The Cost of Advice

The Internet has turned us all into geniuses. We can find answers for all our questions in the time it takes to say, “Hey Alexa”. To make matters worse, if we do not like the first answer we get, it is almost inevitable that we can find an answer that suits us.

What does that mean for industries that are grounded in answering questions (like ours)?

A quick answer is, it means that a lot of jobs that exist today, will cease to exist.

Most people are aware that Machine Learning and Artificial Intelligence coupled with advanced robotics are changing the landscape of manufacturing, what they are not thinking about is how they are impacting every other sector too.

Healthcare, energy, finance, communications, legal, and yes, our beloved insurance industry are all being transformed by algorithms that are becoming more and more advanced. At what point will a computer give the advice we do without requiring the overhead of feeding a family, putting a roof over its head, etc. Make sure you also know how blood dyscrasia is treated.

Well, if you have not heard, they are already dominating the financial industry. Robo-advisors did not exist a decade ago yet Vanguard’s Personal Advisor Services robo has only 25% less AUM than Bridgewater Associates. And oh yeah, Bridgewater had a FORTY YEAR head start!

So, what is the cost of advice?

Right now, there are three ways to pay for advice on insurance products and all of them include an advisor in the process.

1) Product commissions
2) Advisory fess
3) Cash Value can includable as AUM to which a wrap fee applies

If you were to purchase a policy online right now with no “assistance”, then you might be purchasing a no-load product, but are more likely purchasing a commissionable product where the agency that owns the website you used gets the commission instead of a true advisor.

Right now, advisors are paid to find the best possible solution for clients that fit their need. As clients become savvier and savvier online this becomes increasingly tougher as we must contend with the almighty – but not all knowing – Google. We hear it all the time:

“My client wants to see a low-commission illustration with High Early Cash Values”


“My client wants to own a policy but have an ILIT as beneficiary”


“My client heard something on NPR about being the Beneficiary of her own policy to access her cash value”

This is where we come in and earn our keep. Right now, computers cannot give much of the advice we can. It takes our partnership with you to explain to clients that they might not actually want that High Early Cash Value product as it would likely under-perform a straight commissionable product down the line. We assist you in explaining to the clients how the Goodman Triangle works and why the trust should be the owner and beneficiary or if it not needed at all. We can help explain to the client that they may have misheard, and the best way to access cash is to own your own policy.

Right now, advice is as crucial as ever. Machine Learning and Artificial Intelligence are looming, but they lack many fundamental abilities that we all provide.

A policy sold through a robo service does not understand the complexities of insurance. The cost of using that strategy right now could be catastrophic for a client.