Health insurance: we all need it, and though we may sometimes think of the premiums as just one more tax on our income, nobody really wants to give it up. But for many advisors who are affiliated with independent broker/dealers and either running, or employed by, a small business, health insurance coverage can be expensive and sometimes elusive; if there are pre-existing conditions a small business may not get coverage at a normal price–if it’s available at all.
That may be changing: Investors Capital Corporation, an independent B/D based in Lynnfield, Massachusetts, has launched group insurance plans with “guaranteed enrollment,” according to Tim Murphy, the B/D’s president. Premiums are set for 2007, and advisors, their employees, and their families can all be protected. “Our reps spend their entire lifetimes trying to build wealth for people, yet the most important thing you really can have is your health,” says Ted Charles, Investors Capital’s CEO. “To hire quality people you need a health program–you need these benefits.” Investors Capital is offering access to group plans through top providers: medical through Blue Cross and Blue Shield; dental, disability, and life insurance from Guardian; and vision care through Vision Service Plan. Advisors can choose any or all components of the plans.
Although reps must pay the full premium for the insurance–according to IRS rules there cannot be any subsidy from the B/D lest affiliated advisors be deemed employees–they still on average pay “about 15% to 20%” less in health insurance premiums than if they had to go out and get health insurance for their own small business and “over a 30% savings on the life and disability, because these are true group plans” according to Kasie Jacobs, financial consultant/marketing at the Investors Capital home office, and a registered representative with her own independent practice. Are advisors finding this enticing? You bet: the program was announced in mid-December and, Jacobs says, “I had about 200 of [the firm's approximately 800 representatives] call me in the first week.” Actually, she says, “when we opened this out to the rep force across the nation we saw a 75% increase in call volume” of outside advisors interested in affiliating with the firm.
Why Now and Not Before?
Health and welfare benefits like these traditionally have been part of the overhead for most independent advisors because, in its evaluation of who is an employee versus who is a contractor, the IRS prohibits “employee–type benefits, such as insurance, a pension plan, vacation pay, or sick pay for non-employees,” according to the www.irs.gov Web site. Offering a group plan “has to be structured exactly correctly, in a way that doesn’t make the IRS feel that [affiliated advisors] are employees,” says Mitch Vigeveno, president and CEO of Turning Point, Inc., a consulting and executive search firm in Safety Harbor, Florida. While other independent B/Ds have programs in the works, Jacobs of Investors Capital believes theirs is one of the first actual group plans in place.