Even Glenn Daily, a fee-only insurance consultant in New York, one of the people I trust most in the industry and a very tough critic, does not have much negative to say about The Insurance Advisor. Daily looked at a sample report and says, "I can admire the work that went into setting up the report, because I know how much time I had to spend doing the formatting for my life settlement service." And, Daily adds, "I certainly don't put [Flagg] in the same category as the other goofballs who pop up from time to time with a new way of viewing life insurance." For Glenn, that's pretty high praise.
Carolyn Lloyd-Cohen, who has her own financial advisory firm, Carolyn Lloyd-Cohen LLC in Clifton, N.J., says she uses The Insurance Advisor to fulfill fiduciary responsibility when comparing two products from two different companies or when deciding whether a client should replace a policy. Recently, a large international bank hired her to tell them whether a client should replace a variable policy. "If you're a good salesperson, you could always talk someone into replacing," she says. But Lloyd-Cohen wants to make sure her advice is objective and that she's doing the right thing for the client. In this case, she was able to tell the bank that its client had the best policy she could get.
"Barry has done a really good job of putting together a program to help you understand who is taking the risk," Lloyd-Cohen says. If she were a trustee on a life insurance policy and she checked the policy with The Insurance Advisorp every three years, she says, "I would feel I was doing my fiduciary duty."
So how did Flagg get involved in evaluating insurance? He says part of it has to do with how much he admired his father, David C. Flagg, who graduated from Yale University in three years and was "putting the words 'financial' and 'planning' together in the late '60s." When the younger Flagg was in college, he thought about doing what his father did. His father told him that the whole financial planning system was set up backwards. The way it worked, Flagg's father said, was that you sold products and then you developed the knowledge you needed to sell them. "If you want to join as a professional, develop the technical excellence first," Dad advised. He also told his son that "the investment and insurance worlds are going to come together. So learn about insurance."
Flagg earned his CFP designation when he was 19 years old and spent three years interning at his father's firm, Deferred Benefit Corporation in the Springfield/Millburn area of New Jersey, while he finished college. He then set out to add insurance expertise to his resume. Flagg worked as a case designer and eventually sold insurance for a number of insurance companies. In the mid-1990s, he began to collect data for what would become The Insurance Advisor. He says he started to put the company together in 1999 because "I thought that no $3 trillion market could go without ratings forever." Flagg says he overspent on technology early on. "I pride myself in being a contrarian but I got caught up in the euphoria of the dot.com bubble."
It strikes me that Flagg may have had another problem as well: His father was a visionary who saw the insurance and investment worlds coming together and who believed that one needed technical expertise to survive in the new financial world. Did he see the insurance world becoming rational? Did he envision insurance agents looking for objective ratings?
I wonder if he would be surprised today to see the great divide between those who sell insurance as a fiduciary for clients and those who shovel it out the door like they are working in a stable. Keith Singer, a CFP and lawyer in Boca Raton, Fla., writes that if insurers could eliminate the cost of distribution and still operate with equal or greater profitability, "I'm sure they would." But the problem for consumers would be that they would have to pay for insurance planning advice on their own, Singer says.
Singer put his finger on the problem. Everyone who buys insurance pays for advice on which policy to buy. Some get unbiased advice. Many get no advice at all.
No doubt Singer is providing prudent advice to his clients. If clients got to choose an insurance advisor separate from the policy, things would look different. Flagg's father was right. Investments and insurance are coming together. Now we need the objective evaluation system to show us which product is best for each client.
Mary Rowland can be reached at http://[email protected]. She has been a business and personal finance journalist for 30 years, a half dozen of them as a weekly columnist for the Sunday New York Times. She wrote a column called "Practice Points" for Bloomberg Wealth Manager for six years. She speaks regularly about money and values. Her six books include two written for financial advisors: Best Practices, and In Search of the Perfect Model.