Friday, December 19, 2014

Texas Offers Look at Demographics of New Insurance Agents

The Texas Department of Insurance recently published its annual report that details by demographic who has - and who has not - gotten licensed to sell insurance in the state.  The report is very long and warrants an in-depth look, but there appears to be progress in Texas in closing some troubling disparities.

Research by CFS has shown that the agents most likely to work in underserved communities are often the agents that have the most difficulty getting through the licensing process.  While that seems to still be the case in Texas, the chart below suggests Texas regulators are working on the problem.  That is great news.  But as the difference between the pass rate for Hispanic and Caucasian testers shows, there is sill more to do.




What's Coming in 2015?

The debate over the DOL's expanded fiduciary standard is expected to heat up in January, and the incoming chair of the Senate HELP committee expects to make his voice heard.  According to ThinkAdvisor, Hatch wants the DOL to slow down.

Key point:
Hatch’s SAFE Act prevents DOL from “over-regulating IRA investment advice,” and would restore jurisdiction for IRA prohibited transaction rules to the Treasury Department and also requires Treasury to consult with the Securities and Exchange Commission in prescribing rules relating to the professional standards of care owed by brokers and investment advisors to IRA owners.

Friday, November 7, 2014

Look Who Is Promoting Financial Literacy

The New York Times is out with a great look at who is promoting financial literacy in states and pushing some real innovative programs.  Is it state legislators?  Governors?  Teachers?  No, it's Treasurers.

Key quote:
In recent years, some of these workaday officials have taken on a role as public visionaries, pushing through experimental policies aimed at lifting the fortunes of low- and moderate-income families.
Give it a read.

Thursday, August 28, 2014

Licensing Update - Trouble in New York

This blog has talked before about the CFS mission to help ensure that working-class Americans have access to financial tools and advice – including agents who represent a vital link to products like IRAs and life insurance.  In pursuit of that goal, CFS has done a fair amount of work on how financial professionals are licensed and get into the business.

CFS's work on licensing has uncovered instances where state licensing requirements, particularly licensing exams, may be serving as an unfair and unnecessary barrier to entry into the profession - - to the detriment of consumers.  While licensing is important and meant to protect consumers, consumers are not protected if the pool of professionals on which they can rely is artificially limited.

There is new evidence that New York consumers may be paying the price for something as simple as the Department of Financial Services changing the vendor that administers its licensing test.

As illustrated in the chart below, the pass rate on the New York Life Agent exam has dropped precipitously under the new exam vendor, Prometric.  Under the old vendor, PSI, first time pass rates were above 60% for years.  Since Prometric began giving the test in late 2013, the pass rate has been in the low 40s.


Judging from the pass rates, the New York Life Agent exam has become more difficult under Prometric.  Why that would be the case is not clear.  The laws did not change.  The job did not change.  All that changed was "who" gives the test.

The adjustment in difficultly raises a basic issue of fairness.  Why should a New York agent have a more difficult time entering the profession in September 2013 than one in September 2012?  Absent a public policy reason, they shouldn't.

From a consumer prospective, there is significant cause for alarm.  LIMRA’s 2010 survey of the life market found that “almost eight in 10 U.S. households currently do not have a personal life insurance agent or broker to turn to and most of them say they never did.”  Among Hispanic and working class households, the lack of reported contact with an agent was even higher.

Coming back to New York, the DFS publishes a yearly report (results since 2009 below) showing that those candidates for a license MOST likely to work in underserved communities are the LEAST likely to get a license.   As the chart shows, these pass rates by demographic were alarming under the old vendor.  One can only imagine what they look like under the new vendor, as the overall pass rate has dropped.


With life insurance usage so low, and Americans searching for individuals to talk to, will public policy makers listen? As long as candidates for a license in states like New York encounter arbitrary barriers to entry like a new test vendor, consumers will continue to suffer the consequences.

If you are interested in contacting New York regulators to tell them to make sure entry into the insurance profession is free from unfair barriers to entry, use these tools:



Friday, July 25, 2014

Another Survey Shows Gap in Life Insurance Coverage

Society recognizes the value of life insurance.  We provide tax benefits to encourage families to secure their futures with the product.  Yet there is another survey out showing that Americans do not have enough.

 Covering the survey, LifeHealthPro notes one way to help:
If the gap is to be closed, this field force of producers needs to be expanded. Life insurers can help by beefing up recruiting and sales training initiatives for new agents and brokers. Certainly, such programs are expensive. But a short-term hit to the carriers’ bottom line now will reap rewards in the long run.
That is certainly true.  Just as important, regulators need to make sure those trying to enter the profession have a fair pathway.   Data from some states continues to show that those most likely to help families who need insurance are the least likely to make it into the profession.

Monday, July 21, 2014

Diversity Among Financial Professionals

InsuranceNews.net covers a new report suggesting that life insurance companies are making it a priority to diversify their sales force.

Key quote:
With companies hiring again in earnest, it’s a good time for life and annuity carriers to reassess the composition of their distribution force. Industry analysts often point out that if the industry is serious about selling more protection and retirement products, then life and annuity producers need to be from the communities they aspire to sell to.
In order to ensure every community has access to the financial tools necessary to find financial security, it is critical that the industry make such a recruitment a priority. Research from CFS and LIMRA shows that contact with a professional is one of the key reasons a family chooses to protect their wealth.

Just as it is important that the financial industry recruit from all communities, it is critical that regulators ensure entry into the profession is open to all. Some key reports, such as this one from Florida, suggest there is work to do.

Tuesday, June 10, 2014

Why don't more families have life insurance?

According to Chris Blunt of New York Life, one answer is a lack of agents.
Blunt says a second macro factor is at play as well: The number of insurance agents entering the field has been declining, and those who do work for the big life insurers are aging.
Fewer agents out pitching life insurance policies "gave people a further excuse to put off a discussion that they'd like to put off anyway," he said.
Blunt's point is one that has been confirmed by LIMRA research and a survey by CFS.  It is one reason CFS works with states to ensure that agents entering the profession in states do not face higher than necessary barriers to entry.  If we as a society want more families to protect themselves with tools like life insurance, we need to make sure every community has access to professionals who can help them acquire it.

Monday, April 14, 2014

WSJ Coverage of Upcoming Fiduciary Regulations

The Wall Street Journal is out with a good look at the debate in Washington over fiduciary regulations.  As always, the concern here is over the impact of any rule on small savers.  On that point, the article quotes a representative of the insurance agents group, NAIFA:
In fact, [Gary Sanders of NAIFA] says, such a universal fiduciary standard could end up hurting many investors. Lower- and middle-income investors often turn to brokers who are compensated through product commissions, he says, because such clients are less attractive to financial advisers who are compensated based on a percentage of assets under management. Higher costs could prompt some brokers to drop commission-based accounts in favor of more-lucrative accounts that charge a percentage of assets under management, leaving many lower- and middle-income investors without anyone to turn to for investment advice, Mr. Sanders says.

Tuesday, March 18, 2014

Unintended Consequences

While the US Department of Labor grapples with how it will propose new rules to govern retirement advice, a number of countries oversees are coming to grips with the unintended consequences of rules they have already enacted.  One country, the United Kingdom, is debating whether its ban on commissions has created an "advice gap," where some wealthy clients retain access to financial advice and others go without because they industry business model does not work for small savers.

Late last month, the CFS Institute came out with a global study looking at the effect of a ban on commissions worldwide.  The study endorses greater transparency and notes that:
One concern raised in markets where the decision has been taken to ban inducements is a fear that such a move risks stratifying the investing public into the few that can afford investment advice, versus those who cannot afford, or are averse, to pay up-front for advice. Larger financial institutions appear to be moving away from providing advisory services to smaller clients because of a lack of economic incentive to serve them. According to 46% of survey respondents, the main consequence of banning commissions is that distributors will continue to offer advice, but will shrink the product offerings to those they continue to receive fees upon.
Few would argue that investors need strong protections. Experience in other countries suggests, however, that the price of new protections could be no advice at all. That is too high a price to pay and regulators must walk a fine line.

Women in Finance

Newsday is running an op-ed about how to get more women to the top of business.  A key piece of the author's answer?  More financial literacy education.
Finance shouldn't be a foreign language. Beginning in middle school and continuing in high school, girls need to be taught basic financial concepts. They need to learn about interest rates, credit scores, fixed income, discretionary costs and other economic realities such as compound interest, tax-deferments, insurance copays, deductible expenses and so on. If nothing else, it will help them choose a health care plan.

Tuesday, February 11, 2014

Financial Literacy Requirements

The national coverage of financial literacy in education has recently focused on the question of "does it work?"  There are many sides to that debate. While that is an interesting and important conversation, it has yet to trickle down to the states that are considering action.

The focus of legislators considering requirements is often more varied.  Here's a great look at the questions some legislators are asking in Kansas.

Friday, January 17, 2014

Democrats Continue to Urge Caution on DOL Fiduciary Rule

Congressional Democrats continue to urge the Department of Labor to proceed with caution when it comes to expanding the fiduciary standard for investment advice. The latest communication comes from members of the New Democrat Coalition to Secretary of Labor Thomas Perez.

The lawmakers concerns center on fears that the new rule will restrict access to retirement tools and help.  From the letter:
We certainly want to protect plan participants, IRA owners and plan sponsors from ufnair and deceptive practices. But this should be done in a way that does not restrict access to critical investment assistance. While the original rule would have had little effect on wealthy investors or large businesses, it inadvertently could have significantly restricted the availability of investment help to low-, and middle-income individuals and small businesses."
The DOL rule is expected to be released around August 2014.

Thursday, January 2, 2014

Financial Literacy Legislation in Florida

According to the Tampa Tribune, lawmakers in Florida will consider adding a financial literacy requirement for high graduation this session.  SB 212 would require "an elective credit with a financial literacy course" in order to get a standard diploma.

This bill will be one to watch in 2014.