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December 17, 2007, 7:00 am

3 Types Of Financial Advisors

by: The Financial Blogger    Category: Personal Finance,Primerica Series



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!

financial clowns
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 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.

financial planner
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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December 13, 2007, 7:00 am

A Response From a Primerica Agent Part 2

by: The Financial Blogger    Category: Primerica Series

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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December 12, 2007, 7:00 am

A Response From a Primerica Agent Part 1

by: The Financial Blogger    Category: Primerica Series

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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November 26, 2007, 8:00 am

Comparing Primerica To Other Companies

by: The Financial Blogger    Category: Primerica Series


After creating my series of four posts on Primerica, I received several email from readers asking for more details. Again, I will try to make the most honest conclusions on the topic without trying to bash anyone. I use rational arguments and strongly suggest Primerica Agents to comment on this blog. I know people working for several financial institutions as well as insurance and investment companies. I will not make direct comparisons with other companies as most of them work with similar business models. What really differs from one to another is their culture because financial products are alike across the industry in Canada.

Does Primerica have a commercial advantage?

According to their sales pitch, they do. If I sit down and I listen blindly to what they have to tell me, they will explain that they are not there for the money (but will later brag that they are making 6 figures by working minimal hours a week) since they really care about people. They want to help out people with their debt and bring them to a better financial position. They pretend that you only need term insurance and that the rest of the products are useless. Therefore, they don’t sell any other options or so they say, (because I heard they have them too).

The truth is that if you sit down with an advisor from another company, they will more likely tell you that they place the client in the center of their business. Their goal is to meet their client’s needs. Well duh, have you ever heard somebody saying that his main goal is to sell a low cost product at the highest price no matter what the client wants? Seriously! All that to say:  any personal finance company will consider their clients as the core of their business. It is crucial to build a network to survive in this world. Primerica says they are there to help, some proclaim that they are providing clients with professional help; others will explain that their goal is to keep their clients as happy as a pig in  s?!^.

In fact, Primerica does not have a commercial advantage compared to other companies. The truth is that if a client Googles Primerica compared to most companies prior to the meeting, the Primerica agent will have a hard time selling anything!

Can you build your own business within a company other than Primerica?

Primerica is advertising the “build your own business” model. It is up to each agent to create their own office and run their own business with their own employees and their own clients. Most companies in the personal financial field do not offer this “opportunity”. If you want to manage employees, you can become a “team leader” or a “director”. These positions are still commission based but since you are also a recruiter for the firm, they will pay you a commission on your team’s sales in addition to your own. You also have the possibility to go higher up in the company and become a regular salary-based employee.

In fact, Primerica is more or less supporting the same system. The office that you “own” is rented and displays the Primerica banner. “Your employees” are self employed / commission-based employees that are totally independent. Finally, “your clients” belong to Primerica. In their contract, it is clearly stated that if you leave Primerica, you are leaving your clients with Primerica as well. Hmmm, sounds to me more like a franchise than anything else.

What is so different in their commission structure?

If you want to meet with clients, write financial plans and close deals, Primerica is definitely not for you. You do not really have to write financial plans since everything is populated from the Primerica system. And when you close deals, you are making less money than you would with any other company. Commission rates are very low since you have three other people above you that will eat a part of the cake you just baked. These individuals have to be compensated from somewhere. Guess what, Primerica is not giving a penny to them, you are financing their “team leader”, “regional director” and “VP” positions.

So, unless you want to become a full-time recruiter, the commission structure is much better with other companies. And if you recruit people, you have to convince them to sell with under-paid commissions. Sounds like a real challenge, doesn’t it?

Please share your comments, and once again, I encourage Primerica advisors to explain what I am missing about the system.

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October 19, 2007, 7:00 am

The Primerica Paradox: The Conclusion Part 2

by: The Financial Blogger    Category: Career,Personal Finance,Primerica Series



After this fourth post on the Primerica Paradox series, I finally put a final dot on the reasons why I decided to not follow this career path. While I was able to find somebody that was successful in this kind of business, it was still not enough for me to leave my job and hop on the Primerica Train to… financial freedom?

Back to the pyramid scheme

Is it a pyramid scheme? In legal terms, the answer is no. However, it does not mean that because it is legal that the company’s structure is not shaped like a pyramid. Everybody is making a cut off of the people below them; it goes four layers deep! I think it is clear that the guy on top makes the big bucks. They will answer that every company is the same, the President and the VPs sit in the box seats and the  employees are left in the bleachers. It may be so. However, Primerica does not explain why they are able to compensate four people for the same sale. The answer is pretty easy: they have cut down the commission compared to the industry norms. For example, if a life insurance policy of 100K would provide one agent with $1,500 in commission, a Primerica advisor at the lowest level will earn $900, then his recruiter will receive $300, the recruiter’s recruiter will get $200 and finally the guy who put all of them together will earn $100. So for those who are in to sell, Primerica is definitely not the right place to be. “Yeah, but you could build a team and create your own business”, I guess they forgot that the best sellers on earth are not necessarily interested in building a team compared to earning the big bucks right away. The main problem I see with this approach is that you have to convince many an individual to work hard for less that they could earn only because they have the option of building a team to earn extra commissions from somebody else’s work. In fact, if everybody concentrates on recruiting individuals, who will close the sale? You may have a hundred people below you, if nobody sells, it still means $0 in your pocket.

Anybody can do it

Another thing that bugged me was the fact that any Walmart greeter could manage one’s personal finances (no offense intended). With only a couple of licenses in hand, they are shipped to their relatives’ homes  to sell them financial products. Primerica was able to build complete questionnaires that are completed by the clients with the advisor and then sent back to their control centre. An evaluation of the client’s file is done and the result is communicated to the advisor. This is how they manage to have a mechanic suddenly “specialized” in financial products. Don’t get me wrong, I have nothing against mechanics or any other profession, but would you really give me the keys to repair your car if you know that I am a banker and that I recently passed a three month technical class? I can barely check the engine oil myself, how the hell in three months would I be able to diagnose much less fix your car?

This results into a huge lack of credibility in the advisors. Most of them have very limited knowledge as to what they are recommending/selling and why. They follow the guide and offer what Primerica tells them to offer. There is little place for creativity there and real financial planning. The thing is that their market consists of every one that the advisor knows. Most people do not know much about finance anyways and they are even less likely to question their advisor if he is part of the family or has been referred by a good friend. The relationship you have with your financial advisor is based more on trust than competence. You simply assume he knows what he is doing as you know him through your circle of contacts. This is why dealing with a Primerica advisor might be dangerous. Then again, I am not generalizing the situation, but the way they recruit individual leads to this kind of supposition.

How you start making real money with Primerica

It took me a while to figure out the best way to make money through Primerica. The reason is simple; they prefer presenting their company as an opportunity to build your own business and make money on your team’s sales. However, if you think about it twice, you figure out that if everybody is trying to build a team, nobody is concentrating on selling. As I said before, I may have a hundred advisors under my position, if they don’t sell, I do not make s%!t. So how can you really make money?

You have two options: The first one is to recruit good salespeople that will concentrate their business on their own capacity to sell financial products. However, you have to be prepared to answer their questions when they find out that they would make almost twice their income if they would work for another company. You will have to show them how to recruit people in order to keep them. If not, they will surely transfer to the competition. Unless you remind them that the client base must remain with Primerica as it is not yours anymore (wait… I thought it was an opportunity to own my business?).

The second option is how you really make money. When you think about it, the training process is done in two steps: the advisor gets his licenses to sell insurance and mutual funds and then, meets his five best contacts to see how to close a deal. The recruiter makes full commission on these meetings as the advisor is not fully trained and “not ready” to jump into hot water. Therefore, every time you recruit an individual, you are more likely to close four deals out of five. Why? Because you ask them for their best five contacts, people that have a high potential need in financial products and that fully trust your new advisor. The evil plan goes beyond this point: if you train your guy to recruit efficiently, you will make extra commissions on his rookie’s first five sales.

This is obviously the main reason why I decided to not leave my job and work for Primerica. However, I understand that many people may find success with this company. The problem is not that it doesn’t work (because it does) but how Primerica is presented to their new employees (or should I say partners?). This was an honest conclusion and if you think I am in the left field and did not understand the process properly, please feel free to comment

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