In the past few years, certain separate professions have blurred the lines. This has been the case for the difference between insurance agents and financial advisors. Some people are under the assumption these professions are the same- due to the term “advisor” adopting a much broader meaning.
Not every professional in the financial world needs to put the client’s best interest at the top.
When one wants to become an insurance agent, they are essentially working with a company to sell the company’s insurance policies to members of the community. They are working towards ensuring that insurance claims are settled quickly and efficiently.
In this article, we will explain the difference between an insurance agent and a financial advisor and why insurance agents are not advisors.
How to Become an Insurance Agent?
A candidate interested in becoming an insurance agent must have minimum qualifications.
They should be 18 years of age. The candidate should have at least passed the 10th examination or any other examination equivalent to it. The individual must provide proof of at least 15 hours of training before taking the IRDA examination.
After passing the examination, the state authorities will issue a licence for the individual, allowing them to practice as agents.
Bachelor’s degrees in subjects like business or economics may also help.
These minimum qualifications are the basic answer to the question “how to become an insurance agent?”
How to Become a Financial Advisor?
The answer to this question is not much different from the information concerning how to become an insurance agent.
To become a financial advisor, the individual should seek a bachelor’s degree in business, finance, law, or economics. This would help them understand the field matter a lot better. A licence is necessary if they are directly buying or selling stocks, bonds, or insurance policies or providing investment advice.
Why are Insurance Agents Not Advisors?
When someone becomes an insurance agent, they represent their companies and must market the company’s products. Not at all times do agents need to put the client’s interests before; they need to talk about the company’s best products.
Unlike a financial advisor, an insurance agent does not need to behave in a fiduciary manner since they are working on behalf of the company.
The major differences
- An insurance agent works for a company; that is, they try to sell the company’s policies. A financial advisor is typically an independent practitioner who works with clients. A financial advisor will not be able to sell individual policies to the clients.
- An insurance agent’s job is to sell the company’s policies to people, not thinking too much about the customer’s financial situation. However, the job of a financial advisor is to first think about the client’s situation and then provide necessary advice or accurate answers to their questions.
- A financial advisor has a much better understanding of the client’s situation, and the main task is to help the client achieve their own financial goal through proper financial planning. An insurance agent only has one major task; to sell the company’s policies and earn commissions.
- At times, after an individual has become an insurance agent, a part of their job also includes some minor research for the changing market. A financial advisor does not conduct any such research.
It is important to know the difference between financial advisors and insurance agents because many agents misuse their identity – they claim to provide “advice” when the underlying objective is to sell their products. Therefore, it is important to understand who one is working with. A financial advisor will listen to the person and share their business ideologies and philosophies.