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Identity Crisis

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When Tony Goebel decided to become an independent life and health producer in early 2013, he had to decide how to present himself to clients.

His official title at the agency was clear enough. He had become executive vice president of Goebel Insurance and Financial, a Green Bay, Wis., firm founded by his father.

But the younger Goebel, who previously had been a career agent, realized that he also needed to identify himself in a way that would let customers know what he did.

Should he say he is an insurance agent? An insurance salesman? An advisor? An insurance professional? How about a financial advisor, financial planner or financial counselor? What about producer? Or sales agent? Maybe an insurance advisor?

A Matter of Compliance

The question is one that compliance expert Cailie Currin wishes more agents would ask, and not just new or younger agents. Insurance producers of all ages today are using a wide variety of job titles to identify themselves, but state insurance regulators are concerned that this may confuse consumers, if not entirely mislead them, she said.

In fact, insurance-only producers face “significant regulatory risk” by referring to themselves as a “financial advisor,” “financial planner,” “wealth manager” and a number of other appellations that suggest the person works in the advisory business for a fee, said Currin, who is president of Currin Compliance Services, Greenwich, N.Y.

Over the years, financial advisors have become regarded as having the education, experience and expertise to provide broad-based advice and counsel to their clients, primarily for a fee. But some advisors may hold securities and insurance licenses that entitle them to sell products on commission too. They often hold financial degrees, certifications and designations in their field of specialty. It is much the same with financial planners, wealth managers and others who take an advisory approach to client service.

Insurance-only producers typically do not provide such broad-based services, Currin said. “They are primarily salespeople, so most states specifically

prohibit such producers from using advisory terminology to represent themselves.” This is so even if they only sell insurance through a registered investment advisory firm, which offers securities as well as insurance.

State insurance laws and regulations in this area are designed to ensure that insurance producers represent themselves in such a way that consumers will understand the scope of work the producer will do, Currin said. 

“This is serious stuff,” she maintained, noting that those who violate state rules in this area can face substantial fines. “I’ve seen producers being fined $5,000 to $10,000,” she said. 

Does this apply even if the producer presents as an “insurance advisor” – i.e., one who provides advice on insurance needs, pros and cons of various products, and which insurance to buy? It depends on whether the producer charges a fee for the advice, receives a commission for placing insurance or both, Currin said.

“It needs to be clear to the consumer what the consumer is paying for, and the insurance producer cannot be paid for the same service twice.”

Her suggestion is that insurance-onlys who primarily sell insurance identify themselves by using words that signify insurance sales. Examples include “insurance agent,” “insurance producer” and “insurance sales agent.”

“Use a title that is clear and that tells the person that ‘I sell insurance and I am paid a commission,’ ” she said.

Advisor Lingo Is Embedded

It might take some work to have this approach go national. One reason is that advisor lingo has become embedded in the insurance industry right along with terms such as “agent,” “broker” and “planner.”

The Gramm-Leach-Bliley (GLB) Act of 1999 contributed to that. This federal law officially yoked insurance, securities and banking together as “the financial services industry.” When that happened, the types of products and services available for sale expanded and converged, and consumer need for advice increased. Client-facing insurance representatives, whether dual licensed or not, increasingly took on (or added) the title of “financial advisor,” “planner” or something similar to signal that they provided advice and needs-based planning along with insurance product sales. (This trend had begun even before GLB, but it broadened in the blossoming financial services milieu.)

Today, although many insurance-onlys still use time-honored titles like “field agent,” “life underwriter,” “insurance salesman” and “insurance agent,” others use “advisor,” “planner,” “specialist,” “expert,” “wealth manager,” “professional” and more. Sometimes they show the “advisor” title along with the “sales” title. Other times, they may just use “advisor” or “planner” if they believe that word accurately represents what they do.

In the United States, “advisor” has become an especially popular term, said Brian D. Heckert, who is secretary of the Million Dollar Round Table (MDRT) and founder of Financial Solutions Midwest, Nashville, Ill..

“It’s an all-encompassing term, like the word ‘doctor.’ The word ‘doctor’ can refer to a chiropractor, someone with a doctor of medicine degree (M.D.) or someone with a doctorate in philosophy (Ph.D.). Each does different things but they are all called ‘doctor’. ”

In the insurance and financial world, “advisor” is the general term, continued Heckert.

But Currin insisted that insurance-only producers who market themselves using advisory terms are treading on thin ice. Language in National Association of Insurance Commissioners (NAIC) models on advertising and unfair trade practices specifically prohibit use of such terminology when the person’s business is primarily insurance sales, said Currin, who is an attorney as well as a compliance expert.

For instance, the NAIC advertising model regulation says that “No insurance producer may use terms such as ‘financial planner,’ ‘investment advisor,’ ‘financial consultant’ or ‘financial counseling’ in such a way as to imply that he or she is generally engaged in an advisory business in which compensation is unrelated to sales unless that actually is the case.”

NAIC’s unfair trade practices model act also says that it is an unfair trade practice for an insurance producer to hold “himself or herself out, directly or indirectly, to the public as a ‘financial planner,’ ‘investment advisor,’ ‘consultant,’ ‘financial counselor,’ or any other specialist engaged in the business of giving financial planning or advice relating to investments, insurance, real estate, tax matters or trust and estate matters when such person is in fact engaged only in the sale of policies.”

Most states use similar language in their own regulations and laws, so insurance-only producers would be wise to heed those provisions, Currin maintained. She pointed out that consumer confusion on this issue does show up in complaint filings, lawsuits, market conduct reviews and advertising reviews. The cases involve both life and annuity agents.

What about those who are members of professional or trade groups with “advisor” or advisor-like terms in their organizational names? National Association of Insurance and Financial Advisors (NAIFA) is one example. It has the term “advisors” in the name.

The advertising model doesn’t say that producers can’t use the word “advisor,” said Gary Sanders, vice president-securities and state regulation at NAIFA. Rather, the model says they can’t use the word to imply they are advisors when they are primarily selling.

NAIFA is not a compliance organization, he noted. And although NAIFA encourages members to comply fully with in-force laws and regulations, it is the insurance companies, not the association, that monitor, review and approve business cards, letterheads and similar items where titles appear. His suggestion is that producers should look to their companies for guidance.

The Agents’ Dilemma

Sorting this out can get a little confusing. The NAIC models do permit insurance producers to continue to show their affiliations with trade groups and designation programs that include the word “advisor” or similar terminology in their official name. 

For example, the NAIC advertising model says “persons who hold some form of formal recognized financial planning or consultant designation” are not precluded from using the designation “even when they are only selling insurance.”

This means that insurance-only sales agents who are members of, say, NAIFA can show their membership affiliation even though NAIFA’s name includes the term “insurance and financial advisors.”  

Likewise, insurance-only sales agents who are members of MDRT can show their affiliation even though the MDRT tagline (The Premier Association of Financial Professionals) includes the term “financial professionals.” (Note: The NAIC models do not prohibit use of the specific term “financial professional,” but compliance experts caution that this term could be taken as borderline advisory, especially if the producer uses it as the main identifier on, for example, a business card or marketing material.)

Many professional designations also include advisory-type words, and insurance-only sales producers who hold those designations can continue to use them, under the terms of the NAIC models.

However, insurance-onlys still need to clarify their role in insurance sales if that is their primary business, Currin reiterated.

Richard M. Weber, national president of the Society of Financial Service Professionals, is of similar mind.

States have increasingly moved toward solving the nomenclature issue by using the word “producer” to refer to someone who is licensed to sell insurance, he said. The advantage is that the term is “license-neutral,” in the sense that it avoids existing connotations for the terms “agent” and “broker,” Weber said.

But the term “producer” doesn’t include reference to other qualifications a person may have, he added, such as designations and certifications that require holders to pledge to put the client’s interests above their own.

The Insurance Advisor

What about using the term “insurance advisor” (as opposed to “financial advisor,” other financially linked names or “insurance producer”)?

There is no statutory definition or certification for the term “insurance advisor,” Weber said.

A producer may well provide advice about insurance in the course of a sale, Weber allowed. But if the insurance-only uses the term “insurance advisor” in his title, “this is often held to be [an indication that] you have a self-proclaimed duty to a higher standard of care than you probably intended.”

The insurance producer has the duty of honesty and fairness, for instance, but if the word “advisor” appears in the title, “that may raise an expectation greater than just selling insurance. It’s taken as a sign that you intend to be someone who conveys advice.”

Once the fiduciary issue is settled (concerning broadening the fiduciary standard of care – which calls for putting the client’s interests first – to a wider group of client-facing individuals), some of the debate will dissipate, Weber predicted. Until then, he suggested that those who want to be insurance advisors provide advice for a fee, not sell insurance, and operate under the fiduciary standard of care.

Tom Hegna, president of TomHegna.com, Fountain Hills, Ariz., points out that many insurance agents review their clients’ investing, bank accounts, hopes and dreams. “If they only sell life and fixed annuities, there may be a difference in the words used to describe that activity, but it’s splitting hairs. Let’s focus on the bad agents. Bad conduct has nothing to do with titles. We’re wasting resources chasing the wrong problem.”

That comment gives voice to the frustration that many insurance-only agents feel whenever this topic comes up. It also raises a relevant question – namely, in a world where sales roles are changing and advice of various types has emerged, can and should the use of titles for insurance-onlys be revisited? Guidelines and regulations do exist, and compliance professionals can help light the way. But how to resolve the conflicts and reduce the confusion that agents are encountering?

Weighing the Pros and Cons

Not all insurance agents are aware that some state regulations prohibit insurance-onlys who primarily sell insurance from using advisor-like terminology.

Some agents, especially those in the independent agency channel who represent several carriers, choose the title they believe best represents their services. Some acknowledge that they’ve begun receiving cautionary notices from carriers about what titles to use, but add that they are a bit mystified.

As may be expected, they view the issue and solutions differently.

Thomas C. Sellin has the words “insurance agent” on his business card for Sellin Advisor Group, the Eagle, Idaho, firm of which he is also president. Even so, he shares the view that it really doesn’t matter what insurance producers call themselves. “It matters what they do,” he said.

A lot of agents say they are financial planners, Sellin pointed out. “But that doesn’t mean anything because everyone says the same thing. What’s important is to say what you do – for instance, plan for retirement.”

Sellin said that in the course of his own career, he has used various titles, among them “special agent,” “underwriter,” “life insurance agent” and “wealth manager.” He also said he has used the name of his firm, Sellin Advisor Group, in many states and “has never had a problem.”

Sellin pointed out that he is principal and compliance officer of American Independent Securities Group, a broker-dealer, so he works on the securities side too. But whether the business is insurance or securities, he said his recommendation is the same: “Say who you are and what you are doing, and communicate the value of what you do, but don’t overstate what you’re doing. Connect and communicate with the client, and help the client identify what is important. Once you do that, help the client get what he or she needs.”

People who hold both insurance and securities licenses do have skin in the game, even though they are not insurance-onlys. That’s because when selling insurance and annuities, they operate as insurance agents, but when they sell securities, they operate as registered representatives. So what do they call themselves?

“I call myself a wealth advisor,” said Brian Noe, who is dual-licensed and also provides fee-based advice. The title on his business card is financial representative for NW Financial Group and financial advisor at Park Avenue Securities, Farmington, Conn.

To him, an advisor is the hub of the wheel, the person who coordinates the client’s managers (of money, taxes, legal matters, etc.). He tells clients that his job is to “find out what you need, why you want to do something” and then help facilitate that. In one case, he brought everybody together, the team worked out a plan and then they implemented the plan. Noe received a fee for his work; the others received commissions.

But he said that when he is the one who places the insurance, then he is serving as a manager.

What does Noe think insurance-only sales agents should do? “They shouldn’t be embarrassed to say they are agents, salesmen or insurance specialists,” he said. “Be proud of it, brand yourself that way, be the best you can be – and function and help the client as part of the team.”

What about those who hold other credentials in addition to insurance and securities? Ronald E. Ruff is one such individual. A certified public accountant, he is owner of Fairfield Financial Solutions, a Lancaster, Ohio, registered investment advisory firm that handles not only investments, but also insurance (life, annuities, long-term care and disability) and tax and accounting services.

He identifies himself as a CPA and registered rep.

In the course of his work, Ruff said, he has noticed that clients do get confused by all the terms being used for insurance and financial people. This is especially the case among seniors, whom he said often don’t know that there are different types of advisors and that they hold different types of licenses.

This has led Ruff to conclude that insurance-onlys who are primarily in sales should have a uniform name, such as “agent” or “producer,” to distinguish themselves from registered reps. “The public needs consistency,” he said.

Then there is Lawrence F. Kolasa of Birmingham, Mich. At the time of the interview, he was dual-licensed and had several designations but he wasn’t using a title. He just said he is “in insurance and investments.”

A key reason for not mentioning a job title is that he was planning to drop his securities license within a few months, after which time he would be an insurance-only producer selling insurance under his life and health license. But Kolasa also was planning to obtain an insurance counselor license. (In Michigan, a licensed insurance counselor is allowed, for a fee, to counsel clients on the pros and cons of various insurance contracts and issues, and provide advice on benefits.) As a result, he would then identify himself as a “licensed life and health agent” and as a “licensed insurance counselor.”

Heckert, the MDRT secretary, thinks the concern over what title to use is compliance-driven. But the terms agents actually use are marketing-driven. Agents tend to settle on titles that describe what they do within the scope of their licensure but in a way that differentiates or creates a marketing edge, he explained.

Governmental Terminology

The state requirements definitely are important, he said. But what if a producer is licensed to sell insurance in multiple states? Is the same title acceptable in each state?

A related question is: Are federal and state governmental bodies consistent on which terms to use?

The answer: It’s a mixed bag. There have been many governmental efforts to define and refine occupational titles. However, a review of various government reports, laws, codes, regulations, databases and similar documents shows the language does vary.

At the national level, for instance, the U.S. Bureau of Labor Statistics refers to insurance producers as “insurance sales agents” and defines their duties as selling “life, property, casualty, health, automotive or other types of insurance.” It also says they “may refer clients to independent brokers, work as an independent broker or be employed by an insurance company.”

Meanwhile, the National Insurance Producer Registry, a Kansas City database affiliate of NAIC, always uses the word insurance “producer.” No surprise there, considering the organization’s name.

But the U.S. Consumer Financial Protection Bureau (CFPB) takes a different approach. Created by the Dodd-Frank financial reform law, this 2-year-old federal body released a report to Congress in mid-2013 charging that “financial advisors” are using senior designations that may confuse or mislead older consumers.

The report says these “professionals” include “investment advisors, broker-dealers, accountants, insurance agents and financial planners, and other general financial professionals.”

It’s easy to see, from the CFPB wording, that someone might draw the conclusion that insurance agents are a type of financial advisor or professional.

To learn more about the various advisors, the CFPB report sends the reader to a section of the Financial Industry Regulatory Authority (FINRA) website.

That section includes a definition of insurance agent as “a salesperson who can help individuals and companies obtain life, health or property insurance policies and other insurance products.” This definition does get the agent’s sales role down correctly, although it makes no mention of the word “producer.” However, because the definition is linked to the CFPB discussion of financial advisors and professionals, some consumers may not grasp the distinction.

Incidentally, the FINRA discussion says financial planners could be brokers or investment advisors, insurance agents or practicing accountants, or individuals who have no financial credentials at all – a recognition, it would seem, of how interchangeable these terms are in the current environment.

FINRA also tries to clarify some advisor terminology. For instance, it says an investment advisor is paid for providing clients with advice about securities and is registered with either the Securities and Exchange Commission or a state securities regulator. A financial advisor, meanwhile, “is a generic term that usually refers to a broker (or, to use the technical term, a registered representative).”

FINRA cautions that the two types of advisors are not the same “and should not be confused.”

But confusion will certainly arise. Just taking insurance as an example, four national bodies have discussed the insurance salesperson in four ways – as an insurance sales agent, an insurance producer, a financial advisor or professional, and an insurance agent.

Changing Times, Changing Titles

Insurance producer nomenclature is evolving, right along with the business environment, laws, regulations and marketplace realities. But uniformity has not yet arrived. That means insurance agents, whether insurance-only or dual-licensed, have to do some homework on how to identify themselves.

Independent agent Goebel – the young producer quoted in the beginning of this article – did just that. He decided to rule out using any title that includes the word “financial.”

“I don’t have my securities license yet, so I don’t want to use the term ‘financial advisor’ right now,” he explained.

What then? “I’m calling myself an ‘insurance and group benefit consultant,’ because that’s what I’m doing.”

 

Linda Koco, MBA, is a contributing editor to InsuranceNewsNet, specializing in life insurance, annuities and income planning. Linda can be reached at linda.koco@innfeedback.com linda.koco@innfeedback.com.