Life insurance is a complex product, and navigating those complicated policies and documents is extremely difficult for many consumers.
Commission based insurance agents, who might not be looking out for the customer’s best interests, can make life insurance seem even more confusing, says Scott Witt, founder of Witt Actuarial Services LLC, a fee only life insurance advisory firm in New Berlin.
“Even the most well intentioned insurance agents are affected by an inherent conflict of interest because they are rewarded based on how much they sell,” Witt said. “Consumers (of life insurance) can often fall under the mercy of these agents who aren’t always looking out for their best interests.”
A fee only life insurance advisor can be an attractive alternative for life insurance customers, Witt said. A fee-only life insurance advisor is an independent outside source that only gets paid by the customer he or she serves.
In 2005, Witt ended a 10 year stint as an actuary at Milwaukee-based Northwestern Mutual Life Insurance Co. to become a fee-only life insurance provider for Mattawan, Mich.-based Katt & Company, an independent life insurance advisory firm.
In 2007, he broke out on his own and started Witt Actuarial Services out of his home in New Berlin. Witt is one of very few fee-only insurance advisors in the country.
“The life insurance industry is an industry made on the basis of trust,” Witt said. “A fee-only insurance advisor is someone who is a true fiduciary that can provide unbiased advice because they are not working on a commission.”
Witt says he only offers advice on what might be in his client’s best interest. He has no special interest in what company they purchase life insurance from or even if they purchase life insurance at all.
“If someone is truly a fee-only advisor, they charge either a flat rate fee or an hourly fee,” Witt said. “They are an independent third party that an individual can turn to for solid advice either when purchasing a new policy or evaluating an existing one.”
Fee-only life insurance advisors can pretty much look at anything involving a life insurance policy, Witt said. That includes developing new policies, or advice on selling, replacing or terminating existing ones. If you’re looking for a flexible term life insurance allowing you to apply to add or reduce coverage whenever you need it, try to read on he ladder life insurance review. Ladder may be the ideal life insurance option for you.
“Life insurance is complicated, you can’t have a one size fits all blanket approach,” Witt said. “Life insurance agents are often limited on what they can sell a customer. I am not. I essentially have access to the entire life insurance market.”
Witt charges an hourly fee of $300 per hour, and typically works with high net worth clients.
“Anybody who has a relatively high net worth; $500,000 and even more specifically $1 million policies in place is going to find more value in my services than someone with a relatively low net worth,” Witt said. “Otherwise they won’t be able to justify the cost of the upfront fees. It has been my experience though, that in my large cases the value of my services far exceeds the costs associated with the hourly fee.”
While it may not be possible in all cases, Witt tries to reduce or eliminate commission costs in policies whenever possible.
“I try to always find the best option for the client, and that may very well be a product with a lower commission,” he said. “Sometimes what I can do is provide clients with peace of mind. Having an unbiased third party look over your policy can be reassuring even if no cost savings are identified.”
The recession has forced people in opposite direction when it comes to his services, Witt said.
“Even though a fee-only advisor is typically interested in saving the client money in the end game, some are more reluctant to pay an hourly fee for something they may consider a luxury item,” Witt said.
Waukesha State Bank, which serves as a trustee for its customer’s life insurance policies, uses Witt’s services to help the bank make good investment decisions for those policies.
“We started looking for a fee only advisor about two years ago,” said Bernie Fiedler, president of wealth management services for Waukesha State Bank. “We needed to find someone who didn’t have a conflict of interest because of commission. When you take away the incentive of commission, you can really see, from a fiduciary standpoint, the qualifications of the ‘expert’ giving us advice. We are very glad we use (a fee only advisor’s) services. It makes it a little easier to justify the cost, when we know the services we receive potentially could save us some trouble and money down the road.”
