No Load Life and Annuities

[Newlineofwork]

I'm taking some CFP Exam prep courses.
They were talking about no load life and annuity plans sold by fee based CFPs that don't receive commissions.
I'm with a small, full lines agency and the owner says that such a thing existed 40 years ago but not today.
A few life insurance companies my agency represents have reduced or deferred commission policies with high early cash values; is this the current equivalent?
Who is right; is there such a thing today?

 

[scagnt83]

It exists on the Annuity side. You can charge a wrap fee instead of taking commissions.

It does not exist on the Life side, that I know of.

HECV products do receive reduced comp. But that is not the equivalent.

The CFP exam prepares a person to understand life insurance on the most basic level possible... often with unrealistic assumptions or product info.

Basically, it teaches enough to be very dangerous.

 

[DHK]

For the life side, there may be some VUL policies that allow RIAs to charge an AUM (or equivalent) ongoing fee.

There are PPLI policies (both domestic and offshore) that operate similarly, but they are only for HNW. Institutionally priced for COI as well as very low borrowing rates. However, you're looking at a minimum of a $5 million+ premium for those.

And technically, they aren't "AUM". They're "AUA" - assets under administration as you don't need a series 65 to do them (for offshore carriers).

I doubt the CFP board would let someone call themselves "fee-only" and do these kinds of policies.

 

[Tahoe Ray]

I'm taking some CFP Exam prep courses.
They were talking about no load life and annuity plans sold by fee based CFPs that don't receive commissions.
I'm with a small, full lines agency and the owner says that such a thing existed 40 years ago but not today.
A few life insurance companies my agency represents have reduced or deferred commission policies with high early cash values; is this the current equivalent?
Who is right; is there such a thing today?

Several annuity carriers offer those, still.

No commission to the agent but there are overrides payable to an upline.

The indexing features are better (higher caps/pars/lower spreads) but not good enough to make up for charging a fee.

Same with VUL (some carriers offer these like Nationwide, Protective, Ameritas) but when you add on the fee, the math nets out the same or worse than a commission-based product.

Remember though, fees are ok and commissions are bad.

 

[Allen Trent]

HECV products do receive reduced comp. But that is not the equivalent.

I wouldn't say it is reduced comp, isn't it same/similar comp that is spread out over 5-7 years as the carrier doesn't have the surrender charge to cover/protect the carrier from losses due to high 1st year commission/issue costs

 

[Allen Trent]

I'm taking some CFP Exam prep courses.
They were talking about no load life and annuity plans sold by fee based CFPs that don't receive commissions.
I'm with a small, full lines agency and the owner says that such a thing existed 40 years ago but not today.
A few life insurance companies my agency represents have reduced or deferred commission policies with high early cash values; is this the current equivalent?
Who is right; is there such a thing today?

I believe some companies like Nationwide & Ameritas have fee based life. Not sure if it is only their VUL products

 

[scagnt83]

I wouldn't say it is reduced comp, isn't it same/similar comp that is spread out over 5-7 years as the carrier doesn't have the surrender charge to cover/protect the carrier from losses due to high 1st year commission/issue costs

Not necessarily true for all products.

Some are indeed reduced comp, even as a cumulative figure.

---

And as a general statement, product designs that provide high early cash values (either out of the box, or by manually adding PUAs); always have a lower net to the agent vs. not maxing out the cash value.

Is that reduced comp? Depends on your definition.

But true HECV, by base product design, is often lower cumulative comp vs. non-HECV.

 

[Sheryl J Moore]

It exists on the Annuity side. You can charge a wrap fee instead of taking commissions.

It does not exist on the Life side, that I know of.

HECV products do receive reduced comp. But that is not the equivalent.

The CFP exam prepares a person to understand life insurance on the most basic level possible... often with unrealistic assumptions or product info.

Basically, it teaches enough to be very dangerous.

Ameritas has a no load life product, as does Nationwide. sjm