This is where your finance takes place

After reading Michael’s comment on my first post on Primerica, I realized that I should bring another point regarding personal finance companies. While I still do not think that Primerica is being honest with its marketing, it does not mean that all their financial advisors are crooked. On the other side, financial advisors working for other companies may not be as good as you think they are. I have been working with hundred of consultants working for a dozen different companies and I established three categories of financial advisors.
Clowns Yup, you read it right. The financial industry is full of clowns! Clowns are individuals who has no financial background and do not understand products they are selling. Since they do not know what they are doing, you better be careful giving them money to manage. You are asking me how come there are so many of them? Simply because anyone can become a financial advisor within three months!	-
he best way to recognize them is to read about a specific topic in finance and then asking them question about it. If they what they are saying does not make sense whatsoever, you have a clown in front of you.
-	Car Salesman I feel sorry for the (four) honest car salesmen on earth but they did not get a bad reputation for nothing ;-). Seriously, the financial industry is also full of salesmen that are looking to make the biggest commission out of their meeting. They are nice, polite and full of confidence. Therefore, you will feel satisfied dealing with them and you will be under the impression that they are doing the best thing for your (theirs) finance.
Some salesmen are still good financial advisors since they can have a team that are building the financial plan behind them. They most likely are the best performers of their region. If you feel that you are dealing with a salesman, make sure to meet his assistant, associate and other member of his team. Never forget that he is in to make money, if he has a bad team to support him, you will end-up with a bad financial plan.
Financial Planners Yes, there are some good financial advisors out there ;-). While the title “Certified Financial Planner” (CFP) is not a guarantee of results, this is the only category of financial advisors that had to write exams that goes deeper than the stupid mutual funds or insurance licence. However, when I am talking about financial planner, I am not really talking about the title but more about the way they handle things.	-
A financial planner will look at all the aspect of your personal finance (estate, insurance, investment, taxes, debts, etc.). He will help you out building a plan according to your needs and your goals. He will also provide useful advice and knows what is going on in the financial industry. This is a financial planner.
I must say that overall, there are a lot of clowns, some bad salesmen and a few good of them and very little financial planners. In my province, the government and the Personal Financial Planner association are working together to create an official standing for Personal Financial Planners. They want them to be recognized at the same level as the notaries, lawyers and other professions. Hopefully, many other governments will go this way in order to insure a minimum of professionalism to the population.
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Following unto Michael’s response about my Primerica Series, here is a repost of his comment on my blog. I think it deserved full attention of my readers. Once again, thank you Michael for letting us know about your side of the coin.

I have responded once before and wanted to take this opportunity to share some history about the Primerica phenomenon.

When Primerica first emerged, it was under a different name….it was called A.L. Williams. Art Williams, a high school coach, began selling TERM Insurance and MUTUAL FUNDS.

His logic was simple:

(1) Whole Life Insurance is simply a bundled product, composed of a decreasing term policy linked to a savings component I will refer to Whole Life and its cousins now as CASH VALUE POLICIES

(2) Cash Value Policies, on a cost per thousand, are much more expensive than Term Inisurance

(3) Cash Value Policies are difficult to understand and most traditional life insurance agents cannot tell you how much of your premium dollars go the the life insurance component and how much goes to the savings component. Remember, MOST Life Insurance agents were NOT college educated in finance and economics. What they learned about insurance they learned from the Insurance Company that hired them

(4) The rate of return on the savings component is extremely low. According to a Federal Trade Commission study conducted in the 1970s, the rate of return was less than 2 percent!

(5) In most cases, when a person who owns Whole Life dies, his beneficiaries receive only the face amount of the policy, NOT the savings!!

(6) If you take out the savings while the policy is in force, you either have to borrow the money (that’s cute…you borrow your own money) or if you take out all the savings, the insurance company reserves the right to cancel your policy. You don’t have to believe me, just READ the policy and examine its provisions.

(7) His conclusion?

Have people purchase TERM insurance so that they could afford adequate coverage

Have people invest in mutual funds to satisfy their retirement needs because historically they have provided a much higher return than insurance policies.

As another advantage, IF the policy owner dies, his family receive his insurance AND investments.

He called this concept “Buy Term and Invest the Difference!” The concept had actually been around for a long time. Art Williams simply adopted it and put it into practice.

How did the life insurance industry react? Attack after attack after attack. The little dirty secret was out. Primerica revealed that the industry was focused on selling its most expensive product (Whole Life) to make profits rather than to provide benefits to its policy owners. Sure, they could sell term, but they instead pushed whole life policies as “investments.” But Primerica kept forging ahead. As more and more people became financially literate, they began to question the practices of the once revered insurance companies. The people began to act.

In the 1990s several of the industry’s top companies were facing class action suits for parading Life Insurance as an investment. Prudential, MetLife, and many others were stung and forced to pay liabilities to customers.

The industry never forgot Primerica and continued to attack her with a vengeance. The company was excoriated and its representatives impugned. Rumor and innuendo about Primerica was rampant. The way we were protrayed you would have thought that behind each of our names were the numbers, 666!

As Primerica grew, so did the logic and wisdom of its message. But Term Insurance and invest in mutual funds! Now most financial planners worth their salt parrot the same mantra, as do respected magazines such as Consumer Reports, Forbes, Money, and many others. The revolution Primerica launched continues to evolve today. And that is good for the average Joe out there.

Having witnessed attacks against Primerica for fifteen years, I realize there will always be detractors out there and that we will never reach them. I do wonder, however, why you don’t see the same against the so-called traditional insurance companies. It leads me to believe that most of the posts and complaints I have read over the last decade and a half come not from John Q. Citizen, but traditional life insurance agents and their proxies.
Much of the rest come from people who embrace every conspiracy they hear and simply repeat what they read….

Primerica is a MLM company
Primerica is a pyramid scheme
The representative who work for Primerica are evil and ignorant, they don’t know what they are selling
The representatives are not “professional”
Primerica is about to go bankrupt

Goodness, the list goes on for infinity. Despite all this tired diatribe, Primerica continues to be the largest and most successful marketing company on earth.

Let me pose a question to you as an average Joe. The large insurance companies can sell Term just like us. Why do you suppose they opt to sell you their most expensive product (Whole Life)? You got it. To make more money.

Now the follow up question. If the agent sold you his most expensive product, did he do it to benefit your family, or his?

Your ponder those questions and think with logic rather than emotion. As for the life insurance agents, I really don’t care about your opinions. I have sat across the table with whole life agents with clients to debate which type of insurance is best for the client. Wanna guess who won?

I am not an arrogant snob. I am open to different perspectives and understand that NO company is perfect. By the way, NO client is perfect either.

But, I have met a lot of arrogant life insurance agents working for the major firms who spend more time on the golf course while their underpaid secretaries do the work than they do in front of families.

We at Primerica make a heck of a lot less on an insurance commission than the traditional whole life guy. But we are eager to help people and will visit them multiple times to satisfy them and provide the most professional advice we can offer. We don’t have secretaries, we don’t demand you come to our office, we don’t wear costumes (starched shirts and $80.00 ties) to impress you with how we dress.

What we do is offer you, free of charge, the most important thing a person has, and that is his time. AS for our expertise, we have the same credentials that the other guys have, and probably a lot more.

Those of us who have been around for awhile are seasoned, well trained and extremely motivated. We truly enjoy seeing people improve their lives and stick to the old creed, “Give people what they want and you will get what you want.”

Thank you for your time,

Mike

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I knew I would create some interesting waves by writing this series about Primerica and especially with the conclusion that I made out of it. However, I also had the great opportunity to communicate with Michael, a Primerica Agent. I asked him to write more information about his company in order to understand what really lies beneath the Primerica Paradox. Here’s the result of our first communication:

When you state that all financial planners state that they are the best or have the best solutions you have to understand that this runs across all business lines. Ask a salesman for Ford who has the best vehicles….FORD. Ask a Sears Department Store salesman who has the best department store….SEARS!

A sales person should have confidence. He should also have a depth of knowledge about the product or service he markets as well as an understanding about his competitions’s products and services.

Further, he should have very good communication skills so that he can convey effectively the benefits of the services he provides. You see, people need to understand the benefit derived from purchasing the product and the advantages of one over another. Now you have a partnership between the salesman and the consumer and in the case of financial sales, it is advantageous to both parties to forge a long-term relationship based upon trust and success in the client attaining what we all want…financial freedom.

I have read your Primerica blogs. I believe you are making a genuine attempt to provide objective, unbiased information to your readers. What I would suggest is analyzing what Primerica offers and compares that to the competition. For instance, we were conferred the title, “King of Term” by Consumer Reports years ago in reference to us marketing only term insurance. As you are aware, Consumer Reports has long advocated Term Insurance over “Cash Value” life insurance.

When we come on board, we understand that a “Whole Life” Insurance guy will make a much better commission on Whole Life than we do on Term. He elects to sell the most expensive life insurance (at a cost per thousand) and we elect to sell only Term (the lowest cost per thousand). Our goal is not to make the fattest commission, but to satisfy the needs of the client.

Our belief is that savings and insurance should remain separate. In fact, if you call any state insurance commissioner’s office and ask them if Whole Life is an “investment” you will receive an emphatic “NO!” Nearly 80% of Americans who own life insurance were SOLD Whole Life, often under the guise of an “investment.” What they were not told is that if the policyowner dies, in most cases the “savings” component of the Whole Life Policy is retained by the company. Now, I have yet to find anybody, even after conversing with my competitors, who can explain how it is better that the company retain the savings (which the consumer paid for) rather than the beneficiaries who need it.

Thank you for the opportunity of having a form to present my side of Primerica. It is indeed a pleasure.

Stay tuned for the 2nd part tomorrow morning!

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