Highlighting the last sentence from my previous post with a little personal experience.
Banks:
In 2007 I worked at a bank as a Personal Banker (PB). My job was to take care of our everyday clients’ finances and ensure they were vested properly. While doing this I had a monthly scorecard to hit, which consisted of:
1. Checking & Savings Accounts - 19 new/month
2. Lines of Credit - HELOC's and Credit Cars, $100k/month
3. Mortgages - Minimum of $200k/month
4. Investments - $10k/month
When a client came in to run a wire transfer, I had to find ways to talk them into opening a line of credit, or reasons they needed a second checking account. Missing these goals on a consistent basis would result in unemployment. On the other side, if I hit the goals, I was offered some type of bonus or incentive. We had an online catalog, updated each month, with our point totals from hitting sales goals. 95% of these points came from selling checking accounts and loans, not investments. Prizes consisted of cash, vacations, furniture, gift cards, etc. If the PB’s are not hitting these goals, the bank branch is not profitable, if the branch is not profitable it falls on the branch manager, if the branch manager is not performing it falls on the regional manager and so on. There is a ton of pressure at all banks for these employees to meet their goals. So as a client of a bank, guess what the Banker’s first priority is?........(pause)….. Loans and Checking Accounts! On top of that, B Shares which is a completely different story. Yes, Banks do have investment advisors specifically for high dollar clients, and they can do a good job. Let’s just say I left for a good reason, I couldn’t take care of my clients with what they really needed. Consistently pressured into mentioning products to people who didn’t need them…
PB’s can be good in certain situations: wire transfers, NSF fee services, balancing a check book, or opening a HELOC when the time actually makes sense. They receive very little training when it comes to insurance and investing. If you are not good with the internet, you may need a PB to open that new checking or savings account.
Captive Agents:
By definition, captive agents work exclusively for one insurance carrier and are obligated to give business only to that company. While some captive agents belong to affiliated groups of their parent company, the captive agent's main concern is to develop business for the parent company above all others. (http://www.insureme.com/insurance-agent/captive-vs-noncaptive)
My next experience was with a mutual insurance firm in 2008 as a captive agent. When I accepted the new career path I was told I could shift my focus on building my own book of business, take care of clients in the correct manner, with limited investments and insurance products allowed by that company. “You have the opportunity to be a representative in a AAA rated company with the strongest product portfolio in the industry.” Freedom at last, right?!! I could do what was in the best interest for the client………….
Three months into the job I found a repetitive training schedule that focused on Whole Life Insurance and LTC sales ideas only. Nothing to do with a diversified portfolio, dollar cost averaging, share classes, annuities, or the correct way to save for a child’s college. I had asked what sponsored college 529 plans we were allowed to offer and the answer I got from my team lead was "sell them a Whole Life Policy and have them use the cash value!" The training had one focus and that was on the profitable products of the company. I knew I took a position at an “insurance company” and that insurance was going to be an important piece to what I do. But when I interviewed they assured me it was not just insurance, that there would be a focus on the client’s finances as a whole, and I would be taught the right way to do things. After speaking too many of my colleagues, I found quickly that this is what everyone is told when interviewing. My mistake, I should have researched the profession a bit more than what I did. The year I spent with the company was not all that bad. I did become an “Insurance Professional” with some of the best training on Term, UL, VUL, and Whole life one can find! But once again I found myself recommending products that didn’t exactly fit the client’s needs. Example:
34 year old male
Spouse
2 children in elementary school
New Business Owner
$500,000 in liquid assets / diversified portfolio / 70-30 risk allocation
$50,000 in retirement accounts
$200,000 mortgage
Set appointment to look at term insurance options to protect family and look at additional investment options to grow current portfolio
My Managing Partner (MP) at the time had the ability to choose which appointments he wanted to attend with me and this so happened to be it. I had my own recommendations set for the client with our term options printed, a valuable well thought out plan to benefit the family and his business. This was all overridden by the seniority of my MP who was looking out for the “office scorecard” and himself more so than his agent and the client. At age 24 I fought for what I could, but no one would listen. The final recommendation proposed by the MP: A custom 5 pay whole life insurance policy with a premium of $100,000/yr. A ridiculous recommendation for the situation above. Put all your eggs in one basket and lock up the liquidity of a majority of the funds you may need in the short term. The client was a bit more savvy with his financial awareness than the MP had anticipated and never called back. A week later I walked out of the office. I attempted to apologize to the client but to this day have never heard back.
I remind you this is my personal experience. I have seen what goes on behind the scenes at banks and captive agencies, the 3 P’s…. Push Profitable Products. It’s what most companies do in all industries to become successful, I understand. But in the world of finance, people need genuine guidance, not product pushers. This all led to where I am now as an independent agent.
Independent Agents:
Financial Planners with an independent/self-employed title are not married to one carrier or product. They have access to almost every product out there without the scorecard. Their goal: To shop the market, find the best possible product for the need, fill any gaps necessary, and lead a person, family or business to financial independence through the three phases:
1. Protection
2. Accumulation
3. Distribution
Financial independence cannot be reached with product pushers. When making financial decisions, consult with a Financial Planner first and allow he/she to make a proper recommendation. If you choose to work with a planner at a captive agency, be sure to compare it to other proposals/quotes/rates or premiums out there before you sign next to the x. In my short 5 years in the industry I have seen to many people in the wrong product at the wrong time wasting unnecessary money that could be used elsewhere.
