Our Customers

We sell our service to financial advisors and life insurance agents.

Financial advisors may also call themselves wealth managers. The financial advisors manage investment for their clients (e.g. stocks, bonds and mutual funds).

The investments of their clients are called investment portfolios.  And the service the financial advisors provide are:

Financial planning / Retirement Planning (giving financial advice)

Wealth Management (same as investment management of portfolios)

These financial advisors may work at large companies  with hundreds of offices across the US such as Merril Lynch, Edward Jones, Morgan Stanley, Wells Fargo advisors, etc).  These financial advisors are employees of the broker dealer and need to adhere to lots of rules of these big companies.  Most financial advisors at these big companies feel that the rules can inhibit their ability to gain client as these rules limit how they can advertise or market themselves.  

Other financial advisor work for smaller broker dealers and these are referreed to as independent broker dealers and the advisors as independent advisors.  These advisor work from their own location as these independent broker dealers do not have large officer like Merill Lynch where all of their advisors work.  These independent advisors are not employees of the broker dealer, they are independent contractors.  Even though these broker dealers also have rules that limit marketing and advertising, these rules are usually less strict.

Financial advisors who work for broker dealers can choose to charge their clients commissions or fees.   For example, rather than charge a commission to buy or sell an investment, they charge a 1% annual fee to manage someone’s portfolio.  If the consumer has a portfolio say of $500,000, The consumer would pay $5000 per year (1% of the portfolio size) as a management fee to the financial advisor. The financial advisor would then make buys and sells of securities ion that portfolio for the annual fee.

Registered Investment advisors are a totally different type of financial advisor as they do not work for a broker dealer.  They are absolutely independent and have their own business.   They cannot charge commissions.  They can only charge fees as explained above.   Since they do not work for a broker dealer and are 100 percent independent, they are free to market and advertise however they choose to grow their business.

All of the above financial advisors like to call themselves “wealth managers.”

Life Insurance Agents

Life insurance agents that work for big firms such as New York Life or Prudential are called captive agents.  They are employees of the insurance company and are expected to make most of their sales using the products of that company (although they can sometimes use the products of other companies).  Because they work for a big company, they usually have lots of rules and restrictions of how they market and advertise themselves.  All of these life insurance agents are also financial advisors in that they have a license to sell investments or manage investments for a fee.  But they call themselves life insurance agents because most of what they sell are life insurance products (life insurance and annuities).

There are independent life insurance agents that do not work for big companies.  They have their own business and so whatever company products they choose to sell.  These independent agents are usually affiliated with an independent marketing organization (IMO) or field marketing organization (FMO) that helps them select products to sell and may help them with their marketing.

Sometimes when we call life insurance agents offering to help them get new clients, they mistakenly think we are an IMO or FMO looking to recruit them to sell our products and services. This is a mistake because we do not deal in any financial products and services, we simply help these life insurance agents gain new clients.

We sell to the financial advisor or life insurance agent -the guy meeting with individual clients to sell them a financial product or service (e.g. life insurance, mutual funds, stocks, bonds, annuities, etc). 

More detail

Stockbrokers, CPAs, Life insurance agents, financial planners that offer any type of security MUST HAVE a broker-dealer and that broker-dealer is regulated by FINRA (and indirectly, so is the financial advisor).  Well-known large broker-dealers are Merrill Lynch and Morgan Stanley and Edward Jones. However, there are 2000 broker-dealers in the US and most never advertise so you will now recognize their company name.

Financial advisors regulated by FINRA are technically called "registered reps." 

Most life insurance agents are also registered reps as a big life company such as New York Life owns a broker-dealer so that their agents can sell securities to their insurance clients. Similarly, most registered reps also have a life insurance license so they can sell life insurance and annuities to their clients.

So the only real difference between a life insurance agent and a financial advisor is that the financial advisor tends to sell more securities (investments) and very little life insurance, while the life insurance agent sells mostly life insurance and annuities, and not many securities.

Also, the financial advisors tend to earn more and are smarter than the life agents.

There are some life insurance agents that do not have a securities license (they sell only insurance and fixed annuities).   There is a small percentage (6%) of financial advisors who are Registered Investment Advisors and are not regulated by the FINRA (and are not registered reps) because they do not charge commission, they get only fees.  They have much more flexibility in what they do.  All of these people are our market:

• Registered reps (often called financial advisors, in the “old days” called stock brokers)
• Lie Insurance agents
• Registered Investments Advisors (RIAs), they charge fees for managing investment portfolios, not commission

Note that many registered reps also operate as RIAs.  Therefore, they can choose to charge commissions to one client and work on a fee-basis with another client.

Understanding Compliance of our Customers

Everything that a registered rep communicates-his emails, letters, ads, literature must be reviewed by the broker dealer first.  Some reps "cheat" and just use the item without submitting.  My guess is that 30-50% of our clients fit in this group. 

We have never sold directly to the broker-dealer. In other words, we do not pitch companies to “hire us” to be used by all of their reps as this would eat up an enormous amount of time, replete with politics and long delays.  Rather, we sell directly to the decision-maker—the financial advisor or agent who can say yes in 20 minutes.

FINRA holds the compliance officers at these broker-dealers personally liable for any problems.   The last things these compliance officers want is to approve some third-party marketing materials (such as our booklets) that expose them to liability.  The guys on the line are the compliance officers who have NO INTEREST nor do they care how much business the firm does.  Their interest is in protecting the firm and their ass from investor litigation and regulatory sanction.

Therefore, we do not pursue the sale to the broker-dealer market as the broker dealers are under such compliance pressure, they may say no to everything.  See article http://www.researchmagazine.com/articles/pdf/rc04_cs.pdf.

Other than the very large broker-dealers that have over 10,000 reps (Merrill Lynch, Edward Jones, etc), the biggest broker dealer has 5000 reps and it quickly falls off from there.  Although there are 2000 broker dealers in the US, only 180 have 100 reps or more.

Life Insurance Industry

We sell to life insurance agents, those who sell life insurance and annuities (and most also sell investments such as mutual funds and variable annuities).

As to insurance agents, there are two types, captive and independent. 

The captive ones are employees (work for NY Life, Met Life, John Hancock) are never allowed to use any materials their firm did not produce.  Of course, many do anyway and are clients of Retirement Prospects.

The independent agents are self-employed and offer their products of many insurance companies. The independent agents have a great deal of freedom and are more likely to be our clients and no firm has direct control over them. However, 80% of life insurance agents are also licensed as registered reps and do have a broker dealer but many of them "cheat" when it comes to compliance. 

Life insurance and annuities are distributed to these independent insurance agents through wholesalers (the insurance companies have opted not to deal with independent agents directly).  These wholesalers are entrepreneurial, small companies (usually less than 50 employees), and they are much more willing to enter agreements with us to recommend us to the independent agents they serve.

Some of these wholesalers are enormous and have relationships with 80,000 independent insurance agents. These relationships may vary a lot. 

For example, one agent may write an insurance policy every month with a particular wholesaler, and another agent may write a policy once every 3 years (or just once and then disappear). 

The wholesalers have commodity products and are always paranoid of each other stealing their agents.  As a result, they try and develop marketing materials, marketing programs, and sales contest and awards to hold on to these agents and provide added value to the commodity product distribution. See an example at http://www.tarkentonfinancial.com/partner/partnership.asp

As far as we can tell, these marketing programs are not tested or proven and are not on the same plane as what we produce, but of course, these systems compete with us.

The Products Our Clients Sell

The typical financial advisor is also licensed as a Registered Investment Advisor and wants to gain clients who have $200,000 plus.  The advisor will manage this portfolio and charge 1% annually.  So if they successfully grow the portfolio from $200,000 to $220,000 in a year, the next year’s fee is 1% of $220,000 or $2200.

In these portfolios, the advisor may use mutual funds and ETFs.  A minority use stocks and bonds.

However, there are still many “old school” financial advisors who sell products on commission: stocks, bonds, mutual funds, ETFs, variable annuities.  More sophisticated investors shy away from these advisors as they don’t want their advisor to have an incentive to sell them products for a commission.  They prefer to deal with the fee-based advisor described in a previous paragraph.