Selling stuff is simple: a need must be identified, a product recommended to satisfy it and someone to sell it who gets paid for doing so. The protection world however is not so simple.
Yes there is a need, even though most consumers need to be shown it. There is a product - a really great product actually - and there are plenty of people ready and willing to sell it. So what's the problem?
The problem is that the salesperson in any other industry gets paid for selling products, whether directly from the buyer, or from the provider paying him a fee.
This simple system, that has served mankind perfectly well since the birth of trade, just doesn't fit with protection. When was it decided that we wouldn't actually be paid and instead ‘advanced' on a promise? Who decided that I can work for two years, sell bundles of the stuff and not actually have ‘earned' a bean? It must be a joke surely.
Ok, so we are sophisticated enough to grasp the concept of indemnity commission, but why isn't it easier for a business to actually earn as well as have income ‘advanced' to them? Why is our choice so one dimensional; indemnity versus non-indemnity, feast or famine, birth or death?
For any business to prosper and have real value, it must be more than just a custodian of someone else's money. It must have underlying income streams, client banks, recurring sales and intrinsic depth.
I would argue that once on the indemnity helter skelter, it is very difficult indeed (or impossible) to get off. The larger brokers will testify to this fact, even if done so under their breath and in only under the cover of darkness.
There have been mumblings of hybrid commission schemes and indeed some providers have actually developed these in the past, but they have gone almost as quickly as they arrived. These no doubt require extensive IT cost and development by the life offices but perhaps the benefit to them just isn't balanced by the cost.
Just as important however is the question of desire from the distributors. Do businesses really want to earn small now, or be advanced big and worry about the consequences later?
Until a life office steps forward and provides a viable way of paying distributors that addresses this, nothing will change and the number of brokers stumbling wearily off of the hamster wheel for good with continue to grow.
The will of a few distributors isn't enough but the will of life office with vision just might be.
Nick Aumonier is managing director of Clarity Financial Solutions
