As an Insurance Agent, Should I Become a Financial Advisor?

Fran Majidi September 13, 2022
becoming a life insurance agent

Not all insurance agents are financial advisors and not all financial advisors are insurance agents. However, when the twain meet, it's nothing short of magic. If you're an insurance agent reading this because you're looking to take your career to the next level and make more money, we have some answers to frequently asked questions for you. If you're only considering becoming a life insurance agent, you should consider selling annuities, something many life insurance agents do.

How Much Money Do Certified Financial Planners Make?

According to the U.S Bureau of Labor Statistics, the average salary of a financial advisor was over 90K in 2016. Compare that to the average insurance agent salary in the U.S. which is in the 40K range. Yes, as a financial advisor you're potentially looking at doubling your salary.

If selling life insurance products and annuities does interest you, know that to become a financial advisor you will need to take some classes and pass some tests. You've got your work cut out for you, but we're here to provide the steps and knowledge necessary to get started on selling life insurance policies and financial planning.

What Does a Financial Advisor Do?

As a financial advisor, you'll be helping new and existing insurance clients make wise financial decisions. You may even manage their money in some cases, depending on your level of expertise in the area of finance. Based on a client's goals, you'll be telling them what to do to achieve short- and long-term financial goals while mitigating risk, often through the sale of insurance products.

Every financial advisor is different. Some financial planners are life insurance agents, others are accountants or financial analysts. Some focus on risk management while others look to retirement and annuities. There are also financial planners who are specialists in working around tax laws to keep more money in their clients' pockets. Some amazing planners do it all!

If your company is looking to offer financial services, the investment in a few licenses will be worth the cost.

Where Do Financial Advisors Usually Work?

Some financial advisors work for small or large businesses, like investment, finance or insurance companies. Others are self employed independent brokers who offer financial services. Either way, most successful financial advisors are good at sales, which is necessary for getting clients to buy financial products.

Insurance agents make great financial planners because they already sell insurance, which mitigates risk. Licensed insurance agents with insurance companies like Farmers or State Farm are highly encouraged to sell whole life insurance and term life insurance. The proper training is readily to enable the agents who want to give clients financial advice as well.

Investors also work with financial advisors, who are independent insurance agents with the right training and credentials required of financial professionals.

How Do I Gain Clients as a Financial Advisor?

An insurance agent who becomes a financial advisor can educate consumers and create a financial plan that goes beyond selling life insurance, health insurance, home, car or business insurance. Many insurance agents have learned that the most cost-efficient way to get new business is to invest in qualified insurance leads instead of creating their own costly marketing campaigns. When you sell a whole life or final expenses insurance policy, why not sell a variable annuity?

On the flip side, if you're a financial planner, why not sell a life insurance policy when a death benefit may greatly serve your client's family members?

Insurance leads can attract many clients seeking financial planning, especially as they near retirement age. Often, you can offer insurance policies as well as financial products to the same customer after you convince them that you have their best interest in mind. In addition to leveraging insurance clients to gain more business than, say, a single auto policy, financial advisors often teach seminars or lead speaking engagements as a means of marketing themselves to an even broader demographic. You'll spend less money buying insurance leads than generating your own clients.

What Do I Need to Become a Financial Planner?

Most financial advisors have a bachelor's degree (or higher; an MBA in finance never hurts) as well as various certificates. In the example of insurance agents also acting as financial advisors, a nice combination is the license to sell insurance as well as a certificate as a financial advisor. The certifications include Certified Financial Planner (CFP) or Chartered Financial Consultant (ChFC).

Life insurance agents can use their life insurance license and a securities license to sell annuities and Roth IRAs when marketing retirement as their area of wealth management expertise. There are different securities licenses (Series 6, Series 7, Series 63, Series 65) and it's important to get licensed in areas that are relevant to the type of management you plan to do for your clients.

Are There Costs to Becoming a Financial Advisor?

Although there are costs (both financial and in terms of time) associated with taking and passing securities license tests, there is a very strong ROI if you choose to expand upon the current services you render to clients as an insurance agent. And just think, you can simply begin upselling all your existing life insurance clients once you're licensed to plan their retirements with investments in the securities market.

What Courses Are Good for Financial Planning?

Important courses to take are in the areas of risk management, investing, estate planning, retirement planning and even taxes. In a real-life scenario, you'll be taking both long- and short-term goals in mind for your clients. They may be trying to save for their children's college fund or they may be looking at their retirement years (whether they be young or old).

With each scenario, you'll need to strategize investments while mitigating risks with insurance packages. The more success you have in maximizing earnings as a financial planner, the more you'll need to safeguard interests with the right insurance products. It's a win-win situation for both parties if you become an expert in relevant areas of finance, the main one being the securities markets. Knowing how to invest in markets wisely will be key, whether your client is open to zero risk or high risk for a return.

What's the Difference Between Fixed and Variable Annuities?

Fixed (or indexed) annuities are a life insurance product. Variable annuities are considered a security. An indexed annuity provides the owner with an investment return that reflects a change in the level of an index, like the S&P 500, while guaranteeing a minimum stated fixed ROI.

Can All Life Insurance Agents Sell Annuities?

To sell a fixed annuity (or indexed annuity), all you need is a life insurance license issued by the state in which you live. There are 5 types of fixed annuities: Single Premium Immediate Annuities (SPIAs), Longevity Annuities/Deferred Income Annuities (DIAs), Fixed Rate Annuities/Multi-Year Guaranteed Annuities (MYGAs), Qualified Longevity Annuity Contracts (QLACs) and Fixed Index Annuities (FIAs).

Because variable annuities are considered to be a security, they are overseen by the Securities Exchange Commission (SEC) and Financial Industry Regulatory Authority (FINRA). In order to be able to sell these, you must either pass a Series 7, which gives an overview of all securities, or you must pass a Series 63 and Series 6 to sell mutual funds and variable annuities. There is also a continuing education requirement to licensure.

Many captive agents, for carriers like Allstate, State Farm and Farmers, are already licensed and are actively selling life insurance and annuities of all types. Some independent agents are also doing the same by buying leads.

In Which States Do Financial Advisors Earn the Highest Wages?

The top three are New York, Connecticut and Massachusetts. According to the U.S Bureau of Labor Statistics, the field will grow by 27% through 2022, nearly double other occupations.

If you're a licensed insurance agent, it's a good time to consider becoming a financial planner. Insurance companies continue to set quotas for life insurance agents because life policies undersold in the U.S. A financial planner has the expertise and credentials in finance to make selling life policies a little easier. Financial know-how is priceless to many Americans wanting investment advice to safeguard their future.

What Else Should I Know About Selling Annuities?

Because it's so easy to sell fixed annuities doesn't mean that you should start selling these without understanding the securities market. It is advisable that you consider studying for the Series 7, which gives you an overview of the securities exchange and how it works. You are, after all, dealing with people's life savings, and one mistake can deal a heavy blow to someone's retirement plans. Taking courses in finance or even investing in a masters in it can only grow your net worth and make you ever more indispensable.