Life Insurance Payouts

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Jan 20, 2009 4:30 pm

I'm talking with an Independent Insurance Agent who comes from wealth and has some amazing contacts.  He has made me an offer to come in and work with him, and while he is focusing completely on Life Insurance, he has over $40 million in family money that he isn't managing.  Right now the bulk of what he is doing is Key-Man Life Insurance and Corporate Insurance. 
 
I have zero interest in selling Life Insurance, my background is Asset Management with a wirehouse, but if I could get on with this guy I could manage his family money and hopefully sit down with some of his Big Life Insurance guys and talk some investments. 
 
Can anyone help me with the payouts and revenue on Life Insurance vs. Managing Investments?  From the little I have talked to him he said he is doing $1 Million in production annually from Life Insurance.  How does that relate to doing a Million in Production from Asset Management?  Does Life Insurance have trails?  What's the pay-out on a $5 Million Dollar Key-Man policy?  I'm just looking for some info to take back to this guy on how much I could add to his bottom line, if I'm allowed to do some investment work with his Life Insurance guys.
 
Thanks for any help, I'm just clueless on Life Insurance.
Jan 20, 2009 4:50 pm

If you have "zero interest" in LI, why do you care about the payouts?

If his family won't let HIM manage the money, what makes you think they'd let you?

Jan 20, 2009 5:14 pm
Hank Moody:

If you have "zero interest" in LI, why do you care about the payouts?

If his family won't let HIM manage the money, what makes you think they'd let you?



 
I care about the payouts, because I would like to talk to him about the potential money he can make with managing investment, and as a reference point compare that to the insurance payouts he is making.
 
It's not the fact that his family won't let HIM manage the money, it's that he has no interest in investing the money, outside of whole life policies with it.  It's literally just sitting in Money Market, Muni and Corporate Bonds, but there isn't an Advisor "handling it", so to speak.  The reason he got into the Insurance Biz in the first place is because his family sold a business, and Brokers and Insurance Salesmen were giving them all these pitches on what to do with the money.  He did some research and learned how much he could make by selling the Life Insurance to his family, and with all the people he and his family knew he turned it into a profitable Insurance business.  He realizes he needs someone to manage the family money, but isn't thinking about the potential for his current clients. 
Jan 20, 2009 5:22 pm

So you want him to hand it to you, so you can "handle" by charging him???

 
I am with Hank on this one...
Jan 20, 2009 5:29 pm

Sorry, I guess I didn't realize how difficult a concept this is for some people to grasp. 


The guy is offering to pay someone with investment experience a salary plus commission, to come in and manage some assets, while he focuses on Insurance Sales.  Why that's difficult to understand is beyond me, has anyone been brought onto a team to manage money before?


Does anyone know what the range in payout on a Whole Life Policy is?  How does that compare to the payout from a Mutual Fund or Wrap Fee? 
Jan 20, 2009 5:43 pm

Normally payout ranges on whole life are a % of 1st years premium...

Jan 20, 2009 6:09 pm

Bull,

 
If I am understanding this correctly, why do you need to know the payout.  Show him how you can manage the money @ 1% annually.  If there is $40mm in "family money' he isn't managing, that is potentially $400,000 annual gross before any discounting if need be.  That's only the family money, if he has BIG clients who knows what it could be.   
Jan 20, 2009 6:13 pm

Sounds too good to be true... especially in this market, if the "family money"(what is this the mob?) is in money markets and insured muni's then the money is probably doing better than your "management"..

 
Also a lot of people separate their Insurance guy from, their broker... Good luck with credibility when he introduces you as the guy who couldn't make it at a wirehouse..
 
Golden tickets only exist in Charlie and the Chocolate Factory...
Jan 20, 2009 6:34 pm
Squash1:

Sounds too good to be true... especially in this market, if the "family money"(what is this the mob?) is in money markets and insured muni's then the money is probably doing better than your "management"..

 
Also a lot of people separate their Insurance guy from, their broker... Good luck with credibility when he introduces you as the guy who couldn't make it at a wirehouse..
 
Golden tickets only exist in Charlie and the Chocolate Factory...


 
 
Once again I don't understand why this is difficult to understand, the family sold their company, he is the Son who worked for the company.  Sure this year the money sitting in Money Markets and muni's is doing better than 99% of "money management" out there, but it won't always be that way.  There is also a lot of Estae Planning and Tax Planning work that needs to be done.
 
Who said anything about being, "the guy who couldn't make it at a wirehouse"?  I'm at a wirehouse and opposed to hacking it out to try to hit the $50mm in 5 year "wirehouse goal", I'm entertaining this offer.  How is this a credibility issue?  The family name is huge in the City we're in, and the family and guys credibility is solid. 
 
Why is this too good to be true?  I'm thinking about turning it down if he's not going to let me eventually work with his big Life Insurance guys.  If I would have known I was going to have to defend the details of this offer, I wouldn't have given them and just asked what Life payouts look like.  I just thought the details of the offer would help people give better advice. 
Jan 20, 2009 7:58 pm

the initial commission on the life sales he is making will generall dwarf anything you do initially with an aum model.  of course, the fee based will be paying in year 10, while the life may or may not produce trails, depending on how his contract is set up, ie a career agent with a life company or a broker. 
for him it would almost be a "best of both worlds" if you were agreeing to split the fee long term with him.  he would get the initial huge payout on the life side, but then also have the recurring revenue from the money management down the road.
good figure to start out, bear in mind i am pulling this out of the air, is this.  a life policy (whole life) with an annual premium of say, $50,000 will pay a 1st year commission of 50% of that premium.  can be more or less, depending on alot of things, but 50% of first year premium is a good guideline.

Jan 20, 2009 9:42 pm
theironhorse:

the initial commission on the life sales he is making will generall dwarf anything you do initially with an aum model.  of course, the fee based will be paying in year 10, while the life may or may not produce trails, depending on how his contract is set up, ie a career agent with a life company or a broker. 
for him it would almost be a "best of both worlds" if you were agreeing to split the fee long term with him.  he would get the initial huge payout on the life side, but then also have the recurring revenue from the money management down the road.
good figure to start out, bear in mind i am pulling this out of the air, is this.  a life policy (whole life) with an annual premium of say, $50,000 will pay a 1st year commission of 50% of that premium.  can be more or less, depending on alot of things, but 50% of first year premium is a good guideline.


 
Thank You Ironhorse that is exactly what I was looking for, and I was thinking the same thing, just looking for some hard numbers to back it up with.  This will be useful.
Jan 22, 2009 12:38 pm

FYC on a whole life policy can be as high as 100% of target premium (higher if he has a GA contract, which someone doing his numbers would probably have)  trails can be anything from 2-5% annually or none, again depending on his contract.

Jan 22, 2009 3:15 pm

I guess what you'd have to figure out is whether or not you also get split commission on the premiums as opposed to just AUM, which is your strength.  Ask him approximately how much will he have you manage if that's your only source of income.  What types of insurance contracts does he have now?  Is he just focused on getting the premiums and not so much on the invesment management?  You'd also have to ask yourself if you are willing to have someone dictate to you how much you could be making based on his sales performance.