Advances

[noah]

On 110% contract,what ate the pros and cons of being on a 75% or a 50% advance ?

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Sorry meant to say are, not ate.

 

[Newby]

On 110% contract,what ate the pros and cons of being on a 75% or a 50% advance ?

----------

Sorry meant to say are, not ate.

With 75% advances the advantage is you get more of your money quicker. The downside is you are further in debt and debt is risk that can sink you financially.

With 50% you don't get as much up front. Better for your long-term financially stability but only if you can afford to cash flow your business.

Most agents start at 75% advances and the smart ones have the goal of shortening or eliminating the advances when they can afford to.

It's always better to have insurance companies owing you money rather than you owing them money.

 

[noah]

At what point should an agent shorten and eliminate the advances ? Are there successful agents that stay on 75% ?

 

[AnonymousOne]

The bulk of my business each contract your write you chose the comp structure. FE is a bit different but same end goal. Either at the "end of the month" or whenever my bank account was comfortable I started electing the trail options at a certain point you start always electing the full trail. Then I asked the company to stop annualizing the first year.
For FE, after you have become somewhat comfortable with production, I would change one of your more niche companies to no advance. Months later if income is still sufficient change a more often used company. Slow is key.

 

[Thad.Sipple]

This is the best advice.

Now it has been 25 years since I was advanced commissions, and I always used a commission/salary bucket approach. Here is how it worked. Now back then everything was underwritten so this quick issue stuff today usually took 4-8 weeks to issue just like full underwriting is now. We also had to mail apps to the Home Office. Anyway.... it is a simple approach, Create a bucket or money market account that all commissions/Advances are deposited and charge backs are paid from if you have to write a check back to the company. Do not touch the money for 3 months. on the 14th week, begin to pay yourself a salary or LLC/Distribution of 8% of the total amount of the bucket per week. Also withdraw 2.0% and deposit it into a business account for business expenses which includes purchasing leads, office/phone, E&O, CE, Books/Training/Seminars, Staff Salaries and Employer SocSec Taxes (agent included) and any State Unemployment/Work comp (depending on State) essentially spending 10% of your bucket. each week. Example bucket. This requires you to not use commissions at all for the first 3 months. Selling insurance is a business and you must set aside funds to invest in this business. Be sure you have all expenses saved for 3 months + any extra weeks needed for training and trial/error + lead costs. The 3 months begins after you have already cut your teeth and are ready to go for it. Keep this up for one Year and re-evaluate it. What will happen is, if you had a good year your bucket should have doubled/tripled from the date you started drawing on it. This also means your Draw/salary each week went up as the bucket grew. This is where you make a decision to cut your advance from 9 to 6 months and continue the same thing for another 9 months. At this point you have been in the business for 2 years and are continuing to be successful. The main reason you are successful is that you never worried from week to week about money. You had a steady income to pay the bills and keep the wife and kids happy. When you don't think about your weekly income you have an easy time selling. At the beginning of the 2nd year, you go as earned with all your carriers except your GO TO company where you write the majority of your business. You still deposit the As Earned money into your bucket and continue your draws for another 6 months. At this time, if your GO TO company has a 3 month advance change it to that for another 6 months. At the end of year three, Every Carrier is As Earned. Still using the bucket approach to pay yourself. Now at any time you have a fantastic week... Made $10k on a SPWL or Annuity or sold a large Target Prem Case. DO NOT SPEND IT WHEN ISSUED. Simply deposit it in the bucket. You will be thankful when it is time to take the 4 weeks of vacation time Insurance agents seem to take and you will be glad the bucket was a little over funded. I Hope this helps some of you new guys out there. I did this when I was 28 and just started out as an Independent Producer after working with MetLife for 4 years. I learned this method through them and it worked perfectly for 50% commissions. It is even better now for the Street Agent at 100-115%. As new agents, you will find there are always 2 sides to insurance. The Selling/prospecting side and the business side. You have to take responsibility for both sides or you will fail in this business.

 

[AnonymousOne]

O, you wanted specifics?

 

[jdeasy]

On 110% contract,what ate the pros and cons of being on a 75% or a 50% advance ?

----------

Sorry meant to say are, not ate.

It's personal choice really.

In life insurance they do not charge you interest on the advances so it's an interest free loan that most like.

I do not. I'm as earned on all but 2 companies and those are 6 month advances. One is 5 Star and I never signed up for advancing with them but they advance anyway. It's easier to let it go with them than to try and change things. The other is RNA. I was going to move to as earned gradually with them and wanted to go to 3 month advancing first. They don't allow that so I will just have to bite the bullet and got to as earned with them too.

I did recently change one from as earned to a 3 month advance. Just for the sake of seeing money come in when issued other than just one month. Nothing to that really other than a mental thing.

Taking advances is fine as long as you always know it's a loan that has to be paid back.

 

[noah]

Well I've only been selling a few months and I have been mainly focused on learning the FE market,the paper work. I like the business and want to stay in it,I am now in need of developing more of a focus on managing these adavances. Sounds like switching from 75% to 50% is the next move.

 

[WinoBlues]

With 75% advances the advantage is you get more of your money quicker. The downside is you are further in debt and debt is risk that can sink you financially.

With 50% you don't get as much up front. Better for your long-term financially stability but only if you can afford to cash flow your business.

Most agents start at 75% advances and the smart ones have the goal of shortening or eliminating the advances when they can afford to.

It's always better to have insurance companies owing you money rather than you owing them money.

I. Could be wrong but didn't you used to advocate taking advances and banking it along the lines that twilight posted?

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It's personal choice really.

In life insurance they do not charge you interest on the advances so it's an interest free loan that most like.

I do not. I'm as earned on all but 2 companies and those are 6 month advances. One is 5 Star and I never signed up for advancing with them but they advance anyway. It's easier to let it go with them than to try and change things. The other is RNA. I was going to move to as earned gradually with them and wanted to go to 3 month advancing first. They don't allow that so I will just have to bite the bullet and got to as earned with them too.

I did recently change one from as earned to a 3 month advance. Just for the sake of seeing money come in when issued other than just one month. Nothing to that really other than a mental thing.

Taking advances is fine as long as you always know it's a loan that has to be paid back.

I just did the same thing for the same reason. Or tried to. Not all companies allow 25% which seems odd. Some only allow 50%.

 

[TwiLight]

This is the best advice.

I agree.....Thanks.

Now it has been 25 years since I was advanced commissions, and I always used a commission/salary bucket approach.

Here is how it worked. Now back then everything was underwritten so this quick issue stuff today usually took 4-8 weeks to issue just like full underwriting is now. We also had to mail apps to the Home Office.

Anyway.... it is a simple approach, Create a bucket or money market account that all commissions/Advances are deposited and charge backs are paid from if you have to write a check back to the company.

Do not touch the money for 3 months. on the 14th week, begin to pay yourself a salary or LLC/Distribution of 8% of the total amount of the bucket per week. Also withdraw 2.0% and deposit it into a business account for business expenses which includes purchasing leads, office/phone, E&O, CE, Books/Training/Seminars, Staff Salaries and Employer SocSec Taxes (agent included) and any State Unemployment/Work comp (depending on State) essentially spending 10% of your bucket. each week.

Example bucket. This requires you to not use commissions at all for the first 3 months. Selling insurance is a business and you must set aside funds to invest in this business. Be sure you have all expenses saved for 3 months + any extra weeks needed for training and trial/error + lead costs. The 3 months begins after you have already cut your teeth and are ready to go for it.

Keep this up for one Year and re-evaluate it. What will happen is, if you had a good year your bucket should have doubled/tripled from the date you started drawing on it. This also means your Draw/salary each week went up as the bucket grew.

This is where you make a decision to cut your advance from 9 to 6 months and continue the same thing for another 9 months. At this point you have been in the business for 2 years and are continuing to be successful. The main reason you are successful is that you never worried from week to week about money. You had a steady income to pay the bills and keep the wife and kids happy. When you don't think about your weekly income you have an easy time selling.

At the beginning of the 2nd year, you go as earned with all your carriers except your GO TO company where you write the majority of your business. You still deposit the As Earned money into your bucket and continue your draws for another 6 months. At this time, if your GO TO company has a 3 month advance change it to that for another 6 months.

At the end of year three, Every Carrier is As Earned. Still using the bucket approach to pay yourself.

Now at any time you have a fantastic week... Made $10k on a SPWL or Annuity or sold a large Target Prem Case. DO NOT SPEND IT WHEN ISSUED. Simply deposit it in the bucket. You will be thankful when it is time to take the 4 weeks of vacation time Insurance agents seem to take and you will be glad the bucket was a little over funded.

I Hope this helps some of you new guys out there. I did this when I was 28 and just started out as an Independent Producer after working with MetLife for 4 years. I learned this method through them and it worked perfectly for 50% commissions. It is even better now for the Street Agent at 100-115%.

As new agents, you will find there are always 2 sides to insurance. The Selling/prospecting side and the business side. You have to take responsibility for both sides or you will fail in this business.