What is this Million Dollar Round Table (MDRT, COT, TOT) thing insurance agents and “financial advisers” like to put on their name cards and Instagram profiles? Does it mean they are great advisers, or does it mean they earn a lot of money?
MDRT stands for “Million Dollar Round Table” and if you head over to their website, the number 1 item listed under their requirements is Production Requirements, and they spell out the amount of commission, income, or premium required for a person to achieve the three different levels: MDRT, COT (Court of the Table), and TOT (Top of the Table).
The lowest tier already requires some $237,000 of premium to be sold, and one can only imagine how many policies that’d take… Actually we could use a calculator to work it out: a term policy for a young working adult in her mid twenties covering $400,000 in death and critical illness coverage costs around $600 to $700, and the cheapest I could find with a cursory look costs $616 a year. One would have to sell almost 385 such policies to reach MDRT. That’s more than a policy sold every single day in a single year… what a productive agent!
Let’s not forget the agent would need to meet probably more than one person to close each policy since not everyone is going to buy. A closure rate of 33% means that he/she would have to meet 1,152 prospects a year… or more than twenty appointments in a single week. Imagine the hours spent on fixing and meeting these appointments – if you’ve ever done any prospecting work you’d know how much time this would entail (and suffer some sort of post-traumatic stress).
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Realistically, he/she would be selling whole life policies, ILPs, and/or savings plans which easily push thousands of dollars per year even for young people. It’s so much easier to encourage people to “save” for their future and turn up the premium amount, and if you consider a $3,000 average policy size, MDRT is now a lot easier to hit: just 79 clients a year would do, or about 6.5 such policies sold a month. Even this isn’t that easy, so imagine trying to get to MDRT selling term, or do the Math if one were to hit COT or TOT.
Code of Ethics
I have much to say about the different items on the website’s Code of Ethics (and you can hear about it on my YouTube video), but to keep brief I’ll focus on the parts where they supposedly require qualifiers to place their clients’ best interests above their own direct or indirect interests, and having to make full and adequate disclosures of facts such that clients can make informed decisions.
My question would be: do agents really fulfil these requirements? Is recommending ILPs, savings plans, and whole life policies putting clients’ interests above that of the agent? Do agents and “advisers” properly and fairly explain strategies like “buy term invest the rest” to their clients?
These are open-ended questions you can answer yourself.
Income is a poor barometer of an adviser’s ability
At the end of the day, MDRT seems to me to be more of a celebration of one’s income, and says nothing about an agent’s ability to aid you in your financial goals. If anything, given the commission-based nature of the job, one has to wonder whether or not having such awards is a warning sign.
Using income to bolster’s one credibility as a financial adviser is also pretty tasteless, and I say this as someone who does reveal things like my tuition earnings publicly. I would never wave my income in front of my tuition kids or parents as an indication of my teaching abilities. If anything, I would be slightly horrified and embarrassed for any of my tuition customers to find out how much I earn, and indeed that should be the case particularly for insurance agents! Given that they are remunerated by commissions, agents should be justifying to their clients why and how they earn a certain level of income, not wearing it like a badge of honour on their name cards and social media profiles.
Worse is that how much a client pays his agent is often a big mystery, and it’s referred to as “distribution costs”. Why is it such a cryptic term? The exact amount of commission should be placed squarely and prominently on the first page of every insurance contract:
Are all MDRT agents bad then? I don’t think so; some may have high networth clients, and… I don’t know maybe the mythical person hitting their MDRT by selling term policies to working adults does exist after all. But as an ordinary consumer, I would personally be very cautious and sceptical if my agent has these logos, and you should probably be too.
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