Back in 2007, Taylor Schulte started working in the life insurance industry. Yet it wasn’t long before Schulte began to believe that the process of buying insurance was unfairly skewed toward the agent instead of the customer. Since commissions vary per company and product, Schulte felt the objectivity that agents need in order to serve their customers equitably wasn’t there.
“I feel there’s an inherent conflict of interest (in the commission-based business model) that didn’t allow me to be fully objective when advising my clients. That didn’t sit well with me.”
So in 2014, Schulte did the unthinkable — he started refusing commissions.
That’s not to say the 31-year-old Schulte isn’t paid. He says he’s simply found a better way to work through his new business, Define Financial, a financial advisory firm in San Diego. Schulte has a unique approach to his business: he offers life insurance products and advice not on commission, but on an annual fee basis. “When I launched my firm in 2014, I made a pledge to never make a commission on the sale of a product ever again.”
It’s a decision Schulte says sits better with his conscience. It’s also one that sits well with his bank account. The benefits of the fee-only model, he says, are these: income is predictable, and it removes that conflict of interest he thinks exists in the current model. “The client never has to ask ‘Is it in my best interest or yours? Are you trying to sell it to me to meet a sales goal, or is this really a need?’ We take that out of the conversation.”
That shift is one he says a lot of advisors are making these days. The days of commission-based insurance, he believes, are numbered, something he thinks frees agents and advisors. “It allows advisors to become really objective enough to say ‘You know what? Maybe you don’t really need this insurance’ or ‘Maybe there’s a cheaper alternative’ that allows us to sit in an objective seat and really advise the client.’ ”
It’s all part of a comprehensive financial plan, not just a life insurance conversation, says Schulte. The life insurance, he adds, is just one piece. The annual fee gives clients access to advice whenever they’re facing a decision that can alter their financial picture. It’s something Schulte says helps his customers keep an eye on their total financial future. “I’ve never been one to want to focus on just one thing. I don’t want to be known as just a life insurance person.”
No fees, no problem
Schulte says his business has never grown faster since he made the change to fee-only business. That helps in a market in which the consumer is more educated than ever before, he adds. “There’s so much information out there, and a lot more good information these days. Customers are coming in to that first meetings with a lot of good questions. They know what to ask, what to look for. So, starting my firm (as fee-only) has allowed me to showcase who I am, what we do, why we’re different, and it’s made it a lot easier for clients to make that decision to hire us.”
Because of his unique approach to financial planning and insurance, Schulte has seen plenty of recognition, both from his customers and in the form of awards. This year, he was named to the Top 40 Advisors Under 40 list by Investment News, having been chosen from over 800 applicants. Also, San Diego Magazine awarded Schulte a 5-Star Wealth Management Award two years in a row, an award that fewer than five percent of the area’s advisors receive.
Outside of awards, Schulte says one of his bigger successes was obtaining his CFP designation, and being able to hire his first full-time financial planner. “He shares the same values and philosophies I do in this business, so it’s been a big success. It was a goal of mine that I hoped would happen.”
Another goal is having his own business, one that Schulte says was in the back of his mind much of his life. “Both of my grandfathers were entrepreneurs, so it’s in my blood and it was always on the radar.”
Still, Schulte says he finds owning a business a daily challenge. Unlike a traditional position in a captive agency, Schulte says there’s no one managing the back office operations. “There are a lot more pieces I’m responsible for. The challenges of a business owner have been difficult to adapt to. I’ve never had more fun, but I’ve never worked so hard, either. If you come in and your internet’s down, it’s your job to fix it.”
While Schulte thinks his current business model is going to change the market, he feels it’s also going to create challenges for traditional agents. “The challenge is consumers are becoming really educated. They know what questions to ask, they’ve been told there are hidden fees or more fees than they thought there were, that they’ve been tricked into buying a product. Consumers are becoming much smarter. Current agents need to get better at helping clients understand what the product is, and how they’re being compensated. I think commissioned life insurance agents have a tough road ahead.”
Not impossible though, he’s quick to add. Newer agents, he says, can benefit from finding a niche, particularly within a group of people they already have connections with, and becoming that go-to resource. “Our industry is starting to take notes from the legal profession. I would say when was the last time you heard an attorney say ‘I do all types of legal work for all types of clients’? It just doesn’t happen. But that’s what we do — we sell insurance to anyone who needs insurance. So finding that niche, finding that specialty as a new agent starting out, I think you’ll see a lot more success.”
Success comes too in the form of networking and providing good service, says Schulte. “Do good work. If you do good work and people recognize that, you start to get a good reputation.”
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