3 reasons why a life insurance agent should become Series 65 licensed

By Paul Inserra


The trend and need now is for holistic advisors who have a working knowledge of both insurance and securities. When you build that knowledge effectively on both sides, it is a powerful tool for protecting and growing your client’s assets, and this is really what they are looking for from their advisors.

I have spoken to many life insurance professionals who have questions about the Series 65 and how it can enhance client relationships and make them more holistic. I have received responses that range from the "I am interested" to "I want the regulators off my back" to "I don't want any part of the securities world." This article may help address those concerns and shed some light on the investment advising world.

There are three key reasons why a life insurance agent might consider becoming securities licensed even if they never have before.

1. The law and the regulators

It is well known that a broker without a securities license cannot legally advise a client to sell mutual funds or any other securities in order to purchase life insurance or annuities. The offering of such advice is considered a representation of being in the business of giving investment advice and collecting compensation for that advice. This is the very definition of investment advisor — one that regulators broadly apply.

It will become increasingly difficult to provide comprehensive advice and remain compliant without attaining a securities license. In short, why risk breaking the law and financial exposure for unlicensed actions? Why not simply take a test, pass it, and then be compliant and provide greater service to your clients? In addition, why would anyone not want to be able to talk to their clients about their investments? This raises point number two.

2. Trust and relationships with clients

Providing investment advice builds a much stronger relationship and trust with your clients. Lets face it: Talking about the benefits of life insurance and annuities is a discussion of estate planning and retirement planning issues. Typically, the client's existing monies that they will use for these purposes will come from various accounts, such as taxable investment accounts, interest-bearing bank accounts, traditional 401(k)/IRA and Roth accounts.

So let me state the obvious: All of those accounts are invested in something — typically securities. Each prospect/client has his or her own goals and objectives. Each prospect/client has had various experiences with investments. One client may have no idea of how life insurance, annuities and investments work, and another will have a working knowledge of insurance and investments. Still another will want to delve deeper into the products and ask many questions. However, they all want guidance and advice. It's up to the advisor to help the client understand the pros and cons of every product and help them apply the right mix of products and concepts that will aid them in meeting their goals.
Can we afford to limit our advice and the products that are needed when it comes to our clients' future? In addition to our individual clientele, financial products continually change and become more complicated, and markets can be extremely volatile and uncertain. There is market risk, longevity risk, reinvestment risk, inflation risk, company risk, regulatory and legislative risk, to name a few. As an insurance agent, you understand many risks and the need to protect your client from them. As an investment advisor, you can now help your clients address additional risks, and add to that mix growth, income and yes, even protection in the securities realm. The world needs holistic advisors more than ever. This now brings me to point number three.

3. Staying in front of your clients

Having your client’s best interest in mind requires diligent communication that considers any life changes that may have occurred, any new concerns and the need to monitor and make sure that clients are meeting or on target to meet their set goals. Many prospects and clients will tell you that the main reason they left a previous advisor was due to the fact that they rarely, if ever, heard from that advisor after the initial meetings. Staying in front of your clients as a trusted advisor will build your relationships and lead to more referrals.

Some of your concerns

One agent told me, “I do not want anything to do with the market. I work with safe money only, and I don’t want to have to worry about someone suing me because the market crashes.”

Liability arises from the placement of unsuitable products for clients, not variable markets. When you become licensed, you will be able to address managing market risks with your clients through asset allocation, diversification and dollar cost averaging, to name a few principles of portfolio management.

NOTE: You can never get rid of market risk; however, your clients want and need your help in addressing volatile markets and ways to minimize risk. A risk tolerance profile is required for each client before allocating resources. Discuss risks in the market with your clients in detail, and invest for them accordingly.

Even the most conservative and risk-averse clients are not going to allocate all their money to annuities and life insurance, nor would that be appropriate. What advice can you offer to your client? An approach that only discusses insurance and annuities. And when the client wants to talk about investments, you stop and maybe refer them to an investment advisor? Don’t pass on such an opportunity. As I mentioned before, your clients need and want your help in this area. Obtaining the Series 65 license assists you in providing that help.

Another agent told me how he thought that broker-dealers were after the insurance agents for taking money away from them and were pressuring the regulators to crack down on them, and how unfair this was. I have no idea if that is true or not, but it is entirely irrelevant for you, the agent, because of the previous three reasons mentioned. The trend and need now is for holistic advisors who have a working knowledge of both insurance and securities. When you build that knowledge effectively on both sides, it is a powerful tool for protecting and growing your clients' assets, and this is truly what they are looking for from their advisors. The results are a winning combination for your clients and for you.