The FMO Scandal

If you’re starting a business, you begin with a plan. Over the years, that plan is modified about 20 to 30 times before your business runs as smoothly and effectively as you first anticipated. You have high hopes and aspirations to not only make a good living, but to eventually live the life you had always dreamed of as long as you work hard and stick to the plan.

In March of 2001, I found myself learning what an annuity was and focusing on helping a small company become a large company. It was fresh, exciting, and new for me.  It was nothing like I had ever done before.   I was given a phone, a computer, and a list of phone numbers. I was told to start dialing, smiling, and to just say such and such. I had no idea what I was talking about. I didn’t need to at the time.  Annuities were HOT, and every agent needed to sell them.  As far as I knew, that was true.  The less I knew the better.  Right!? Over time, I became the top internal wholesaler in that office.  The company I was working for had positioned themselves to sell, and that’s what they did. They sold to a much larger company.

Turns out, the company I was working for already had their business plan perfected.  They knew exactly what they were doing and what their end goal was. Not knowing their plan, I spent five years creating relationships with my clients (advisors) that would last many years and in some cases a lifetime.  I didn’t think about the wake of disappointment that would be left behind when the company sold.  They weren’t only hurting my clients (advisors); they had misled thousands of consumers into situations that were never explained to them.

There are many Insurance Marketing Organizations (IMOs or FMOs) to choose from: some great, some good and some not so good. The one thing that truly separates these FMOs is their business models and, in some cases, their hidden agendas.

Many independent agents and advisors do not understand how the FMO side of the industry works and how the independent advisors are being manipulated into selling the wrong product, exposing them to future litigation. I want to share my experiences in hopes of enlightening you and empowering you with the truth that may just save the hard-earned future of your practice.

I have been on the wholesale side of the business for over 13 years, and I have seen how the large, well known marketing organizations manipulate their networks of advisors. It’s all planned out from the inception of their business plan.  And this is how they do it.

With the right amount of seed money, an unscrupulous FMO can and will offer most or all of the overrides they are receiving from the backing insurance company to the advisor they are in the process of recruiting.  This is frowned upon by all insurance carriers, but still occurs. This allows them to recruit more advisors based solely on the fact that the advisor can make more money working with that FMO.  This also helps the FMO reach a bonus tier with the backing insurance company they are soliciting product for, based on premium paid in that year.  Once the FMO has gained a large advisor following and has the proof of such volume, they are then free to go to an insurance company, perhaps with a product design already in mind. This product will look great on the outside but smell really funny once you take a sniff.  The product design will be more favored towards the profitability of the FMO and the backing insurance company.  The only way you can tell is by reading a specimen contract and knowing what you are looking for.

At this point, the FMO is huge and they have a very large distribution channel of advisors in the field. These advisors believe in what the FMO has to say and, for the most part, trust the FMO enough to just go on their word.  This makes it very simple for the FMO to get their advisor network to solicit this new “amazing product” to the consumer.  This chain of events is just the beginning of what you need to know.

The FMO in this scenario had planned this from the start. They did not think about the repercussions this would have on the future of the industry or the people (advisors and clients) they were hurting in the process, because ethics was never part of their plan. Their real plan was to sell off to a large insurance company for millions and be out of the future liability loop leaving all the liability on the advisors they recruited that sold the products the FMO recommended. These advisors didn’t know what they were selling because the FMO never truly told them.

Agent: “My FMO said it was great for my clients!”

Beneficiary and attorney : “Can we contact your FMO?”

Agent: “No, they are out of the business”. 

In 2005, many of these FMOs sold and were under a non-compete for 5 to7 years in the process. Well, that non-compete is long gone, and these new FMOs have plenty of seed money to do it all over again. And that is exactly what they are doing.

I am not sharing this information with you in the hopes of recruiting you at my IMO.  I am merely supplying you with this information because you deserve to know.  I have built my business plan on ethics, integrity, and karma.  I can proudly say that I have not swayed in any fashion and will continue to serve both the independent advisor community, as well as the consumer, with full disclosure and the pursuit of always doing the right thing.