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Confessions of a Third-Generation Insurance Salesman (How to Interview Your Financial Advisor)

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I was the third generation of my family to sell insurance. It was by accident, not that I was following in my grandfather and father’s footsteps. No, in fact my father said, “Whatever you do, don’t work in the insurance business.” And many years later I proceeded to ignore his advice.

Some thirty years later, I am embarrassed to say I was more interested in the income opportunity. The opportunity to earn huge commissions and bonuses when I sold a product was appealing. I wasn’t that interested in insurance and financial planning. I was an insurance salesman. They told us we were here helping people solve “difficult” financial problems. Yeah right. I had zero background or training in finance or investments. I was 32 and didn’t know how much about money I didn’t know.

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I guess I was an ideal candidate for the insurance industry, eager to make money. Not so sure I was an ideal candidate for my prospects and clients though.

I often thought it was odd that I would produce these pretty projections for clients 20 years my senior. We called them “financial plans.” I knew nothing about financial planning. In fact, I was terrible at even planning my budget. When I told my manager my concerns he said, “The software will give you the answers. Your job is to gather the data. Then sell them a product that solves the problem.” Seemed logical and simple enough. Computer generated projections were quite novel and all the rage in the 1980’s.

It’s Your Money, Not Your Advisor’s Money

In those days interest rates were on the upside of 20 percent and our projections were “conservative” at 12 percent. I would discuss that those rates were not sustainable long term with my clients. Yet, nobody wanted to base their decisions on projections of 6 percent or 8 percent. We would run with the 12 percent assumptions, which was a big mistake.

I couldn’t argue or oppose their decision because it would mean I could end up talking myself out of a sale. Which would mean no commissions or bonuses. Beware when a salesman needs to make money more than you need to buy their product.

I needed to make money. The way we got paid was contrary to acting in my clients best interest. I did my best to ask lots of questions, allow them ample time to make a decision without pressure. The projections were so enticing, even the most mature and savvy clients found it hard to resist 12 percent. It seemed foolish to not take advantage of this unique money making opportunity. Ugh.

Yes, I took the industry standard financial planning courses. I got great marks, 99 percent, which was a score they had never seen before. This gave me undeserved confidence that I was all that and a bag of chips too.

What the training did not provide was perspective or insight. We were not trained in historical trends or sound financial principles. We talked about how to stay in “compliance” completing our “Know Your Client” forms. When the forms were complete we were compliant — the forms seemed more like “cover your ass” forms. I did my ethical best to serve my client’s needs. I often felt in conflict. Self-interest, my need to make money always put my interests in conflict with my client’s needs. I had to sell to keep my commission advance otherwise I would not be able to pay my bills?

I often wonder why anyone ever bought what I sold. I actually did care about my clients. I invited questions. If I didn’t know the answer I would get back to them with an answer after consulting our “experts.”

I definitely had misgivings about our sales process. As well as the obvious but not discussed conflicts of interests. When I inquired of my manager about these conflicts he would answer like a politician. Give me a nothing answer. Or he would talk me through how I could argue with the client how it could be in their best interest. Basic sales training stuff about how to deal with the client’s objections. It was all about closing the sale. They did not want you asking thoughtful questions.

In our sales meetings and trainings we never discussed how to act in the client’s best interest. When I did ask all I heard were comments like, “Of course, it is in the client’s best interest. You wouldn’t sell something you didn’t believe in would you?” This was classic sales manager speak for “shut the hell up and close the deal.”

We are talking about the single biggest financial decision of your entire lifetime. Caution is the order of the day. It might be smart to make sure you are dealing with someone who has your best interests at heart. Interview your financial advisor, the good ones will welcome your inquiries.

How to Interview Your Financial Advisor

How can you know your financial advisor has your best interests at heart? As a former insider to the insurance industry I would recommend asking a few questions.

How are you paid for serving me? If they answer commissions, trailing fees and/or bonuses, their self-interest could already have created a conflict of interest. You want fee-only, not fee-based, nor commission.

What experience qualifies you to give me financial advice? Look for an advisor who has professional designations. Look for either the Certified Financial Planner or a Chartered Financial Analyst designations. Ask them to share some success stories of clients they have served. You may also want to hear the word “fiduciary.”

Do you get any trailer fees, hidden commissions, bonuses, or trips when I buy from you? Even the most credible professionals receive bonuses as part of their compensation. The key is these are hidden costs you may not be aware of and might be being paid for directly from your capital.

Which of the products or services that you are recommending do you own, or have you purchased? If they haven’t purchased these products, ask them why, see how they answer that question. If they haven’t bought these products or their family hasn’t, ask why you should buy it?

Please share with me an overview of your own financial plan. Who prepared that plan? How are you doing at implementing it? Their answers will give you a good idea how well versed they are about financial planning. As well as how much they believe in it.

What has been the most difficult part of implementing your own financial plan? No financial plan is cut and dried. There are many nuances and personal factors involved. They can each affect how you make decisions. You want to make sure you know how experienced the is person who is going to be advising you.

How many financial plans have you completed? How many have you revisited and reworked based on changing client circumstances? This will give you a good idea how long they have been doing this work and how happy their clients are. Client retention is a good sign of people feeling well served.

Money is an emotional subject. How do you incorporate my values and emotions into your advice? Your plan needs to be unique to you. If it doesn’t include your individual values and priority while addressing your specific dreams and concerns, then it’s a wasted exercise.

I realize you might feel uncomfortable asking these questions. I am quite certain you will know your advisor much better by asking them. If you see your financial advisor squirm, exercise caution.

Professional Advisors Love Clients Who Ask Tough Questions, Amateur Advisors Don’t

Maybe your financial advisor is the real deal. If so, he/she will welcome the opportunity to answer your inquiries in an honest, upfront way. If so, I would say there is a good chance he/she is able to put your needs ahead of their own.

That said, the one quality I would want in a financial advisor is to be my advocate and critic. If they are my advocate they will always speak to what is my best interest. As a critic, they will also argue against decisions they think could be a mistake. Decisions that could unknowingly put my lifestyle and plan at risk. I do not believe that commission based sales are able to be your advocate or put your best interests first.

Advisors who practice “fiduciary responsibility” might make you uncomfortable from time to time. That’s all right because they are advocating on your behalf. They are in a sense the “conscience” of your financial plan. They take the time to explain their point of view, so that you are informed and comfortable with the decision. After all, their job is to guide you. Point the path through the tax, estate, health and legal consequences of your situation. They are also more likely to speak frankly and openly. They will give voice to the impact and consequences of certain decisions. Whatever you decide, asking more questions will make you a better informed consumer. You will be well equipped to hire a firm to assist you in managing the biggest financial event of your lifetime.

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