MCCarron Ferguson revisited

[Anonymous]

Isn't it redundant at everyone's work, having to file all your BS with all 50 states? Mccarron Ferguson did say that power to regulate insurance rests with the FEDERAL not states govt. They went on to say, however, that "since it ain't broke, don't fix it". Well, I say it's broke! What kind of savings would an annuity company/L.I. company/state govt. save if we had 1 federal commissioner to deal with?

Of course, 99% of expenses are commissions, but that's a whole separate topic. Coming soon...

[oedipus rex]

Andy, your new identity does not fool us.

[The Drunken Actuary]

But the fact that he is putting this in the non-actuarial does...

[Anonymous]

And my point on commissions:

Why do we have to pay a dopey salesman 7% upfront, when we need handpuppets to explain what a pro-rata withdrawal is?
I'd say price in "intellectual property commissions" for actuaries. We designed these products, we should get the commission. Get the SOA to serve more as a union to get it through.
I think we get paid plenty already, though. So the society should propose the money gets distributed in a bottom-up manner. There are a lot of depts. getting screwed over worse than us, and I'm NOT talking about our bosses!

By the way, we ARE anonymous on these, right?

[The Drunken Actuary]

And my point on commissions:

Why do we have to pay a dopey salesman 7% upfront, when we need handpuppets to explain what a pro-rata withdrawal is?
I'd say price in "intellectual property commissions" for actuaries. We designed these products, we should get the commission. Get the SOA to serve more as a union to get it through.
I think we get paid plenty already, though. So the society should propose the money gets distributed in a bottom-up manner. There are a lot of depts. getting screwed over worse than us, and I'm NOT talking about our bosses!

By the way, we ARE anonymous on these, right?Who is going to distribute the products you develop? Have you ever sold anything? Are all salespeople dopey or just the ones you know?

[Anonymous]

Internet can do the work of any salesman. And it wouldn't be biased by different commissions.

[The Drunken Actuary]

Internet can do the work of any salesman. And it wouldn't be biased by different commissions.How does the internet do the work? You mean the consumers will do the reasearch and pick your product over the rest? And all your current customers want to buy that way? What kind of products do you develop?

[Anonymous]

I'd be willing to bet sales are most highly correlated with commissions than ANY other factor. What does that tell you?

Even if we keep salesmen, get rid of commssions. Get rid of 90% of expenses.
It's like the RIAA is running the industry...

[The Drunken Actuary]

I'd be willing to bet sales are most highly correlated with commissions than ANY other factor. What does that tell you?That you are making up facts, don't know anything about the distribution system for the products you develop, and never met a good saleperson.

Even if we keep salesmen, get rid of commssions. Get rid of 90% of expenses.
It's like the RIAA is running the industry...What is 90% of the expense? The commissions? What kind of product are you developing?

[Anonymous]

Well, I'll admit, I've never been on any of their fancy expensive retreats, so I'm not privy to everything they know. Have you been to any?

What 1 feature would you say sales are more highly correlated with than commissions? Surrender charges? Lower M&E? It should be. Am I wrong in my assumption?

[The Drunken Actuary]

Well, I'll admit, I've never been on any of their fancy expensive retreats, so I'm not privy to everything they know. Have you been to any?I guess you're trying to make a point here, but I have no idea what it is.

What 1 feature would you say sales are more highly correlated with than commissions? Surrender charges? Lower M&E? It should be. Am I wrong in my assumption?I think so. Sales are most highly correlated with customer needs, especially for complex financial products. I don't care if the commission was 100%, no saleperson in the world can consistently sell something no one wants.

[The Drunken Actuary]

I'd be willing to bet sales are most highly correlated with commissions than ANY other factor. What does that tell you?

Even if we keep salesmen, get rid of commssions. Get rid of 90% of expenses.
It's like the RIAA is running the industry...BTW, none of that explains how the internet is going to replace sales people.

[The Drunken Actuary]

Of course, 99% of expenses are commissions, but that's a whole separate topic.Oh yeah, where does this come from again? Do you have any 'facts' that aren't completely made up?

[oedipus rex]

I bet DTNF can't wait to get his hands on this thread...

[Anonymous]

Pricing guidelines for our company's products.
99% is an exaggeration, but I'm sure it's WELL over 50%.
That's WELL over 50% going to ONE person. More than goes to:
rent
actuarial
accounting
marketing
and everyone else COMBINED!

Just do the math:
Figures are rounded to avoid giving out any trade secrets:
Average up front commission: 5%
Average trail commission: 1%
Average M&E: 1.5%
Average addt'l fees: .5%
(CDSC for first few years)

After commissions, what's left?

[The Drunken Actuary]

I bet DTNF can't wait to get his hands on this thread...I was thinking something similar. But who's side would he be on?

[Anonymous]

>>I think so. Sales are most highly correlated with customer needs, especially for complex financial products. I don't care if the commission was 100%, no saleperson in the world can consistently sell something no one wants.<<

Poor naive TDA...
Did you know Santa Claus isn't real?

[The Drunken Actuary]

Pricing guidelines for our company's products.
99% is an exaggeration,No kidding. but I'm sure it's WELL over 50%.First its 99, then 90, now well over 50. OK, and this is based on what, that illustration below?
That's WELL over 50% going to ONE person. More than goes to:
rent
actuarial
accounting
marketing
and everyone else COMBINED!If you say so.

Just do the math:
Figures are rounded to avoid giving out any trade secrets:
Average up front commission: 5%
Average trail commission: 1%
Average M&E: 1.5%
Average addt'l fees: .5%
(CDSC for first few years)

After commissions, what's left?Quite a bit?

[The Drunken Actuary]

>>I think so. Sales are most highly correlated with customer needs, especially for complex financial products. I don't care if the commission was 100%, no saleperson in the world can consistently sell something no one wants.<<

Poor naive TDA...
Did you know Santa Claus isn't real?I had a feeling you would say something like that. I'm glad to know your sales people are so good they can sell the crappy products your company makes to people that don't even want them. Whatever you're paying them is not enough.

[Anonymous]

>>BTW, none of that explains how the internet is going to replace sales people.<<

Just like autobytel.com does for autos.
There are already systems that do it for financial products.
Set up pre-designed questions that are pertinent to your investment decisions. Than, the software can come up with the best vehicle, regardless of commissions. Only reason it isn't more widespresad yet, is because the entrenched distribution systems won't allow companies to start it. Any company that were to come out with an e-version would get dropped quicker than you could say Willie Loman!

[oedipus rex]

I'd say he'd be on your side, since Tupac is making some wild claims here with nothing to back it up. Tupac: Yes in the first few years of a policy's life commissions eat up alot of the profits. Depending on the profit signature of your products, there is a point at which commissions drop considerably. So if policies stay in force, profits are then generated. You're proposing direct marketing with the internet as the primary mode of distribution. To sell anything, you'd still have tons of marketing expenses, which would be ongoing.

[The Drunken Actuary]

I'd say he'd be on your side, since Tupac is making some wild claims here with nothing to back it up. Tupac: Yes in the first few years of a policy's life commissions eat up alot of the profits. Depending on the profit signature of your products, there is a point at which commissions drop considerably. So if policies stay in force, profits are then generated. You're proposing direct marketing with the internet as the primary mode of distribution. To sell anything, you'd still have tons of marketing expenses, which would be ongoing.I guess we're talking about life products...

[Anonymous]

>>I had a feeling you would say something like that. I'm glad to know your sales people are so good they can sell the crappy products your company makes to people that don't even want them. Whatever you're paying them is not enough.<<

That's an industry stat, not specific to our company.
The industry research group, Markom (sp?) has done studies that will confirm this.

[The Drunken Actuary]

>>BTW, none of that explains how the internet is going to replace sales people.<<

Just like autobytel.com does for autos.Oh yeah, I forgot there are no physical car dealers anymore.
There are already systems that do it for financial products.
Set up pre-designed questions that are pertinent to your investment decisions. Than, the software can come up with the best vehicle, regardless of commissions. Only reason it isn't more widespresad yet, is because the entrenched distribution systems won't allow companies to start it. Any company that were to come out with an e-version would get dropped quicker than you could say Willie Loman!Now you are being naive. If all you are selling is term life, maybe. Anything more complex than that, and there is s substantial segment of your customer base that wants to talk to a live person, in person. I'm sorry the salespeople you know need puppet shows to understand the most basic concepts. That is not always the case.

[The Drunken Actuary]

>>I had a feeling you would say something like that. I'm glad to know your sales people are so good they can sell the crappy products your company makes to people that don't even want them. Whatever you're paying them is not enough.<<

That's an industry stat, not specific to our company.
The industry research group, Markom (sp?) has done studies that will confirm this.Confirm what? That I am naive? Please priovide a link. To anything you have said in this entire thread.

[Anonymous]

>>I guess we're talking about life products...<<

Talking about annuities.
You guys watch the commercials that make it sound, to the consumer, like "rollovers" are such great things? Well, that's a fancy word for "churning". There, I said it. Doesn't do the client a darn bit of good. But it pays another 5% commssion.

[oedipus rex]

I'm assuming that's what he's talking about, but I could be mistaken. Also, you'd still have to pay your software developers to keep updating the services each time you wanted to chage anything about your products. Hopefully they'd get it right...

[The Drunken Actuary]

>>I guess we're talking about life products...<<

Talking about annuities.
You guys watch the commercials that make it sound, to the consumer, like "rollovers" are such great things? Well, that's a fancy word for "churning". There, I said it. Doesn't do the client a darn bit of good. But it pays another 5% commssion.I will admit that there are times when sales people are poorly incented. Couple that with stupid customers.....

[The Drunken Actuary]

I'm assuming that's what he's talking about, but I could be mistaken. Also, you'd still have to pay your software developers to keep updating the services each time you wanted to chage anything about your products. Hopefully they'd get it right...And work for salary. Hey, that's an expense, right. So the salepeople make more money than all other people in the company COMBINED according to TS. Forget these exams, I'm going into sales.

[oedipus rex]

Oh yeah, and amazon really put Barnes & Noble out of business too. The problem is is that people with money want to go into fancy offices and get pampered, to pay someone money to manage their money. Maybe it's a status thing.

[Anonymous]

>>Oh yeah, and amazon really put Barnes & Noble out of business too. The problem is is that people with money want to go into fancy offices and get pampered, to pay someone money to manage their money. Maybe it's a status thing.<<

It's a matter of time.
Napster has shown people they don't need to go to a record store to pay $20 for 10 songs by one artist.
Record stores will never be completely obsolete, but their days as #1 means of distribution, are numbered. Just like the days of 5% upfront commissions on annuities/mutualfunds are limited...

[oedipus rex]

Ok, I think I'm beginning to follow your logic. It would be a boon to investors if commissions and expenses were reduced. I could see an extremely productive company with very low costs entering the market with an "investors first" marketing campaign, and offer virtually expense-free funds, annuities, etc.

[Anonymous]

>>Ok, I think I'm beginning to follow your logic. It would be a boon to investors if commissions and expenses were reduced. I could see an extremely productive company with very low costs entering the market with an "investors first" marketing campaign, and offer virtually expense-free funds, annuities, etc.<<

Seems like a no-brainer to me.
There are companies doing that, and they haven't begun blowing away the competition.
Why?
Public hasn't been sold on it, yet. They still think they need someone to tell them where to put their 401k. An idea they're getting, mostly, from the established distribution systems.
Also, remember, the current market for 401ks hasn't been raised on the internet. In about 25 - 30 years, things will change. Hell, my dad even has an e-mail account now! The times, they are a changin'.
I would imagine they would have more stable GAAP earnings, since they won't have nearly as much DAC.
That's my completely cynical opinion, anyway...

[oedipus rex]

I think maybe the problem lies in the complexity of the decision to be made. I buy books, CDs, clothes, etc over the web, but these are simple products. Financial and insurance products are not as straight-forward as something that you'd buy in one click.

[The Drunken Actuary]

I think maybe the problem lies in the complexity of the decision to be made. I buy books, CDs, clothes, etc over the web, but these are simple products. Financial and insurance products are not as straight-forward as something that you'd buy in one click.Yeah, i think I alluded to that earlier. Ees use the internet for 401(k) transactions, not to many companies put in a k plan using only the internet to do all their due diligence.

[OftenWrong]

I think dealing with 50 different state regulators is a necessary risk management expense for the insurance industry. Yes, it would be more efficient to deal only with one federal regulator, but what if that regulatory regime were like New Jersey, or Massachussetts? Then the whole country would be fubar. (Can I say that here?)

[Westley]

>>Ok, I think I'm beginning to follow your logic. It would be a boon to investors if commissions and expenses were reduced. I could see an extremely productive company with very low costs entering the market with an "investors first" marketing campaign, and offer virtually expense-free funds, annuities, etc.<<

Seems like a no-brainer to me.
There are companies doing that, and they haven't begun blowing away the competition.
Why?
Public hasn't been sold on it, yet.

So, we should cut out the "Sales" expenses. But, it doesn't work yet, because the public hasn't been sold on it. It's hard to sell the public on it when you're cutting the sales expense, eh?

[Chris Poirier]

Fact: Life insurance (and annuities) are sold, not bought. People may know they have some kind of unfulfilled need, but without an agent or broker to sell them on the advantages of the product, many will either not buy or will not buy enough. And by advantages, I mean the life contingent and tax advantages that no other product can offer, not neccesarily the advantqge of a superior crediting rate. It's a difficult sale and the people who do it must be paid. The ones who do it well are very well compensated, those who do not draw average or poor pay. Whether you pay it as a commission or a salary, they still need to be paid.

Distribution expenses are not paid to one person. If you are pricing products and you believe that, you should sit down with your supervisor and discuss the distribution method used at your company. Your math and technical skills may be fine, but you need a better understanding of how your business works. Pricing distribution expenses cover a wide range of people and fixed costs. For a brokerage distribution, you are paying not just the broker who makes the sale but also everyone he or she works for, right up to the head of the brokerage company, plus the costs of the broker's offices, computers, etc (depending on the arrangement this might come from the MGA's cut, but it has to come from somewhere). Other distribution channels have a different split, but it is split nonetheless, even with a pure career agency system.

Twenty years ago, direct sales made up 2% of all life sales. This was mostly in the form of direct mail. Today, with the boom of the internet, direct sales make up....2% of all life sales. People like to do research online but when it comes time to buy, they want to talk to an agent. Maybe that 2% number will change over time but even if it grows tenfold, we will still have 80% of all sales done face-to-face, so the agent will never be cut out completely, barring a complete shift in the sales paradigm.

IIRC, the ACLI (which represents life insurers) does not support elimination of state control of the insurance industry. The do support an optional federal charter which would allow companies to file with one federal regulatory authority rather than the individual states.

[The Drunken Actuary]

Very well said Chris. But I think any response we are likely to get from Tupac will not address any of your points.

[Anonymous]

>>Fact: Life insurance (and annuities) are sold, not bought. People may know they have some kind of unfulfilled need, but without an agent or broker to sell them on the advantages of the product, many will either not buy or will not buy enough. And by advantages, I mean the life contingent and tax advantages that no other product can offer, not neccesarily the advantqge of a superior crediting rate. It's a difficult sale and the people who do it must be paid. The ones who do it well are very well compensated, those who do not draw average or poor pay. Whether you pay it as a commission or a salary, they still need to be paid. <<

The majority of sales at my company are rollovers. I believe this is true about the industry. Do you know what percentage it is? I could be way off, but I don't think so. Anyway, rollovers don't serve any purpose in majority of the cases. In the annuity industry, you lose any death benefits built up (more of a recent issue with down markets), but you've always had new surrender charges. Majority of companies will offer very similar underlying investments and riders. So, while they DO need to be shown the tax advantages, etc. of what they are buying, I think the current system is more geared towards directing a client towards the highest commission. I'm not as familiar with life insurance, but I would imagine it's similar. I'm sure there is the exceptional sale that would require a professional to tell him exactly how to optimally game the tax code, the vast majority of sales are to joe 6 packs that just want to supplement a social security check they still believe they're going to get.



>>Twenty years ago, direct sales made up 2% of all life sales. This was mostly in the form of direct mail. Today, with the boom of the internet, direct sales make up....2% of all life sales. People like to do research online but when it comes time to buy, they want to talk to an agent. Maybe that 2% number will change over time but even if it grows tenfold, we will still have 80% of all sales done face-to-face, so the agent will never be cut out completely, barring a complete shift in the sales paradigm. <<

I believe that's a demographics issue. Majority of LI sales are to older people. And don't forget, the established distribution system will fight the change, tooth and nail, whether it's best for the general public or not. That's just human nature - self interested motivation. Keep an eye on how long it takes music sales (a very young demographic) to go internet. The RIAA will be fighting that. Some LI distribution channels would be smart to help the RIAA in that fight, out of self interest, not concern over general good of course. That is just going to be the opening battle in a long war which, I believe, many industries will eventually go through. But then again, the established distribution channels have VERY deep pockets.

>>Distribution expenses are not paid to one person. If you are pricing products and you believe that, you should sit down with your supervisor and discuss the distribution method used at your company. Your math and technical skills may be fine, but you need a better understanding of how your business works. Pricing distribution expenses cover a wide range of people and fixed costs. For a brokerage distribution, you are paying not just the broker who makes the sale but also everyone he or she works for, right up to the head of the brokerage company, plus the costs of the broker's offices, computers, etc (depending on the arrangement this might come from the MGA's cut, but it has to come from somewhere). Other distribution channels have a different split, but it is split nonetheless, even with a pure career agency system. <<

I am fairly certain that the vast majority of individual sales (annuities) wind up paying more than 50% of revenues to a single person. The person receiving this knows FAR less about what he/she is selling than that statistic would indicate. I know series 7 isn't easy, but it doesn't compare to becoming an FSA. Where's our commission? I also believe the commission system serves, too often, as the motivating factor in a sale. Eliminate this, and there would be no motivation to sell a client anything other than what's best for him/her.

>>IIRC, the ACLI (which represents life insurers) does not support elimination of state control of the insurance industry. The do support an optional federal charter which would allow companies to file with one federal regulatory authority rather than the individual states.<<

That makes some sense. Makes it easier for the companies to get their filing done, but still too much bureaucracy. 50 state offices when you only need 1. Baby steps, I guess....

[The Drunken Actuary]

Tupac, you have a lot of beliefs (about what motivates a salesperson, how smart they are, the worth of a Series 7 license vs an FSA designation, why distribution channels should change, how much money is paid to various parties, the list goes on) but none of them are supported by anything at all. Why don't you do a little research and get back to us.

[oedipus rex]

Series 7 and actuarial exams aside, I think something major is being blown aside in this conversation. Life insurance, annuities, etc usually are not sold in isolation, but in the context of a financial plan or strategy of some kind. It would be very difficult, if not impossible, to automate every single possiblity that could be encountered, especially with constantly changing regulations. It seems that people generally agree that when it comes time to shell out big bucks, that there needs to be some kind of plan involved, a plan that changes as the markets, the economy, and an individual or firm's needs alter. Excuse me if these points were made earlier.

[Anonymous]

<<Tupac, you have a lot of beliefs (about what motivates a salesperson, how smart they are, the worth of a Series 7 license vs an FSA designation, why distribution channels should change, how much money is paid to various parties, the list goes on) but none of them are supported by anything at all. Why don't you do a little research and get back to us.<<

Just trying to get other people's input on some things I feel are very important in our industry. One way I can "do a little research" is by bouncing my opinions off of people. A dialectical approach to learning. I guess I should have more questions marks than exclamation points. My bad?
Doesn't work so well with my non-actuarial friends, they're not interested in the subject. Nothing personal, just not their cup of tea.

Oh yea, and as far as not supporing opinions? Hasn't stopped you from posting, but I'm interested in your viewpoint. Thanks.

[The Drunken Actuary]

<<Tupac, you have a lot of beliefs (about what motivates a salesperson, how smart they are, the worth of a Series 7 license vs an FSA designation, why distribution channels should change, how much money is paid to various parties, the list goes on) but none of them are supported by anything at all. Why don't you do a little research and get back to us.<<

Just trying to get other people's input on some things I feel are very important in our industry. One way I can "do a little research" is by bouncing my opinions off of people. A dialectical approach to learning. I guess I should have more questions marks than exclamation points.And has the fact that every person that has so far respoonded to you disagrees to some extent or another changed your opinion on any of these ideas? My bad?Perhaps you just come across as very biased and unconvincing.
Doesn't work so well with my non-actuarial friends, they're not interested in the subject. Nothing personal, just not their cup of tea.

Oh yea, and as far as not supporing opinions? Hasn't stopped you from posting, but I'm interested in your viewpoint.And now you have it. OTOH, I haven't made sweeping statements about the evils of commission and not been able to back up my assertions about how much sales people make as a percentage of expenses. I might have opinions about things but I don't make up numbers support them. Thanks.You're welcome.

[Anonymous]

<<Series 7 and actuarial exams aside, I think something major is being blown aside in this conversation. Life insurance, annuities, etc usually are not sold in isolation, but in the context of a financial plan or strategy of some kind. It would be very difficult, if not impossible, to automate every single possiblity that could be encountered, especially with constantly changing regulations. It seems that people generally agree that when it comes time to shell out big bucks, that there needs to be some kind of plan involved, a plan that changes as the markets, the economy, and an individual or firm's needs alter. Excuse me if these points were made earlier.<<

Those are good points.
I think the majority of sales (annuities/mutual funds in particular) are pretty straightforward. Seems like it would be pretty simple to come up with software (probably some online companies that do it already), that would guide a client through a series of questions, and use that info to come up with a few options, and supporting literature. Maybe my beef is just with the commission part, and it would be just as cheap to pay salaried sales staffs. I still think software would be less prone to mistakes. AND cheaper. Up front costs would be a little bit more, but once the system is up and running, no rent, only cost of programmers maintaining 1 system. If every company in the industry went this route, I believe it would result in a BIG drop in expenses, and clients would still get advice as good as, if not better than under the current system. If, after going through series of questions, and being offered a few options with marketing/explanatory literature, you still feel the need to talk to someone, make it an option at THAT point. Just my suggestion. Now, the lithmus test is the current system: A guy who passed series 7, getting paid a different commission on different products, giving you his advice. It could be the best, but maybe not??????

[Anonymous]

>>And has the fact that every person that has so far respoonded to you disagrees to some extent or another changed your opinion on any of these ideas?<<

No, not until 30 people have answered.
That does, however, make me wonder when actuarial became marketing's b*tch?
(is that uncacceptable in this forum? I'm new here, but it sounds funny)

>>Perhaps you just come across as very biased and unconvincing.<<

Biased? Towards what? A better system? Something fairer for employees AND clients? Well than call me biased.
Oh wait, you just did.


>>And now you have it. OTOH, I haven't made sweeping statements about the evils of commission and not been able to back up my assertions about how much sales people make as a percentage of expenses. I might have opinions about things but I don't make up numbers support them.<<

I am only 45% certain that is a true statement. I will check the record.

[The Drunken Actuary]

<<Series 7 and actuarial exams aside, I think something major is being blown aside in this conversation. Life insurance, annuities, etc usually are not sold in isolation, but in the context of a financial plan or strategy of some kind. It would be very difficult, if not impossible, to automate every single possiblity that could be encountered, especially with constantly changing regulations. It seems that people generally agree that when it comes time to shell out big bucks, that there needs to be some kind of plan involved, a plan that changes as the markets, the economy, and an individual or firm's needs alter. Excuse me if these points were made earlier.<<

Those are good points.
I think the majority of sales (annuities/mutual funds in particular) are pretty straightforward. Seems like it would be pretty simple to come up with software (probably some online companies that do it already), that would guide a client through a series of questions, and use that info to come up with a few options, and supporting literature. Maybe my beef is just with the commission part, and it would be just as cheap to pay salaried sales staffs. I still think software would be less prone to mistakes. AND cheaper. Up front costs would be a little bit more, but once the system is up and running, no rent, only cost of programmers maintaining 1 system. If every company in the industry went this route, I believe it would result in a BIG drop in expenses, and clients would still get advice as good as, if not better than under the current system. If, after going through series of questions, and being offered a few options with marketing/explanatory literature, you still feel the need to talk to someone, make it an option at THAT point. Just my suggestion. Now, the lithmus test is the current system: A guy who passed series 7, getting paid a different commission on different products, giving you his advice. It could be the best, but maybe not??????I'm sure the software could be made. People don't want to buy that way.

[oedipus rex]

And that is what it all boils down to, in the end.

[The Drunken Actuary]

>>And has the fact that every person that has so far respoonded to you disagrees to some extent or another changed your opinion on any of these ideas?<<

No, not until 30 people have answered.
That does, however, make me wonder when actuarial became marketing's b*tch?
(is that uncacceptable in this forum? I'm new here, but it sounds funny)I'm not sure if its acceptable. I'm pretty sure it doesn't sound that funny to most people over the age of 14.

>>Perhaps you just come across as very biased and unconvincing.<<

Biased? Towards what?Against sales people. A better system? Something fairer for employees AND clients? Well than call me biased.
Oh wait, you just did.And I will keep doing it until you stop making up numbers and point to a source.

>>And now you have it. OTOH, I haven't made sweeping statements about the evils of commission and not been able to back up my assertions about how much sales people make as a percentage of expenses. I might have opinions about things but I don't make up numbers support them.<<

I am only 45% certain that is a true statement. I will check the record.What a novel approach for you.

[oedipus rex]

ouch! :)

[Anonymous]

>>I'm not sure if its acceptable. I'm pretty sure it doesn't sound that funny to most people over the age of 14.<<

I'd have to go with at least 16, but you may be right.
Obviously, by your response, it isn't popular with the 55+ crowd, ya old fart.

>>Against sales people.<<

That's what they said about people who wanted to get rid of door to door salesmen. Willy Loman is dead, get over it.

>>And I will keep doing it until you stop making up numbers and point to a source.<<

Won't happen again.
I can state that with 95% certainty.
(that is backed up by empirical evidence)


>>What a novel approach for you.<<

Good one.
What's next, I'm rubber your glue...

[Lucy]

Gee, I thought door-to-door salesmen had been replaced by telemarketers.

Unless you can honestly say you like wading through voicemail menus, I think you have to admit that there's still something better about dealing with another human being, especially for a complicated transaction where the cost of making the wrong decision might be high.

[Chris Poirier]

That does, however, make me wonder when actuarial became marketing's b*tch?
(is that uncacceptable in this forum? I'm new here, but it sounds funny)

That's exactly where actuarial should be, in a properly driven organization. Or more appropriately, everyone in actuarial should have a sound understanding of the marketing principles that drive their company. Products should be financially sound, of course, but they also need to be in sync with the marketing strategy. The first is a technical exercise and by far the easier of the two. A company which allows actuarial to create its products and then tries to decide how they should be marketed is a doomed company.

[Chris Poirier]

I know series 7 isn't easy, but it doesn't compare to becoming an FSA.
The reason we comp agents isn't because of their technical skills, it's because of their people skills. I know a lot more about our products than any one of our agents, but if you sit me in a sales office I'm not going to make many sales. I'd be able to sell to those who had already decided to but. But I would miss out on all the other prospects, who have a need but need to be shown it.

Where's our commission?
No numbers to back this up, but I'd say the salary of the average FSA far exceeds the commissions of the average agent with a similar number years experience. But you want commission? Find a company that offers a good bonus program based on a combination of personal and corporate performance. They might not call it "commission" but it comes down to pretty much the same thing.

I also believe the commission system serves, too often, as the motivating factor in a sale.
As it is designed to. The company should structure its compensation program to make sure the agent's goals are aligned with the company's goals. You want them to sell more of a particular product? Offer a higher compensation on it. It's not the only factor -- a strong training program on product advantages is more effective in many channels than you might like to believe -- but it is a factor.

Eliminate this, and there would be no motivation to sell a client anything other than what's best for him/her.

Wrong. There would be no motivation to sell a client anything. Fact: different people are motivated in different ways. Very few agents are motivated just by the money. But just like many actuaries would consider jumping to another company if they offered to pay 20% more, so would many agents.

And just a quick note on rollovers - you are correct that most annuity money is the result of rollovers. In some cases, I won't dispute that it does appear to be churning. But if I had a personal annuity, I would absolutely, without question, look at rolling it over every time the surrender charges ran out. Who cares about surrender charges if you don't plan to surrender it - and with big pre-55 tax penalties, why would you do that? I don't care what commission gets paid on it. I care what my policy values will look like. And if I can get no up-front charges and a better rate on my annuity, why wouldn't I roll it?

[kazh]

Well put, CP.

It is very important to align the company's goals with its commission structure. If the incentives drive the agent to do something improper, e.g., churning & twisting, the incentives need adjusting. Class action lawsuits and nasty market conduct exams await companies that offer excessive incentives without added value to the consumer. (And by the time the penalties arrive, the agent might be long gone. Sometimes the actuary has been promoted away from the problem, but don't count on it.)

One example I've seen multiple times is a company selling whole life with a high 1st-year cash value. If the premium is smaller than the sum of 1st-year cash value + commission, some agents will give it away in exchange for the 1st-year cash (in spite of no-rebate laws) -- and most of it will lapse the 2nd year. (I own one, which my agent sold honestly-- but the company quit offering it after a couple of years.)

But eliminating commissions will simply drive agents to sell something else. Direct response often starts off well, but response rates drop too low to do better than commissioned products. In credit insurance, much of the resistance to states dropping prima facie rates is bolstered by the threat that auto sales/bank loan staff will sell other high-commission products, e.g., extended warranties, rustproofing, detailing, that don't represent much real value to the consumer. Many public officials would rather they sold credit insurance.

[aces219]

I'm 21, and I'd rather buy from an agent than online. This applies not only to complex financial products, but also to simpler products like car insurance. I really value the service I get from my agent. I appreciate that he is willing to run different combinations of coverages and deductibles in order to get me the most appropriate package. I value the insight he has about the products due to many years of experience, something which a computer cannot replace. I manage my 401k online, and frankly I find the advice to be a lot more cookie-cutter than I'd like. Once I acquire more assets I am pretty sure I will get a financial planner to look at the big picture.

I'm young and I feel this way - imagine how our parents' generation feels.

TS - I think you could benefit from a marketing class. Your company may offer training in this area. It's awfully hard to price if you don't understand how all your inputs work, and as for product development, forget about it.

[2pac Shakur]

:bump:

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