What do insurance agents and rock stars have in common?

My answer will surprise you. 

I’m reading Brothers by Alex Van Halen.  I’ve just read a section describing their first record contract.  I have read about other rock groups—and this must apply to other music styles too—initial record contracts.  Essentially, they were paid poorly; instead the recording company made bank on their success. 

Why is this? 

Recording companies are out there signing multiple acts looking for the next great superstar.  They KNOW many of the acts they sign will be duds.  To protect themselves, most of the potential revenues for these groups’ initial albums go to the record company, not the band.  It’s a risk management exercise. IF the band makes it, the recording companies know they will find a creative way to break the contract and have a better revenue-share mix with the distributor. 

So, what does this have to do with Insurance? 

Here’s an exercise for you.  If you have ever bought an annuity or a whole or universal life insurance policy, look at the surrender charges (annuity) or when the insurance policy starts to accumulate cash.  I think you will discover it is many years down the road, in most cases. This is generally because the insurance company used the first few years of the policy to cover their marketing and sales costs.  (Note: one of those costs is the commission earned by the agent.) 

A good band’s success will take many years to build.  They can move on to another agent or update the contract to more favorable terms.  Likewise, if you look at your contract, I believe you will find that it is not until years after you get it that it has any real cash value. 

Go look at your insurance or annuity contract and see if I am right😊 

*Note: For more detailed information and sources, please click on the embedded links throughout the text. * 

About Michael Ross 

Michael Ross is a 30+ year veteran financial advisor. After 30 years with Morgan Stanley, he is now an independent financial advisor who excels in helping business owners exit their businesses and move to the next phase of their lives. 

  Investment Advisory Services offered through Integrated Advisors Network LLC (Integrated), a Registered Investment Advisor. Registration does not imply a certain level of skill or training. 

Learn more: www.mylatticewealth.com 

Disclaimer: 

The information provided in this blog is for informational purposes only and should not be construed as financial advice. It is important to consult with a qualified financial advisor to discuss your specific financial situation and goals. Past performance is not indicative of future results. Investing involves risk, and there is always the potential for investment loss.