Trips, Incentives Remain Despite DOL Rule

Incentive trips and other bonus-style compensation are squarely in the crosshairs of the Department of Labor fiduciary rule.

But those strategies remain legitimate options, mainly because they are effective in rewarding and motivating top producers, said Michelle DeClerck, founder and president of Conference Event Management.

DeClerck is leading a session today on effectively using trips and incentives to motivate producers at the National Association of Independent Life Brokerage Agencies (NAILBA) annual conference in Dallas.

DeClerck has been watching the fiduciary rule closely. Most life insurance companies are booking trips as usual, she said, but some broker/dealers “are holding back just a bit."

“They want to take it all in before making a decision,” she said.

The controversial fiduciary rule is DOL’s attempt to extend a “best interest” standard of care to anyone selling in the retirement fund space. Commissions are placed under stringent compliance standards, but will be permitted.

Selling under the Best Interest Contract Exemption (BICE) will enable financial institutions to continue offering trips and other incentives, Fred Reish, a partner at Drinker Biddle & Reath in Los Angeles, said during an October webinar.

The cost is a much tougher compliance regime that includes hefty disclosures, recordkeeping and a signed contract between advisor and client.

Those incentives are important for firms to retain and motivate top producers, DeClerck said. This is especially important to millennials who want to work hard and be rewarded in straightforward fashion.

“Without rewarding the producer, it makes it very tough to keep the top producer,” she said. “Those who find these types of rewards appealing tend to stay with the company because all of the competitors do these trips. It shows that the company cares about them.”

Incentives could become more important to producers as overall compensation continues to fall.

According to Wink’s Sales & Market Report, the average street level compensation for indexed annuities as of the second quarter 2016 was 4.6 percent, the lowest in more than a decade.

It’s not just about sending the producer off to an exotic place as a reward for past performance, DeClerck added. The trip creates a lasting impression and motivates for the next sales cycle.

It is much more effective than a cash bonus, DeClerck said.

“Giving a reward such as cash, there’s no longevity value,” she said. “Once they spend it, the memory of that cash is no longer associated with who gave it to them or how they earned it.”

InsuranceNewsNet Senior Editor John Hilton has covered business and other beats in more than 20 years of daily journalism. John may be reached at john.hilton@innfeedback.com.

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