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My insurance agent says their are no fees for the investment products he wants to sell me.  How can he make a living if the products he sells don't have fees?

Jan 04, 2012 by Toni from Kenansville, NC in  |  Flag
17 Answers  |  23 Followers
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2 votes

We all like a good deal. But if it sounds too good to be true than it probably is. That wisdom has never changed. Don't you just love it that everything in this world is so free? Go to H&R Block for free tax preparation. Have a company 401k plan that never charges you any money. The reality is simple: It costs money to design, produce, distribute and service any type of tangible or intangible product or service. Let's not kid ourselves. Somebody's paying. How else are all those insurance agents, financial service sales people and their corporate home offices paying the rent, lights and benefits?

The one thing that a consumer can control is costs in any transactions. Unfortunately, too often you are presented with obscure, non-transparent products that never clearly tell you how someone is getting paid.

This is at the heart of the debate between a "fiduciary" standard and a "suitability" standard: the disclosure of conflicts of interest that may result from compensation.

So bottom line: Get it in writing.

1 Comment   |  Flag   |  Jun 27, 2012 from Amesbury, MA
Edward Smith, ChFC, CRPS, AIF

Love the answer Steve. First rule Do No Harm.

Flag |  Jan 14, 2015 near Loveland, OH

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1 vote

Your agent is either misleading you or does not understand the product he's selling. In either case you should not be doing business with him.

1 Comment   |  Flag   |  Aug 18, 2014 from Suffolk, VA
Edward Smith, ChFC, CRPS, AIF

NIce way of saying he is either ignorant or a thief, Run.

Flag |  Jan 14, 2015 near Loveland, OH

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1 vote

Your agent is lying or doesn't know the product he is trying to SELL to you. Everything has fees! Find a new agent that will find the product that first your needs and isn't trying to "sell" you something because of a high commission.

Don't be afraid to ask what your agent will make from the sale. You are paying for it. Transparency is best.

Comment   |  Flag   |  Aug 18, 2014 from Boston, MA

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1 vote

In my opinion when insurance agent and investment are in the same sentence there's a problem. And that problem will almost certainly come in the form of unnecessarily high fees and most times those fees are hidden, too (and they are hidden for a reason). Use insurance for insurance, which is to provide money for your estate and/or your dependents upon your death. Don't use insurance to invest, you can accomplish your investment goal for a lot less (which equals a better investment return for you) if you avoid the insurance route. If you don't know how to invest on your own then consult a fee-only financial planner to help educate you and to get started on the right path.

A very simple and easy to read book discussing how to start investing is "The Investment Answer: Learn to Manage Your Money & Protect Your Financial Future" by Daniel Goldie and Gordon Murray.

Comment   |  Flag   |  Aug 18, 2014 from Lemont, IL

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All of the answers above are good ones. The only thing I did not see mentioned is the cost of lost opportunity. Some insurance agents compete against investment representatives buy selling lets say an annuity. They will tell you there are no fees and maybe they are right. There are no fees that are a line item that you can calculate. But what they fail to tell you is what is call a spread. That is the difference between what you are making and what the insurance company is making on the investment. (Nobody works for free) Whether it is a fixed annuity or a fixed index annuity there is always a spread. The lost opportunity cost is the return you miss out on for not being in a different investment. In my opinion good advisers don't sell products they offer solutions. Anything offered to you should be part of a cohesive plan ( an ingredient in the overall plan) When an agent or adviser is simply talking about one product all the time, BEWARE.

Comment   |  Flag   |  Jan 14, 2015 from Loveland, OH

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While there is certainly a possibility that the insurance agent is lying to you, there is also a real possibility that he doesn't understand how insurance products work (which is frightening). This is not the first time that I've come across naïve insurance agents. A lot of insurance agents think of themselves as investment professionals, even though they might have been a mattress salesman a few months ago. Even if you do give this guy the benefit of the doubt, the stupidity of his statement should make you run in the opposite direction. Nothing in life is free.

Comment   |  Flag   |  Jan 14, 2015 from San Diego, CA

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It should be really easy to explain to you how the person is being paid. If they can't easily explain it then either they are trying to be dishonest about it or they are so new to the industry that they don't understand the product they are offering. In my opinion both are red flags......

But know this not all insurance for commission is a bad thing. I'm sure you have Home or Auto insurance and both of those products are designed with build in commissions.

Comment   |  Flag   |  Jun 29, 2015

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