| My Guest Author for Blog #97 |
| Mark Pace, CLU, RHU, ChFC, |
| President, ObjectiView, Inc. |
| “The value you create by charging fees is worth far more than the fees themselves.” |
At InsMark’s recent Symposium that I attended, President Bob Ritter asked how many of the 140+ advanced planners in the audience charged ongoing monitoring fees for their clients’ financial plans and strategies including:
- In-force policies;
- Executive benefit plans;
- Premium financing cases;
- Wealthy and Wise® evaluations.
A handful of the attendees indicated they charged such fees for some of their services. Throughout the meeting, I asked several who didn’t, why not? The most common answer was the commissions they received seemed to preclude their asking for additional fees.
Below are my thoughts on using InsMark’s Wealthy and Wise System as the basis for charging fees for a variety of monitoring services provided by you. (Bob Ritter tells me he will be providing examples of this in next week’s Blog #98 which will include fees built into the cash flow modeling.)
| Charging Annual Fees for Wealthy and Wise® |
| and |
| Managing Life Insurance Performance |
The opportunity to charge fees is mixed:
- Some have the ability to pull such fees out in this manner;
- Others can charge fees but have to be paid directly by their clients;
- Others are prohibited from charging fees of any sort.
The Asset Under Management Industry did not take off until it was figured out how to make it painless to pay for the service. When drawing fees directly from the funds under management, the industry began its meteoric ascent.
Advisers have to figure out which group they are in and check state/federal broker dealer and insurance company compliance.
The net worth and cash flow modeling that Wealthy and Wise provides is one of the best financial planning tools in the market place. In and of itself, it delivers tremendous value to the client. Moreover, when advisers update it annually, they deliver that tremendous value year after year.
However, until advisers have sold themselves on the value proposition of charging fees, they will avoid them -- resulting in their financial detriment or in reduced service to clients. That is why advisers must be encouraged to believe the value they will create is worth far more than the fees they can charge.
Virtually everyone using Wealthy and Wise® is using life insurance as a core component of each client’s financial plan. Since 1979 and the advent of universal life-type products, the vast majority of life insurance sold has been a buy and manage asset . . . not a buy and hold asset. Since then, each policy has been created with its own unique performance rights. These rights must be constantly managed if we wish the policy to perform as it was originally projected (and sold). (Click here to review my position paper on this subject: Crossing the Great Divide.)
The performance management of life insurance by itself - like annual Wealthy and Wise reviews - merits a fee because the work is not easy, requires considerable expertise and delivers significant value. Putting life insurance management together with an annual update of Wealthy and Wise creates a tremendously powerful value proposition.
Not only that, by going back to your clients consistently, and supplying this type of information, you are creating and maintaining a major differentiator that will not only reap you the added fees, but also provide you with strong referrals and new sales from existing clients.
InsMark’s Referral Resources
(Put our Illustration Experts to Work for Your Practice)
We created Referral Resources to deliver a “do-it-for-me” illustration service in a way that makes sense for your practice. You can utilize your choice of insurance company, there is no commission split, and you don’t have to change any current relationships. They are very familiar with running InsMark software.
Please mention my name when you talk to a Referral Resource as they have promised to take special care of my readers. My only request is this: if a Referral Resource helps you get the sale, place at least that case through them; otherwise, you will be taking unfair advantage of their generous offer to InsMark licensees.
Save time and get results with any InsMark illustration. Contact:
- Ben Nevejans, President of LifePro Financial Services in San Diego, CA.
More Recent Blogs:
Blog #96: Retirement Cash Flow Funded by Premium Financing
Blog #95: How Much Do I Really Need?
Blog #94: How to Double Your Affluent Clients
Blog #93: Maybe the Best Executive Benefit Plan Ever
Blog #92: The Prospecting Magic of Endorsed Referrals from CPAs
| 3 Reasons Why It’s Profitable For You To Share These |
| Blog Posts With Your Business Associates and |
| Professional Study Groups (i.e. “LinkedIn”) |
Robert B. Ritter, Jr. Blog Archive
I have been asked by several readers what are the compliance issues regarding charging monitoring fees for the annual management of various aspects of a client’s overall financial plan. (This was discussed in Blog #97 and illustrated in Blog #98.) I asked Mark Pace, the guest author of Blog #97 to comment on this.
Bob Ritter
President, InsMark, Inc.
Bob, this question actually reminds me of the broker/dealer’s response in the mid-1970s to the whole concept of charging fees to manage mutual funds. Their response at that time was “Why in the hell would you want to charge a fee for something that already has performance management fees built in?” But look where we are today! This discussion, in my opinion, boils down to:
Education
Liability
Money
Education
As you can see from my opening comment, before the mutual fund market really took off, a common language and consensus about what managing mutual funds meant and why it was important had to be created and shared among all stakeholders. The same holds true for managing life insurance. It is clear we have to help educate advisors, consumers and the broker/dealer community that life insurance is an asset with complex performance rights – particularly the universal life products – that need some form of ongoing management.
Liability
The broker/dealers will likely make the case that this is adding liability, which they then need to be compensated for. I would contend that providing performance management actually dramatically reduces liability; particularly when it is done from the inception of the policy. In fact, as an advisor, I would start with liability reduction as a powerful argument for performance management fees.
Additionally, there is an important distinction between variable products, which are a security and clearly under the purview of the broker dealer, and fixed products, which are not even though many broker dealers content they are. The IUL products give broker/dealers even more fuel for this smoldering fire.
Money
This is really all about money. The broker/dealers have been trying to gain complete purview over every line of business that the registered rep is involved in. In summary, if I were an advisor, I would approach the broker/dealer with the proposal that managing the fixed products is an outside business activity… one that I would disclose to them. I would attempt to get by without paying the broker/dealer compensation. On the variable product side, because it is dealing with a security, a compensation method that meets the broker/dealer’s compliance requirements needs to be created. This would most probably be seen as another activity within the RIA and therefore you will need to share the fees.
The issue here is if we are dealing with the broker dealer’s RIA or an advisor’s separate RIA. If it is the broker/dealer’s RIA, then they would have to make this a policy change for the entire system and complete the requisite amendments to their ADV. If it is an advisor’s RIA, it is a simple as making the adjustments providing for the management of life insurance and associated fees… just as many of the larger AUM firms have done. The other option is to build this into your annual financial planning fee, which can be done either by the broker/dealer or the independent RIA, I’ve seen both.
The advisors would also need to check state and insurance company regulations before charging fees. Bob, I hope this gives you what you need to flesh out comments in Blogs #97 and #98. Please do not hesitate to email or call for additional information/clarification.
Mark Pace
President, ObjectiView, Inc.