I have been after my father-in-law to write up something for my blog and he’s finally obliged. Here’s his thoughts on life and commissions (my response follows):
I was raised on a farm in the Panhandle of Texas. I drove 12 miles to go to school in a town of 1200. I learned a great deal from my parents and the work ethic of the farmers I knew. Like most small towns, the youth grow up and move away. When I go back to visit, I go back in time about 20 years. I am not saying they are behind the times, they have what they need to do their business, but not all of the bleeding edge technology we depend on each day. As an example, my Dadâ€™s business got a fax machine a few years back, about the time we were phasing out faxes to go to imaging and email solutions. I am probably old to most of you who are reading this, I will be 57 in a month. So remember these are my views and observations. I hope they are somewhat enlightening and helpful, if not hit the delete key.
Things that separate me from some popular thinking today follow. I began selling life insurance in 1979. Commission only, across dining room tables. I like commission only sales. If I do a good job the commissions grow, if not the go away. I am also licensed to accept fees in lieu of commissions and do some business that way. Is it the best way? I do not know, but I can tell you that fee is another way to say commission. So is paycheck. You had better make your employer at least a set percentage over what you cost or either you will be history, or your employer will. What most people forget when being dogmatic about either fee or commission is the customer. What does the customer need? What is the customerâ€™s position? Take the time to develop a relationship, sit on the same side of the table and become a trusted friend and adviser, not adversary. Trusted is the key. I know sales people who view selling as a competition, sales person wins if he/she gets the sale, loses if they do not. These people are not helping the customer. The ever ongoing discussion of whether a person should buy only funds with no fees, etc is interesting to me. In my many years of sales, I have come to realize this: There are people who spend a great deal of time and money studying the market, products, and applying that to their situation. Do they need to pay an advisor? No, I think they have paid the fees in time and money educating themselves. There are also people who have no interest in doing any of that research at all. Do I think they need to pay an advisor? Absolutely! Fee only? Not always, some people canâ€™t pay the fee, but can have commissions deducted along the way. Whatever is best to get that customer to save and prepare. There are costs involved each way. And remember, more people have lost money in the Magellan Fund than have made money in it. Probably because of not having an advisor to ADVISE them. People can go from one category to another, so do not be idle in your service to them, or they will find a better adviser.
I now live in a city of over 100,000 people. To some of you, that may seem small. In 1979 that was a huge number to me. It is small to me now. I have been selling insurance here since 1979 and know many of the business owners in the town. The point here is INTEGRITY. Always do right, be more than honest, be more than fair. Word gets around about a person and his ethics, what do I want to be said of me? Remember, if a deal is not good for both parties, then it is good for neither. If the salesman is only out for self, then the customer is not going to be satisfied in the long run. If the customer gets too good a deal, the service he receives may be lacking. In the nearly 30 years I have been selling insurance products; life insurance, annuities, employee benefits, retirement plans, mutual funds, and some p&c I have always strived to do the best for clients. In our company, we have a thought we live by: Do right for the customer and the income will follow. It proves right 100% of the time. I have sold $2,000,000 of term life to the same person I sold $3,000,000 of Variable Life. Why? The needs were different. Not all problems are nails so every solution is not a hammer. The toolbox is full of different tools, use the appropriate tool for the job. And of course; â€œA fool and his money are soon partedâ€, try not to be the fool or the parter!
On the Sub prime matter, yes mortgage brokers and companies bear some of the blame. As human beings always looking for more and better, we get caught in traps that harm us. The word responsibility comes to mind. I could argue either side and be right, or wrong. I do not know each individual situation. There are crooks, there are fools it is not my job to judge them but to avoid them.
And that point brings me to my closing point, and observation from reading many interesting posts on the blog: When you see something posted always ask, What does the writer want as a response, What agenda does the writer have, Has the information been vetted completely before publication, Are there other opposing views that have some validity. The louder someone gets, I have learned to trust them less (I have gotten very loud from time to time and have asked for forgiveness for that). Write a response, let it sit for a while, then reread it before hitting the send button.
And always remember: Doctors and Lawyers are salesmen also. My favorite college textbook was: â€œHow to Lie Using Statisticsâ€â€¦â€¦â€¦â€¦â€¦..
First off, I want everyone to know that I have known my father-in-law for over 16 years. I even worked with him for several years. You simply cannot find a more honest and trustworthy man than Scott (and I’m not just saying this because he’s my wife’s father!). So, when I talk about the evils of commissions or anything like that, I’m NOT referring to Scott.
I’m very passionate about what I write about on this blog. I always have been and probably always will be. If my passion for this stuff dies off, I’ll quit blogging. That said, I have tried to always place appropriate disclaimers on my posts when I rant against commissions or anything that I feel strongly about. Sure, there’s lots of honest and ethical commissioned advisors out there. I never said there weren’t. My rants are against the system and not against the honest players in the system.
Finally, on the subprime issue, I HOPE Scott doesn’t think that I’m just ranting against the brokers. I’m pretty sure I was clear in placing the bulk of the blame on the individuals who took out bigger mortgages than they could afford, using loans that they had no business using. Ignorance simply was not an excuse to place the borrowers in the victim category. If I wasn’t clear on that in my subprime posts, I hope it’s clear now.
I appreciate Scott taking the time to send me his thoughts. Now if I could only get him to write a post on health insurance (a topic I know little about). Maybe we’ll make that a goal for 2008…