While reading the January issue of Advisor Today, the official publication of the National Association of Insurance and Financial Advisors, I came across an apparent conflict of objectives between a feature article and an advertisement.
The article appeared on the back page of the magazine and was titled TRUST=Opportunity. By Marvin Feldman, a respected industry leader, the article points to industry research that indicates public trust and confidence in our business has fallen. The objective, as I see it, of Marv's comments, is to restore that trust through improved inter-personal relationships. He emphasized the importance of integrity in all that we do in the sale and servicing of the products we sell. He also characterized this as an opportunity as well as an obligation. These are truly noble objectives and I completely agree with Marv's admonitions.
After reading Marv's article I flipped the page, which was actually the back cover of the magazine, and beheld an advertisement that appears to pursue a totally different objective, and much in conflict with the Back Page article. The ad featured "Zero Cost Life Insurance," a sales approach designed to attract brokers and prospects.
As I read the ad I thought, "Here we go again asking for trouble." The wheel of history turns again and it appears we may be in for a repeat of problems we faced 40 years ago. In the early 1970s we came under attack for the way we presented our products and the difficulty in making cost comparisons between similar products. The Veterans Administration and the military were particularly critical because of the difficulty veterans experienced in making wise choices when converting their G.I. insurance and new sales of private insurance to active duty military people. It was alleged by critics that then current practices did not portray a true cost of insurance largely because they, for the most part, did not take into consideration the time value of money.
The product featured in the ad I have referenced is a good case in point. Having all your premiums returned to you at some date in the future does not produce "zero cost" because it ignores the time value of money which adds significantly to the true cost of the product.
At any rate, the 1970s sparked interest in developing means by which similar policies could be more accurately compared. The industry produced a couple of "interest adjusted" methods for such comparisons and a few independents came up with other approaches. The most notable of these was the one devised by Professor Joe Belth and was known as the Belth method. While somewhat helpful, my own observation at the time was that the so-called solutions created about as much confusion as understanding.
