now look closely on how they refer to license agents to those that don't have a license? Okay, Katt and the other person are quite knowledgeable but still. Yet I really loved this paragraph:

The distribution system is the major problem with insurance, because it adds too much to the cost of the product. This system has been carefully built to train lifetime agents to believe they are messengers of God, bringing salvation to families in the event the breadwinner dies. They have all the horrible tragedy stories to show what happened to Mrs. So-and-So when her husband died, leaving her and the kids without insurance benefits. Never mind that this working-dad-stay-at-home-wife model of the family all but disappeared in the 1960s.

 

[CHUMPS FROM OXFORD]

Ah yes...Mary Rowland. Not a big fan of the insurance industry.

 

[tommyk]

Well, if that is actually what all Career Agents believe, then they will have a second job later in life....a television evangilist

 

[somarco]

She is correct . . . to a point.

The Leave it to Beaver, Ozzie & Harriet family model did go away in the 60's and were replaced by the two income family.

After years of two income families they still are living paycheck to paycheck. No one saves any more. No one expects to die, have large medical bills or become disabled.

If either parent dies, becomes disabled (even for a short period of time) the financial struggles start almost immediately.

If life, disability & health insurance were not the answer, then why are so many bankruptcy's foreclosures caused by unpaid medical bills?

 

[Agent]

I posted about this over at the fpi boards; the thread can be found at the link below.

Financial-Planning.com

The magazines for our industry, ostensibly, argue against our industry. Do they forget who their marketing their rag to? Katt and the other guy may be knowledgeable however, after they give their advice and charge them for it (but hey, at least their not paying a commission) they have to send their clients off to a licensed (which the article hints at "is not necessary?") agent to sell them the life, DI or Health they had prescribed.

The "No load" life companies she list are TERRIBLE. They perform lousy, and are more expensive then commissionable insurance products. Why would that be? Because the "load", better described as a distribution cost, is more expensive than using agents. They say their product is no load because there is no distribution percentage allocated toward *an* Agent. However, "no load" products still maintain the cost of product development underwritten in their policies.. And here's the kicker, they have a higher cost associated with their distribution, because it's more, much more expensive to market LI solely through TV, Print or Radio then it is to market your product through agents. So the products are not even close to competitive.

So, does Katt (smart or not) sell this crap? If he does, then he's not looking out for the best interest of his clients. If he does not, but instead charges a fee, only to tell the client to then go see xyz insurance agent to implement his advice. Well then, he is undermining his own position of "fee Only". Of course the client has now spent how much for the advice plus the "load" cost?...these people are a joke.

BTW, limiting your income to AUM could create as much of a conflict of interest as does being commission only. That is, it's against the interest of the Fee Only planner to refer business, such as DI or life, to other agents. Because, that takes away from dollars being allocated toward AUM. Character, steers the decisions of man. Not mode of compensation.

 

[James]

If I'm not mistaken, he is big on Ameritas and USAA in more than one article by him.

 

[Agent]

When I stated "...these people are a joke" I meant that to be directed toward Mary Rowland and Fee Only planners that believe their model to be ethically superior than commissioned based. I am not aware if Peter Katt has the same militant and irrational view.

 

[James]

When I stated "...these people are a joke" I meant that to be directed toward Mary Rowland and Fee Only planners that believe their model to be ethically superior than commissioned based. I am not aware if Peter Katt has the same militant and irrational view.

I enjoy his articles, and while he may have some of that it doesn't seem to be as militant as Mary's.

 

[James]

Than again, let us look at this article he wrote, Putting Death Back into Life Insurance now can anyone see the obvious flaw he is making about various agents, or him an someone like me that sell WL?

First off he recommends a Low Load UL to age 95 (never any real CV to it) at the cost of $4,800 but offers a second choice, a 20 year Term for the same DB of 1 million at a cost of $1,200. Now on the bottom of the article he accuses some agents that sell WL would end up selling him a $150,000 for the annual cost of $1,800???

Now the assumption is that the WL seller (that bad bad person) wouldn't suggest a term rider to bring his total DB up to the 1 million mark since his income is $60,000 yearly. Now as a WL seller, I see the $1,800 cost for $150,000 in the ballpark, maybe, seems kind of low too me? Never the less we will use his numbers, now I can add a 10 year term (if not ART) for the additional $850,000 for what? About a $900, so my total cost would be around $2,700 annually and the person gets the benefit of the WL which even Katt suggest has good potential for future value. I find his assumption to be a bit self serving at best!

Ps, I don't know of a serious agent that sells WL or well funded UL that wouldn't use Term to boost the DB to a needed level or at least suggest it with all seriousness.