Everywhere you turn, it seems like everyone is telling you it’s time to invest for the future. Unless you hang out with crackheads, that is. Do you hang out with crackheads?
They bombard you with stupid sayings like “the best time to plant a tree was 20 years ago; the second best time to plant one is now”, without realizing logic obviously dictates that the second best time was 19 years ago. Do the guys who come up with these sayings even think about it, or are they just dumb?
So you decide it’s time, and you diligently save up a few hundred dollarie-dos each month. Soon, you’re sitting on a nest egg of several thousand of said dos. Bill Gates is probably laughing at you, but hey, you worked hard for that cash. Go ahead and punch him in the face.
You know you’re supposed to invest that money, but where should you put it? Mutual funds sound good, but they often have high fees and suffer from underperforming the market. ETFs might be better, but buying them can be complicated, especially for a newb.
So you end up doing with thousands of other people do, and that’s use a financial advisor. Your friend works for an outfit called Primerica, and she seems pretty nice and knowledgeable about investments. Besides, you want to help her out.
Is it a good idea to invest with Primerica? Let’s see.
Primerica calls themselves a “Main Street company for Main Street North America.” What the hell does that exactly mean?
Basically, their premise is this. They believe that it shouldn’t take a fancy office or a bunch of designations after your name to be a successful investment advisor. So they open up their ranks to pretty much anyone who can pass the tests to sell life insurance and mutual funds.
These representatives have two goals. They convince their friends and family to invest with Primerica, knowing that trust is a huge part of the relationship between financial advisor and client. As a secondary goal, these people try to recruit people to work under them.
That’s because Primerica is basically a pyramid scheme. Folks who sign on at the bottom get paid pretty terrible commissions, at least compared to other financial service professionals. But once they get a few people working under them, they get a bigger share of their own sales plus a small cut of what their underlings do. Those underlings get their own underlings, and you’re laughing all the way to the bank.
It gets to the point where some of these advisors don’t even care about helping out people with their investments or life insurance. They just want to sign up more people under them.
Primerica offers quite a few different products. They offer the usual mutual funds and term life insurance, but also debt consolidation loans, critical illness insurance, and pre-paid legal services. That last thing is for those of you still reading who hang out with crackheads.
It has its own family of funds, but reps are free to pick from most of Canada’s mutual fund providers. A full lineup of mutual funds from AGF, CI, Fidelity, Franklin Templeton, and Mackenzie Investments are all offered. Insurance products are through its own insurance company. And the debt consolidation loans are through B2B Bank.
So there are some relatively big companies that have entrusted Primerica agents to sell their products. It’s not a tiny company either. According to the small print I found on the company’s website, Primerica paid out more than $108 million in commission to its Canadian sales force in 2014, at an average of $10,599 per agent. That works out to almost 10,200 agents, which is way more than I expected. But it also shows the majority of its agents are only doing this as a part-time business.
Invest with Primerica
Now we know a little about the company, let’s take a closer look at why you’re here. Should you invest with Primerica?
Uh, Nelson, I’m only here for the pics of hot chicks.
We all are, anonymous reader. How come this blog doesn’t post them anymore? Going downhill, IMHO.
So, remember a few paragraphs ago when I said the majority of Primerica reps only make enough to do it part-time? Well, for a lot of people, that’s a problem.
Basically, the logic goes like this. Passing the mutual fund course in Canada is pretty damn easy; the life insurance course isn’t much tougher. Back in 2010 when I was contemplating a career change, I easily passed the mutual fund course after only flipping through the textbook. The total study time was about three hours.
So if getting licensed isn’t hard, then you’d realistically expect someone to have a lot of experience if they’re going to be managing your money. But logic would dictate that somebody who does this on a part-time basis isn’t very experienced. It’s hard to gain experience as an investor guy if you’re only dedicating 5-10 hours per week outside of your day job to it.
Plus, if you look at the disciplinary action page of the mutual fund dealers association, you’ll find plenty of cases against Primerica agents (look for the name PFSL Securities) and World Financial Group agents (WFG Securities is that company’s operating entity).
I’m not saying every Primerica agent is crooked. What I am saying is sure seems like it’s more likely your Primerica agent is engaging in some bad stuff than somebody from a more traditional firm. This might be because of a lack of experience — it’s common knowledge in the industry that Primerica agents are given very little training, with much of it focusing on building the pyramid part of the business — or because it’s an unfortunate side effect of the business model of leaving the agents alone to go do their own thing. Still, it’s obvious it exists, and it’s something knowledgeable investors know about.
And while Primerica does have a full line of mutual funds, the fact is their offerings aren’t very compelling. There isn’t a low-fee ETF to be found anywhere. If you’re going to be ripped off by expensive mutual funds, it might as well be with a company like Investors Group. At least IG takes professionalism seriously.
Would I invest with Primerica? Nope. Is the average Primerica agent any worse than say the nice mutual fund lady at your bank? Probably, but I don’t think the gap is as big as we all assume. The average Primerica rep works hard and has a keen interest in this stuff. Unfortunately for them, the whole business model encourages people to come into the industry without much experience. This ultimately leads to a higher occurrence of bad stuff, which taints the ones who do take it seriously and view it as an entry level stepping stone to a career in financial services.