Why Commission Stinks when Obtaining Financial Products!

October 14th, 2012

Why Commission Stinks when Obtaining Financial Products!

The financial industry, from investments and insurance to mortgage and lending, has always relied heavily on agents or employees being structured as commissioned employees.  You might be asking yourself what this has to do with you and why it is important?

I personally have spent nearly twenty years in this industry and have had the opportunity to work in these commissioned environments.  I have built my own mortgage-banking firm, twice, in addition to working for independent companies, wholesale lenders to large and small community banks.  One common theme continually keeps coming to fruition.  One theme or truth, that continuously arises, is a direct result of the income structures these organizations employ (and other organizations in investments and insurance).  These practices are deeply flawed for many reasons.

Let me explain what I have learned through these experiences.  First, let me show you a working – successful - model of what this income stream or structure looks like.

Example 1: Commission Pay Flow Chart:

More business = more income and pay = employees meeting fundamental survival needs = more profit for an organization

You might be asking yourself what the problem is with this, because I did too.  It wasn’t until I factored in ALL the variables that I realized some fundamental problems.  Now, I am a fan of paying employees for production.   I am also a fan of paying employees on the results of their hard work including high customer service scores.  This is where it gets interesting.

Most employees in the financial industries sector - at least in sales - are not provided a living wage or base salary to support their families or selves.  Now, most companies will refute this statement.  However, in doing so, they leave out one key fact.  This fact is, that while companies who claim to provide this “living wage” do so in the form of a draw.  In almost all cases this draw, or living wage as it is many times called, is recoverable upon future commissions earned by an employee.  This means that the “living wage” is merely a way to avoid many loan officer pay rules or labor laws.  It is in essence a way to avoid the governance of employee pay.

So, having looked at this for a moment, lets now look at a working – unsuccessful – model of what this income stream or structure looks like and the impacts on you the consumer.

Example 2: Commission Pay Flow Chart:

> More time with a customer educating them appropriately =
> Less overall transactions (sales) =
> Less money and ultimately less profits for the financial entity =
> Less profit for share holders =

NET RESULT

> Less commissions for sales people (employees) =
> Inability to pay their bills when educating customers appropriately
(less income from sales compounded by no base income support) =
> Disengaged or actively disengaged employees =
> Customer experiences on the decline =
> A long term sustained loss of customers and revenue

Now, I am not saying that the mortgage and financial crisis of 2008 and 2009 are solely a result of this income structure.  What I am saying is that when an employee has no support through a living wage, they are forced to transact as much business as possible in order to meet their fundamental physiological and safety needs under Maslow’s hierarchy of needs.  The lack of this practice places that employee in a quandary.  It forces them to choose between spending the appropriate time with a customer educating them on the financial products they seek and providing for themselves and their families.

As a business owner, this creates a massive problem.  If you look at the year over year results of the Gallup Q12 survey results (a measure of employee happiness with their job and work), you will see the high percentage of employees who are disengaged or actively disengaged.  This practice is rooted in the Gallup results which state that today 71% of the workforce suffers from disengagement or active disengagement.

I have also spent years in my undergraduate and graduate work at Doane College exploring this exact subject.  Through my own research (and my business experience) I have corroborated the Gallup findings regarding employee happiness factors and engagement.  Additionally, You can read the research here under Matt Fuller’s e-portfolio.

At KeneXsus, our mission is to help you become educated about the financial products you obtain independent from someone who may be forced to choose between doing so and feeding their families.  It is unfortunate that the business community and the public have come to this cross roads, but it is a reality a consumer today must face.  So, take charge of your financial education and future today by utilizing the KeneXsus approach.

The KeneXsus Team

The Importance of Understanding Financial Products!

The Importance of Understanding Financial Products!

You might be asking yourself why the KeneXsus IVL’s (Interactive Video Lessons) matter and are the difference maker in what we do versus other companies who imitate our program and approach.

Our IVL’s break down all the things you always wanted to know about financial products from how they work to the associated charges and fees.  We do this in an unconventional way by explaining them at their lowest common denominator and in an easy to understand format.  Our members can then use this knowledge before they go and obtain a financial, insurance, mortgage or bank products.  This may seem insignificant but lets look at one exact example of its importance.

In our mortgage IVL section we break down lots of things but one portion in particular walks members through the various types of lenders in the marketplace.  During these lessons we walk members through how each of these lenders are compensated.  Through a move as simple as choosing and comparing one lender versus another through our approach you could save between $300 and $500 on your next mortgage loan.

We reveal many other money saving tips and tricks to financial products in our IVL lessons.  This is a small glimpse at the education we provide and why it can benefit you and save you money.  We believe this is the one approach no one is trying to provide, a means to create real meaningful changes in your personal financial life. 

We decided on this approach because no one else was utilizing it.  Many companies provide lists of ratings, which are helpful, but the real change comes from going a step further and combining ratings while educating the public so permanent change can occur.  A similar saying goes, catch fish and feed an individual, but teach that individual to fish and feed an entire village!

One final point is what sets KeneXsus apart from other free sites that provide ratings.  The first issue is that most only focus on the negatives instead of also encouraging its members to point out the positives.  The second point is that they do not (in the majority of cases) provide any sort of education.  Finally, free sites can be gamed by its users.  This means that companies can log in and create false rankings because the ratings are not verified.  The problem here is that you are being handed a false sense of value of any ranking or rating you may be viewing. 

We certify our rankings are coming from the public, our members, and not stacked by agents or companies who you may rate.  Here is a link http://www.kenexsus.com/index.html to our site so you can watch some great introductory videos that will speak more in depth about what we do at KeneXsus everyday.  Here is another additional link http://www.kenexsus.com/kenexsus-mission.html with more in depth knowledge about us should you want to learn a little more.  Make sure to contact us soon (just send an email to administrator@kenexsus.com with your name and email) about joining our BETA launch, as we are only 3 weeks away.  Thank you all for your support and your feedback, keep it coming!

 The KeneXsus Team