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.