I recently met a life insurance agent who has been selling financial products for the past 2 decades years. His life has not been too bad. The agency commissions from life insurance, mutual funds, company fixed deposits, and certain other products has been his main source of income. His wife is not earning. Well, technically not earning because he is doing all the work, but earning from an Income tax point of view. Both he and his wife are just graduates, and they are hoping that their children will get professionally qualified, eventually.

With this he has bought a house in Navi Mumbai, he is educating his 2 children in a nice school, drives a decent car, and has annual vacations. His agencies have ensured that he has traveled across the world – South Africa, Egypt, Sri Lanka, USA, Europe – he sells life insurance, mutual funds, land, and second hand cars in the Rs. 1 million + range.

Not too bad, right? While talking to him I realised that he NO LONGER sells life insurance – he stopped in 2015….and is now down to a trickle. He does sell mutual funds and company fixed deposits. His main income is the trail commission from his life insurance business. He had sold ‘conventional’ policies worth Rs. 10 crore PREMIUM. That alone gives him a Rs. 50 Lakhs annual trail or renewal income. This is awesome. Now even if one assumes that this income over the next 10 years will come down (as the policies mature or clients surrender them) he is assured of a Rs. 5 crore future stream of income.

Along with this if he builds up say an AUM of Rs. 250 crores in mutual funds (not impossible for a man who could sell Rs. 10 crores of annual life insurance premium). He will earn a trail income of say Rs. 250 lakhs – and growing (unlike a stagnating trail in a life insurance plan)…

I used to be sceptical about a career in financial services – esp as an agent, but now it does not seem to be so bad after all. Also as the number of people selling mutual funds (banks of course are) is only about 15,000 the scope seems to be improving…

The downside to this for the client is this man will NEVER allow the client to surrender his life insurance policy. Imagine an agent telling a client ‘Please surrender your Rs. 5L per annum premium policy, and get a term insurance form SOME OTHER COMPANY because it is cheaper’. Impossible.

A few days back an agent of X company said ‘I sell only online policies’. According to another agent in the same company, there EXISTS no such agent who sells ONLY online policies. This is easy to understand too. It is almost impossible for an agent to live on just the commission earned by selling online term plans alone.

So when a regulator regulates a part of the business – only mutual funds, he will have to shift the business to his father or son or daughter and pretend that there is an ‘arms’ length. That is of course for another day.

Its our Republic Day today, remember?