Simple insurance

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chiefcornerfan's picture
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Joined: 2007-04-29

I have a relative in the business who has around 80 AUM.  He would like to start doing more insurance biz.  He works for a major wire house.  Regarding exploring options outside of his current firm, is there a major b/d who makes insurance business simple for the rep or is it better to work for an insurance firm with a b/d leg?  Also, with those insurance firms with b/d's, who has the deeper inventory for fixed income (as it is an important aspect of his current book).
 

Morphius's picture
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Joined: 2007-07-21

What exactly do you mean by "makes insurance business simple for the rep?"  

henryhill's picture
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Joined: 2007-08-23

Here is how to make it simple.  Get a good life insurance consultant and/or long term care consultant.   Have you relative set meetings up with the client, consultant and himself.  Let the consultant be the closer.  This way, the broker and client can sit on the same side of the desk and when the consultant is done the broker can lean over to the client and say "I think this makes a lot of sense for you."  I hope this is helpful.

anonymous's picture
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Joined: 2005-09-29

Henry, doing it your way, the broker won't make enough money to make it worthwhile.
If someone is going to do insurance, they have to get away from having a B/D that forces them to put it through the grid.

chiefcornerfan's picture
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Joined: 2007-04-29

Morphius,
 
I mean excellent back office support, so the rep can simply close the biz while having a reliable avenue with questions regarding policies etc....

Broker24's picture
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Joined: 2006-10-12

Unless he wants insurance to be a MAJOR part of his business and income, I would not move to an insurance B/D.  Not worth the risk of moving.  And I am not aware of any B/D's that make insurance "easy".  I think they all take a haircut and send it to the grid.  I can't speak for indy B/D's, however.  The system at Jones is very simple of you just want to do term and UL and VUL policies (it's automated, and the ins co's do all the underwriting legwork).  But they take a huge haircut.  First the insurance company takes 20-30% for the services of the wholesaler desk, then Jones sends it to the grid.  I think this is how all the wirehouse and regional firms work.  Tough to make a living off that.

anonymous's picture
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Joined: 2005-09-29

I always wonder about these, "I have a relative" questions.
 
Unless he wants insurance to be a MAJOR part of his business and income, I would not move to an insurance B/D.  Not worth the risk of moving.
 
Can you elaborate please.  I am not saying that he should move to an insurance company B/D, but why would it have to be a major part?  I know plenty of people affiliated with insurance company B/D's who do investments as the majority of their business.   
 
Regardless, I think that he should not be at a major wire if insurance is going to be more than a sideline.   Depending on the situation, almost any Indy B/D might fit the bill.  The B/D does not need to be afilliated with the insurance company.  It must, however, not put insurance through the grid.  If it does go through the grid, the grid must be very high and he must get his overrides.

Morphius's picture
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Joined: 2007-07-21

Broker24 wrote:Unless he wants insurance to be a MAJOR part of his business and income, I would not move to an insurance B/D.  Not worth the risk of moving.  And I am not aware of any B/D's that make insurance "easy".  I think they all take a haircut and send it to the grid.  I can't speak for indy B/D's, however.  The system at Jones is very simple of you just want to do term and UL and VUL policies (it's automated, and the ins co's do all the underwriting legwork).  But they take a huge haircut.  First the insurance company takes 20-30% for the services of the wholesaler desk, then Jones sends it to the grid.  I think this is how all the wirehouse and regional firms work.  Tough to make a living off that.I think you misunderstood anonymous.  He didn't say use an insurance b/d, he said get AWAY from a b/d'er that forces you to put insurance through a grid.  They take too much of your money for too little in return (or as you rightly say, tough to make a living off that).  But you don't need ANY b/d to do fixed insurance - only variable insurance. 

chiefcornerfan's picture
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Joined: 2007-04-29

Thank you for the input folks.  I guess the question is:  What solid insurance firms that have a b/d arm would not force to put insurance through the grid?  Is this something to be negotiated upon bringing a book of brokerage biz to the underlying b/d? 
 
Northwestern Mutual, Principal, Metlife, etc?

anonymous's picture
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Joined: 2005-09-29

To the best of my knowledge*, none of the insurance company B/D's will make you put fixed insurance business through the grid.   All non-proprietary variable insurance business will go through the grid. 
 
Don't trust my knowledge on this one.

Morphius's picture
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Joined: 2007-07-21

chiefcornerfan wrote:Thank you for the input folks.  I guess the question is:  What solid insurance firms that have a b/d arm would not force to put insurance through the grid?  Is this something to be negotiated upon bringing a book of brokerage biz to the underlying b/d? 
 
Northwestern Mutual, Principal, Metlife, etc?No, that's still not the question.  I'll make one more try.Don't think this is simply about  insurance b/d vs. other b/ds.  It's about  ANY b/d with certain types of insurance. Variable insurance (including variable annuities, VUL, etc.) MUST go through a b/d and hit whatever grid they apply.Fixed insurance (including term, WL, fixed annuities, etc.) needs NO b/d.  Zero.  Zip.  Zilch.  As long as you are insurance licensed you can be appointed directly by and place this type of insurance directly through a given carrier, as well as a couple other more indirect channels not involving b/d'ers.  Think of insurance agents who sell NO securities, only fixed  insurance - they have no need for a b/d.You certainly CAN also place this type of insurance through a b/d, but you gain little and you give up an inordinate amount of your potential compensation to the b/d if you do.  THAT is why no big insurance producers would ever consider placing their fixed insurance business through a b/d's grid.This is a tough concept if your entire knowledge of the industry is as a registered rep and derived from what your b/d has provided.  They have no incentive to explain to you other channels and how you could potentially do certain types of business without them, as they would make less money.  It also requires a desire and willingness to work a little harder to learn on your own.  Even then, many decide it is 'too much hassle' and prefer the familiar arrangement and support of a b/d.  This approach is not for everyone by any means, especially if you are newer and/or do little fixed insurance business.  But you should at least realize there are other options to the traditional registered rep of a b/d.

Broker24's picture
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Joined: 2006-10-12

anonymous wrote:I always wonder about these, "I have a relative" questions.
 
Unless he wants insurance to be a MAJOR part of his business and income, I would not move to an insurance B/D.  Not worth the risk of moving.
 
Can you elaborate please.  I am not saying that he should move to an insurance company B/D, but why would it have to be a major part?  I know plenty of people affiliated with insurance company B/D's who do investments as the majority of their business.   
 
Regardless, I think that he should not be at a major wire if insurance is going to be more than a sideline.   Depending on the situation, almost any Indy B/D might fit the bill.  The B/D does not need to be afilliated with the insurance company.  It must, however, not put insurance through the grid.  If it does go through the grid, the grid must be very high and he must get his overrides.
 
I hear what you and Morph are both saying.  My point was that making a JUMP to an insurance company is a risk.  There are plenty of good programs.  I guess my thought is this: let's say this guy is at Merrill.  He has a $80mm book.  How happy would his clients be to move to Northwest Mutual or some other insurance company?  Not that they would be any less served, but I am talking about the perception of moving from a major wirehouse or regional to an insurance company.  I just think it might be risky to try moving clients to an insurance BD unless he feels he will get a LOT out of writing insurance (at minimum, the payout is much larger).  I think his better bet is to go indy.  But if he is happy with his current BD, and he just wants a better payout on insurance, he really needs to do a lot of insurance to make that move worthwhile (again, if his ONLY reason for moving is for more insurance).
 
I'm talking in circles, but hopefully I clarified my point.

anonymous's picture
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Joined: 2005-09-29

Just to be accurate, if he goes to Northwestern, he is going to an Indy B/D.  (aren't they 5th or 6th largest?)
If he has a good relationship with his clients, they won't care who the B/D happens to be. 
 
That being said, change always carries risk.  What the insurance plans happen to be certainly need to be a major driving force in the change or lack of change.

chiefcornerfan's picture
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Joined: 2007-04-29

This all helpful info from all, thank you.
Just to clarify Morphius.  Doing fixed insurance at a wirehouse is not something that is advertised (by the b/d) as it does not go through the grid?  This is basically worked out with a carrier of choice?   Must it be an approved vendor I am guessing?   

Morphius's picture
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Joined: 2007-07-21

chiefcornerfan wrote:This all helpful info from all, thank you.
Just to clarify Morphius.  Doing fixed insurance at a wirehouse is not something that is advertised (by the b/d) as it does not go through the grid?  This is basically worked out with a carrier of choice?   Must it be an approved vendor I am guessing?   I'm not sure what you mean by 'doing fixed insurance at a wirehouse is not something that is advertised as it does not go through the grid.'  To the extent a wirehouse 'advertises' any of their available products, they would do so with fixed insurance, and perhaps more so BECAUSE they make it hit the grid and therefore THEY get paid on it as well as you.  In this sense, nothing much has changed at wirehouses.The change has come more at indy b/ds as of the last few months, which have increasingly started to force all insurance - even fixed - to be placed through them and hit their grid so THEY receive their b/d cut of your fixed insurance business.  They don't do this because it is strictly required by insurance companies or regulators - they do it to compensate themselves, ostensibly for whatever platforms and services (including supervision) they provide you.  Until recently, most indy b/ds did NOT require fixed insurance to go through the grid, but many (not all) changed their policies on this in late 2007.  So in most cases - certainly wirehouses and other non-indy channels - reps have no alternative.In cases where you are able (indy and allowed by your b/d) and want to write direct with carriers, you just need to be properly licensed/appointed with that carrier directly or through a GA. 

theironhorse's picture
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Joined: 2007-03-03

ok, correct me if i am wrong here, but doesn't he/she really want to explore a GA for independent reps, like say a BISYS.  i personally use TNBC and write direct with Principal, BISYS has screwed so much up i pass on them completely now, but isn't this what he is looking for?

anonymous's picture
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Joined: 2005-09-29

Theironhorse,
You aren't wrong, but it is putting the cart before the horse.   It's a waste of time to find a GA for independent reps until he finds a broker dealer that will allow him to be an independent rep.
 
As a registered rep, he can't take a crap without B/D permission.   At the wirehouse, he won't be allowed to place this outside business.

theironhorse's picture
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Joined: 2007-03-03

gotcha, i jumped in the convo at the end.  did not even know he didn't have a b/d.

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