August 6, 2010
I have been in the INSURANCE business for 20 years. I work with business owners and their key employees. Over that time I have never met with a client who is willing to "fork over" a client consulting fee to BUY life insurance. No one wants to BUY life insurance. And the rules of adding full disclosure on how an insurance product is priced and we are compensated for placing that product will only make it more difficult to make sure that those people who need life insurance the most, will have it.
This problem is only more amplified at the lower income levels where over 75% of all benefits that employees have are what is offered on a voluntary basis through their employers. The complexity of explaining the compensation in this situation would only make the employee NOT BUY life insurance.
In addition to the human aspect, there is a very large cost to maintaining compliance. Currently I dedicate one person to compliance issues on a full time for four registered representative. We do very little securities business but because some of the insurance products we use are securities controlled, we have to have a securities license. It is not our intention to be in the securities business, but regulation requires it. Something that I believe is overkill.
Good books and records are a must in any business, especially life insurance. However, the level of compliance is so high, that I have had second thoughts about staying in a business that my father, mother and grandfather were in all of their lives. It's just good business to document items for clients but there is a place for this level of scrutiny (i.e. the largest financial institutions and their transactions not the insurance agent trying to get the teacher insurance).
This rule is the equivalent of telling the clerk behind the counter at a liquor store to tell the client that he is making $1.20 in salary, $1 in tax to the state of XY and that the distributor who sold him the bottle is making the other $6.50 on the $8.70 retail purchase BUT the SHOP CLERK is responsible for disclosure, compliance and ultimately liable for selling that bottle of liquor. Now isn't that crazy? Well that is what the fiduciary standard is that you want to apply to life insurance agents.