August 2, 2010
I think a change from recommendations that are "appropriate" to recommendations that are "best" will drastically affect how I serve my clients. Who will define "best" and when will it be defined? Will that definition be constantly updated? I do not think that is possible in any circumstance. Is best cheapest? If so is best cheapest over a 1 year period, or a 10 year period? If you define best as cheapest and one person has a 10 year horizon and the next person a one year horizon then obviously best will be different for these two people. Maybe best product is not the cheapest. Maybe the best product is from the company that has the best ratings. Well that changes every day. By the way so does cheapest If I sell a product today that is cheapest and that changes do I go back tomorrow and change it? Will every agent be required to sell the same one company? The one that is cheapest or most highly rated? What about product features that exist at one company and not the other? Who will be the one to evaluate and decide? What an incredible mess.
If I am forced to change to a fee based model then probably 50% of my clients will be without an advisor since they simply do not have the resources to afford the fees I will need to charge. I am the service representative for hundreds of insurance poliyholders. For the majority of them I do not receive any renewal compensation. Yet, I take their calls, service their policies, offer advice on beneficiary designations etc. I will end up turning all of those policyholders back to the company for service. Instead of a professional with 33 years of experience these policy holders will need to contact an 800 number in a home office and talk to a policy services clerk.
The system is not broken when it comes to life insurance agents and their policy holders. This change will break it.