Taking Issue with Fee-Based Commissioned Agents

To The Editor:

While reading “More Carriers Now Offer Fee-Based Financial Planning,” in the Aug. 19, 2002 issue, and “What Agents Deal With In Moving to Fee-Based Planning,” in the Sept. 2, 2002 issue, I was inundated with mixed emotions. Should I laugh, cry, or scream? This is yet another initiative that our industry employs to confuse us, as well as the consumer, as the terminology of “fee-based planning” was used with reckless abandon.

Having come from the insurance culture and being active in the financial services industry for 30 years, I have some bones to pick:

1. Everyone seems to have forgotten why the large upfront commissions on life insurance were structured as they are: to (a) compensate for all of the time spent in nonproductive prospecting and sales calls, and (b) compensate for the time spent in developing a “plan” for the client as part of the process to show the need for, and thus initiate the placement of product. It is this same high non-disclosed commission that pays for the time that the agent (planner) spends on the case.

2. Carriers providing financial plans for a fee is nothing new. I can remember in the 80s there were several firms, American Express being one, that provided multilevel comprehensive plans for a fee, ranging in cost from $500 to $2,500. This “service” was to bring a “higher level” of professional image to the soliciting agent and was instrumental in developing the product need initiative. This was not fee-based planning back then, nor is it now. Properly stated, this is a function of providing a plan for a fee. Period. There is a definable difference between the two.

3. Objective advice is out of the question, as Mr. Larry Moore properly stated. When there is the potential of a high commission dollar at stake, objectivity is an unrealized fantasy.

4. Going to existing clients with an option for a fee plan would indicate to me that products were sold without justification. The obvious assumption is that a financial plan was not developed when the client relationship first took place. That would be disgraceful.

5. Annual retainer fees for review. Have these agent planners given up their renewal commissions?

6. One agent states that at least he gets paid for his time if the client implements elsewhere. Yet, the NU phone poll had most agents stating that they could not survive on fee income. Conclusion: Sale has to be made.

If this “transition” is to be believed, the fee-based planner (agent) needs to use a no-load insurance policy for implementation, dial down commissions dramatically, or at least give the client full disclosure as to the full commissions earned.

If this new concept makes the agent “feel good,” as expressed in the article, I have two facts for you to consider: 1) fee-planners do not double-dip their clients, and 2) insurance agents may have a negative image, but they serve a vital role in society and should be proud of what they do.

Be one, or the other, but dont play a game of masquerade.

Joseph W. Maczuga
Executive Director
Fee Planners Network


Reproduced from National Underwriter Life & Health/Financial Services Edition, September 16, 2002. Copyright 2002 by The National Underwriter Company in the serial publication. All rights reserved.Copyright in this article as an independent work may be held by the author.