Filed Under:Your Practice, Practice Management

Making the leap from commissions to fees

Producer's Corner

Agents and brokers may believe it preferable to retain an insurance-focused practice, even if means lost business.
Agents and brokers may believe it preferable to retain an insurance-focused practice, even if means lost business.

In the January issue of NU, I reported that commissions paid to agents and brokers were increasing, reflecting an improving outlook for the industry. Carriers collectively doled out a combined $34.5 billion to agents and brokers in 2012, a significant 5.9 percent jump from the $32.5 billion paid in 2011.

Are life insurance and financial professionals who also make money from fees charged for investment advice and other financial planning enjoying a comparable increase in income? The question is timely, in part because many insurance professionals who are thinking about shifting to a fee-based practice are having second thoughts.

So is the pie growing? In respect to mutual funds and ETFs— collectively a significant share of investable assets — the trend-line clearly is positive. As Cerulli disclosed in a November survey of U.S. product trends, ETF assets grew to $1.6 trillion from $1.5 trillion in October, representing a 4.8 percent increase, while attracting an additional $24.8 billion in net flows for the month. Mutual fund assets in October also grew, rising to $10.7 trillion from $10.4 trillion, a 2 percent gain.

All well and good. Yet the question remains: How can independent insurance and financial service professionals — competing for business not only among themselves but also against alternative distribution channels —capture enough in investable assets to make a fee-based practice worthwhile?

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Nichole Morford

Nichole Morford
Managing Editor

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