Why Insurance Agents Should Become IARs
There are three reasons why every insurance-only licensed agent should consider becoming an IAR:
1) Protection from regulation
2) Earn significantly more income (and create a reoccurring revenue stream)
3) Provide more comprehensive services to clients
1) Protection from regulation is such an important issue that it is covered in a stand-alone web page. To read why every insurance-only licensed agent should become an IAR to protect themselves from violating state securities laws, please click here.
2) Earning significantly more income is such an important issue that we have a stand-alone web page illustrating how much income most insurance-only licensed agents are leaving on the table by not being licensed. Please click here to learn how you can easily double your income in a short period of time.
3) Provide more comprehensive services to clients (click here to learn more)
Most insurance-only licensed agents are only able to provide advice on the fixed products they sell. Such agents are not supposed to discuss money management. Because of this limitation, insurance-only licensed agents are NOT providing the most comprehensive advice to their clients.
Let’s look at an example that should drive home this point. Assume Mr. Smith is a 55-year-old small business owner who has the following assets and income:
-income = $200,000 (pre-tax take-home pay of which $50,000 of it is income he can use to grow wealth for retirement).
-$500,000 in a brokerage account
-$500,000 in a rollover IRA (in mutual funds)
What advice could an insurance-only agent provide that would be “prudent” advice?
The client is a great candidate to use guaranteed income rider Fixed Indexed Annuities (FIAs) to grow his wealth in the IRA with a product that can guarantee him an income for life he can’t outlive.
The client is also a candidate to use Equity Indexed Universal (EIUL) insurance as a supplemental/tax-free/risk adverse retirement vehicle.
Questions: How much of the money in his IRA should be allocated to FIAs with income riders and how much should be budgeted for premiums into an EIUL policy (and should some of his brokerage account be used to fund the policy)?
An insurance-only licensed agent may be tempted to tell the client that “ALL” of the money in his IRA should go into an FIA with income rider and that “ALL” of his brokerage account should be funneled into an EIUL policy over the next seven years in addition to the extra income he takes home from work every year.
Is this good advice? Is this comprehensive advice? The answer is NO to both questions, but this highlights the dilemma of an insurance-only licensed agent.
What prudent advice should an insurance-only agent provide? The agent should identify X amount of the money in the IRA that should be earmarked for an FIA with a guaranteed income rider and Y amount, if any, from the brokerage account should be used to pay the EIUL premium for the next seven plus years.
Depending on how much the client wants to have a diversified retirement portfolio, a significant portion of the brokerage account money will NOT be going into the EIUL policy and maybe 50% of the money in the IRA will NOT be going into the FIA.
A “good” insurance-only licensed agent would have to tell the client that he can only give advice on what to do with the money not going into fixed products. Unfortunately, most insurance-only agents will not make this comment because they want ALL of the client’s money to go into fixed products so the agent can make more money or because the agent will not want a securities-licensed competitor to come in and potentially screw up the sale of the fixed products.
Neither of the reasons in the previous paragraph are good reasons for not bringing in a securities-licensed agent to help this client.
What is the BEST reason NOT to bring in a securities-licensed advisor to help this client?
The best reason not to bring in another advisor to help this client is because the insurance-only agent really isn’t insurance-only licensed. IF the agent giving advice was a licensed IAR under POM Planning’s RIA, the discussion is much different.
If the insurance-only agent was also an IAR, he could have a prudent discussion with the client about asset allocation and give information to the client about POM Planning’s unique, “conservative” money-management. To learn about this platform, please click here.
Different advice—if the adivisor was an IAR under POM Planning’s RIA, the advisor might suggest the following:
-$300,000 of the IRA money should go into an FIA with a guaranteed income rider
-$200,000 of the IRA money should go into the POM Planning’s “conservative” money-management platform.
-$50,000 a year should go into an EIUL policy until the client retires
-Then a discussion of the remaining money not in the IRA can be had wherein the advisor will discuss with the client how much should also go into the POM Planning’s “conservative” money-management platform (the client once he learns about the unique platform will most likely opt to have a significant amount of his remaining money go into the POM Planning managed-account platform).
As a side note, the client might choose to use a no-load VA ($20 a month fee) to house the money in the POM Planning managed-account platform (this will reduce capital gains taxes and provide for more after-tax income in retirement). To learn about POM Planning’s no-load VA, please click here.
The bottom line is that the insurance-only licensed agent is limited in what can be provided to clients. Good advice can be offered on fixed products; but by not being an IAR, agents are not able to provide the most comprehensive advice possible, and they are also leaving significant money on the table.
Sign up NOW to learn more—if you would like to learn more about how POM Planning can help you grow your business, earn more income, and provide better services to your clients, please click here to fill out a request-for-more-information form.