Difference Between An Independent Agent and Broker?

[yellowbirdnj]

Great article DHK. Here is a quote from it:

"States have increasingly moved toward solving the nomenclature issue by using the word "producer" to refer to someone who is licensed to sell insurance, he said. The advantage is that the term is "license-neutral," in the sense that it avoids existing connotations for the terms "agent" and "broker," Weber said."

and

"What about those who hold other credentials in addition to insurance and securities? Ronald E. Ruff is one such individual. A certified public accountant, he is owner of Fairfield Financial Solutions, a Lancaster, Ohio, registered investment advisory firm that handles not only investments, but also insurance (life, annuities, long-term care and disability) and tax and accounting services.

He identifies himself as a CPA and registered rep."

That CPA is smart. He identified himself according to his licenses. Just my opinion.

When I worked at Monumental, they restricted the CFP designation unless you had the 65, to which I thought was unfair.

That's great DHK that you got the ChFC. Since you have the designation, its fair in my opinion to use that term to define yourself, although it could be inferred that you are a consultant and not an agent or broker.

My issue is when people who have no additional training past the licensing come up with unique names claiming expertise when they really don't have any. The same people who say professional designations are stupid are the same people usually who come up with lots a unique designations that are making them look like experts in their fields.

 

[DHK]

That's what I was getting at DHK, thanks for stating it a little more clearly.

Great article too, thanks for sharing!

What I see alot of Insurance only producers using these days, Financial Consultant.... and Wealth Strategist.

To the topic of the OP, I believe that if you are an independent you are technically operating as a broker (you can shop and pick what is best), if you are a captive you are just an agent. What you call yourself..... well...

IMO, not all training has to be "accredited coursework", unless you are touting a designation. For example, if one obtains an advice delivery method such as the LEAP system, Circle of Wealth, or even Found Money Management from the Insurance Pro Shop... you will learn more about financial products and services and how the integrate and work together. And I think these systems, if you truly become a student of them, do a BETTER job than the designation coursework that I have taken.

So, here's my "real world" solution (that may not work with compliance people):

If you're selling a product, for the product's own merits (features, benefits, price)... then you're a producer, agent, or broker.

If you're asking about most areas of a client's life, doing a full fact-find, asking about insurance, investments, retirement, income taxes, debt load, etc.... then I think you should be able to call yourself a financial consultant (or a "financial strategist" which is becoming a little more popular)... because you're not just talking about one single product and whether they should buy it or not. It's a comprehensive approach & strategy, even if you're only licensed in one area.

In fact, The American College already alluded to this when they decided to give up the LUTCF designation and re-brand their sales training program to be called FSCP - Financial Services Certified Professional. This implies a more comprehensive approach, even if you're just selling insurance.

However, every state has their rules, so check them out.

 

[TwiLight]

Difference Between An Independent Agent and Broker?

Getting back to the question at hand.......

An independent AGENT make more commission % with companies A Broker does not make as much a percentage as an Agent.

With most companies, there may be an exception and I am sure they will chime in their 2 cents soon.

 

[DHK]

When I worked at Monumental, they restricted the CFP designation unless you had the 65, to which I thought was unfair.

I don't know how long ago that was for you, but I'm sure you know that those who have the CFP are required to take on a fiduciary duty in all matters... which makes it very difficult for captive agents & advisors to adhere to. Most captive insurance companies won't let you use the CFP... even if you had the Series 65. Of course, the CFP is a Series 65 exempt designation as well. (I think someone mentioned that earlier in this thread.)

That's great DHK that you got the ChFC. Since you have the designation, its fair in my opinion to use that term to define yourself, although it could be inferred that you are a consultant and not an agent or broker.

Well, I already talked about my "real world" definition differences between a consultant and an agent/broker above. It's about one's process with their clients, not just showcasing a product.

My issue is when people who have no additional training past the licensing come up with unique names claiming expertise when they really don't have any. The same people who say professional designations are stupid are the same people usually who come up with lots a unique designations that are making them look like experts in their fields.

Agreed!

 

[F150]

Difference Between An Independent Agent and Broker?

Getting back to the question at hand.......

An independent AGENT make more commission % with companies A Broker does not make as much a percentage as an Agent.

With most companies, there may be an exception and I am sure they will chime in their 2 cents soon.

So the only difference is commission?

not to mention, you are wrong....

 

[TwiLight]

So the only difference is commission?

not to mention, you are wrong....

Not to be a detractor....The OP wanted a simple explanation and this thread got into a philosophical discussion.

And.....I told you so.... I knew you were lurking in the bushes to pounce on that comment.

Show me how a broker for NWM or NYL makes more that an indy agent. A Broker in the real sense is a contract term and not how business is conducted?

A broker does not care about compensation as it has been loosely defined in this thread, because he represents the client first. How does that translate into a higher commission for an Agent that has pre-negotiated a contract commission percentage and is dedicated to place business with that carrier.

Oh ya....not to mention that most States ban this Brokerage practice.

 

[yellowbirdnj]

Not to be a detractor....The OP wanted a simple explanation and this thread got into a philosophical discussion.

And.....I told you so.... I knew you were lurking in the bushes to pounce on that comment.

Show me how a broker for NWM or NYL makes more that an indy agent. A Broker in the real sense is a contract term and not how business is conducted?

A broker does not care about compensation as it has been loosely defined in this thread, because he represents the client first. How does that translate into a higher commission for an Agent that has pre-negotiated a contract commission percentage and is dedicated to place business with that carrier.

Oh ya....not to mention that most States ban this Brokerage practice.

Commission has nothing to do if you are an agent or broker. Commission has to do with your contract.

If you are working for a major company as a captive agent, you usually start at 55% commission. As you increase selling, you get more percentage commissions. You could get up to 85% on average for an experienced agent. Even more sometimes.

If you start your own agency, you get 100% of the commission. Now your agency can just be one company, like a franchise, or you can go the independent route and carry several companies, in that case you would be a broker. But the commissions are not any better?

Many independent agencies / brokerages will offer higher contracts to agents that work under them. So the agency gets 100% and the agents under those contracts get 70% to 90% of the commission. You will continually read about people getting low percentage offers to go work in agencies that offer nothing for them and the experienced people on the forum will make issue with that.

Now its not a perfect world, you have IMO, FMO, Clusters etc to deal with as an agency, but generally being an agency its a better gig and you get bulk of the commissions.

Now to answer your question, NWM or NYL are just companies, when you become an agency you can contract with them for 100% of the commission. If you are an independent agent, and didnt do the work to create your agency, then you can get a lesser deal. When I say create your agency, I'm saying, create an LLC, get e and o, and file with the insurance dept that you are a business entity, and other fun stuff to create your own business.

 

[TwiLight]

Commission has nothing to do if you are an agent or broker. Commission has to do with your contract.

If you are working for a major company as a captive agent, you usually start at 55% commission. As you increase selling, you get more percentage commissions. You could get up to 85% on average for an experienced agent. Even more sometimes.

If you start your own agency, you get 100% of the commission. Now your agency can just be one company, like a franchise, or you can go the independent route and carry several companies, in that case you would be a broker. But the commissions are not any better?

Many independent agencies / brokerages will offer higher contracts to agents that work under them. So the agency gets 100% and the agents under those contracts get 70% to 90% of the commission. You will continually read about people getting low percentage offers to go work in agencies that offer nothing for them and the experienced people on the forum will make issue with that.

Now its not a perfect world, you have IMO, FMO, Clusters etc to deal with as an agency, but generally being an agency its a better gig and you get bulk of the commissions.

Now to answer your question, NWM or NYL are just companies, when you become an agency you can contract with them for 100% of the commission. If you are an independent agent, and didnt do the work to create your agency, then you can get a lesser deal. When I say create your agency, I'm saying, create an LLC, get e and o, and file with the insurance dept that you are a business entity, and other fun stuff to create your own business.

so your point is that if you are a contracted agent or agency you can negotiate your commission based on your production and experience......

What does a broker get.....a lesser deal usually for producing one case and not establishing a history with the carrier.

Thank you....You prove my point.

 

[yellowbirdnj]

In fact, The American College already alluded to this when they decided to give up the LUTCF designation and re-brand their sales training program to be called FSCP - Financial Services Certified Professional. This implies a more comprehensive approach, even if you're just selling insurance.

However, every state has their rules, so check them out.

I think that there more to that. Its has to do with some complaints about NAIFA and a power struggle.

The LUTCF program in my opinion is the best designation out there for what it does, it trains you to be a life agent. The new program, FSCP is too broad. Which to me makes it unfocused. Just my opinion.

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so your point is that if you are a contracted agent or agency you can negotiate your commission based on your production and experience......

What does a broker get.....a lesser deal usually for producing one case and not establishing a history with the carrier.

Thank you....You prove my point.

Well hold on, I dont I think that I proved your point. You determine at your agency level, what you want to be. You can be an agent, broker, or consultant. So to give you an example, I work in Medicare. For anyone who understands this field, there are very few people that do it because of all the regulatory hoops that one has to jump through in order to make a sale. Now I represent 10 companies. Now I have to choose what role I'm going work in.

One of the 10 companies that I represent has a contract with a major pharmacy chain. So they ask various agencies if they would send someone there to represent the insurance company. So my agency was asked and I go there myself. When I sit in the pharmacy, I sit there at a desk that has signs of the company and I usually wear a polo shirt with the name and logo of the company. So when I'm sitting there, I am an agent. If someone comes in and see the signs and wants to sign up then I do the sales presentation, check doctors, pharmacy, and sign them up. If they come back and say that they are going to sue me because there is a better plan out there, well too bad because I was working as an agent.

Now when I do mailers, I usually go in as a broker. I tell the customer that I am going to review their doctors, hospitals, drugs, state aid, etc, to help them pick the company that best for them. Now this opens me up to more liability then just being an agent. Now I'm looking at all of the companies for the best deal for the customer.

Lets say that later, I have a person referred by the pharmac who needs help filling out a state prescription form for help with their drugs. So I tell the person that I will meet them at the pharmacy but latter in the day, because this person works during the hours that I staff the kiosk. Now, in Medicare, you have to have the kiosk registered with CMS and if you dont then you cant sit there pitching the product. So in this situation, Im going in as a consultant. I am now helping someone fill out a form for state aid. Now I'm not in trouble with CMS, as long as I dont pitch the products or talk about Medicare. If CMS or some other compliance person shows up, I rub in their face that I am working as a consultant. By the way, I help people all the time with things like these out of good will, no sale or money involved. Just something that I do. Maybe you do things like this too?

Anyway, as a licensed insurance producer, you can pick what role to go in as, as long as it is legitimate.

Now in some states, as well as the past, before 1990, you had 4 common licenses that you could get:

Solicitor
Agent
Broker
Consultant

Many states said that you could have only one role or license. Now with the NAIC Insurance Producer model, you can now choose like I did, what role you are going in as.

Your contracting is at the agency level. Thats what determines your commissions, not the role that you go in as.

Now if you live in state that still has these licenses you will have more trouble than someone who lives in a state with the NAIC insurance producer model. But I still dont see the difference in commissions between the roles.

 

[TwiLight]

Now in some states, as well as the past, before 1990, you had 4 common licenses that you could get:

Solicitor
Agent
Broker
Consultant

Many states said that you could have only one role or license. Now with the NAIC Insurance Producer model, you can now choose like I did, what role you are going in as.

Your description is not a Broker role, but that as a Consultant.....

Solicitor, Agent, and Broker all involve an application for insurance being taken by you...... A solicitor and agent has an agreement in place with a carrier or agency to take the application....

The Broker is taking an application that is not represented or contracted with an insurance company or by an agent/agency. This is what a Broker is... a non representative party that is taking an application on behalf of the Client without a company agreement. This is Brokerage and only a few States allow this. Most States Ban this practice.

If you call yourself a Broker for marketing purposes because you want to pull an illusion that you represent the client....Well....That has already been discussed in this Thread.

Now some States require Agents (that act as a consultant) to register and license as a consultant if they charge a fee.

The NAIC Insurance Producer model only leveled the playing field for the States and NIPR licensing. This has nothing to do with company representation and contracts.

The point is What is the difference between a Broker and an Agent. It is all about company representation and compensation.