AboveBoard was founded on the belief that expert and ethical financial advice should be easy to come by. A cornerstone of our business is the standard of Total Transparency - we educate our clients and prospective clients about how the financial services industry - including AboveBoard’s business, specifically - makes money. We always strive to be fully aligned with you.
This post focuses on our insurance business, AboveBoard Insurance Services. If you’re interested in understanding AboveBoard’s entire business, we go into that in detail [here].
Interestingly, the way that the vast majority of the insurance industry compensates is often not fully aligned with the client. That’s because compensation is closely related to the total premiums you pay. But the highest premium insurance product is often not the best choice for a client.
If you take one thing away from this post, let it be this: as a general rule, the higher the premiums you pay, the higher the insurance commission paid to the insurance professional.
This has led to all kinds of not-good outcomes for consumers, which we go into in Truth vs. BS: The Inside Scoop on Popular Life Insurance Sales Lines.
But the vast majority of life and disability insurance compensation works this way, and we felt we could not "shop the market" for our clients while totally rejecting how the industry works. AboveBoard Insurance Services gets paid commissions, too. So we asked ourselves: how could we set up AboveBoard’s life and disability insurance business to be ethical and aligned with you, the client?
We decided on several key practices to ensure we always conduct our insurance business in a way that makes us proud and makes you happy:
We Offer Investment Advisory and Wealth Management Services, Too
We want to be long-term-aligned with our clients. If you’re a client who first comes to us with a need for life or disability insurance, we hope you’ll be so happy about the great job we did for you that you’ll:
- Hire us for other financial matters you want to have handled ethically & expertly, or
- Recommend us to your friends and colleagues, or
- Ideally, both #1 & #2
We recognize that not everyone needs or wants help with anything beyond insurance, and that’s OK. But most people do need help with their retirement planning, their investment choices, their household savings strategy, taking advantage of tax-aware wealth management and planning, thinking about ways to get on track for big life goals, etc.
We believe that by having a business model that is aligned with our clients’ long-term financial well-being, we have a built-in safeguard to make our insurance business uncommonly ethical.
We Are Totally Transparent About the Coverage Amount Calculation
We recognize that the way insurance industry compensation works rewards professionals who sell as much insurance as possible. But this is often not the right choice for clients.
We put our calculator on the website and we make it very easy to adjust the assumptions. If you’re somebody who likes to get in the weeds (maybe you’ve built an Excel spreadsheet or two or more yourself), those details are available. No hiding the ball here.
We vehemently reject an approach that is all too common, what I’d describe as “produce a number out of a black box, act unwilling or unable to answer questions about where it came from, and attempt to scare the $*!# out of the client if they dare wonder if that amount is necessary”. I experienced this as a customer, it has no place at AboveBoard.
If you don’t feel like digging into our calculation yourself (this is most people’s situation), no problem - an insurance expert here at AboveBoard will happily talk you through the places where you could reasonably make adjustments to save money. Just hit us up with your questions on chat, or (if you prefer a phone call) just shoot us your number and someone will call you shortly.
Our goal is for you to be properly insured for your situation and goals - everything you need, but nothing that you don’t.
We Don’t Believe “Fee-Based” or “Low-Load” Insurance Is The Answer - Not Now, Anyway
There’s a very small universe of “fee-based” and “low-load” insurance products out there. I see three main problems with this.
First, the “fee-based” plus “low-load” portion of the market is tiny. I don’t believe that we could - in good faith - say that we’re shopping the market for you if we limited ourselves to these options. Maybe that will change in the future, but it’s simply not a meaningful portion of the market today.
Second, “low-load” strikes me as an irrelevant concept. Consider this analogy: when you go shopping for a car, do you care about the total price of the car and its features, or do you care about the size of the payment the dealer gets from the car manufacturer? You obviously care about the total price of the car and its features. You would not buy a more expensive car with fewer features, just because you knew the dealership was getting paid less and the manufacturer was keeping more. Same deal with insurance: what matters if how much you’re paying for what you’re getting.
Lastly, insurance sales of fee-based or low-load insurance products still have to make money; they have incentives, too. The fact that someone has “innovated” a financial product such that they believe they can call something a fee and not a commission is subject to all kinds of gamesmanship. I believe transparency about payments and incentives is the correct answer to the potential problem of conflicts of interest.
Maybe the industry will evolve to a place where there is a meaningful and competitively priced portion of the market that is not based on traditional commissions, but the industry is far from that place today.
We Always Answer Your Questions
The cornerstone of Total Transparency is clearly and correctly answering all your questions. We believe it’s our job to know our stuff well enough that we can explain it to anyone. That includes questions about how we’re compensated.
If you have any questions left after reading this, just ask us! :)