This time last year I was, in my off time, working toward becoming an Independent Representative for Primerica (PRI). I was motivated in this goal for two reasons: 1) The ability to earn an extra income, the use of which was almost 100% intended to replace my lost savings/investment accounts 2) To become licensed for Financial Advising, which is possible through the Primerica pipeline.
I had a very good friend who was also working on this. Part of our weekly routine was going to team meetings on Friday evenings and then another meeting on Saturday mornings. I had a good time in all of this and met some very nice and interesting people. Like many (most?) Multi-Level Marketing programs there is a certain aspect of Primerica that is reminiscent of joining a cult -- believe me, I have done both -- and being wide-eyed mindful of this I went along with the flow of things.
The mission of Primerica in general is quite pure -- To bring Wall Street to Main Street and help educate families about how money works. They attempt to accomplish this by teaching about the world of finance and make the same tools accessible to their clients that the Wealthy use to build and grow their wealth. Primerica teaches a lot of good concepts. Paying yourself first, the rule of 72, debt stacking, the high cost of waiting. In general the idea is to convince people to tackle paying down their debt and to invest in their future.
The path for a new Representative is to become licensed to sell Life Insurance, book a certain amount of life insurance business, then become licensed to sell Mutual Fund products. My goal was to become licensed to sell Mutual Fund Products as this license is "portable" and I could apply at "more legitimate firms" already having this license in place.
But why do I use the term "more legitimate firms". Is Primerica not legitimate?
To a certain degree, certainly, Primerica is legitimate. And since it is a direct marketing organization the connection between end clients and their representatives are often times quite close -- family, friends, neighbors, social peers -- and as far as Insurance Products go, I have no issue with Primerica. The general practice of "Selling Term and Investing the Difference" is a tremendous advantage for most households who truly follow the path of building their financial home the right side up. IN FACT, I believe in this core mission so much I will be devoting space to it here and elsewhere as a reference to my reading audience.
The problem are the Mutual Fund products that Primerica has on offer. They are all, without exception, FRONT-LOADED FUNDS. Which means that any amount you roll over or invest will have a NOT SMALL percentage (think ~5%) that is taken as "fees" and out of this fee your representative (and their upline and Primerica-Prime) get paid. Not to mention they also sell fund-class shares with proportionally much higher management fees than what is available on the open market in most cases.
I became aware of this soon enough into the process (thanks to an article I read on Seeking Alpha which has now been archived into the Pro-Only section) that I simply resolved myself to NOT SELL to any family, friends, neighbors or social peers with whom I wanted to maintain said relationships. Maybe some folks out there could live with the practice of selling such a product to someone who is not informed enough to know the difference and sleep well at night, but I already have trouble sleeping and chose not to go down this route.
My friend was laid off from her job and so became intent on replacing her employer of 15+ years with Primerica. I honestly rooted for her success.
My breaking point in the whole endeavor came when our Team Leaders convinced her to roll her not-small 401k retirement savings into Primerica Front-Loaded Funds. Of course they would profit and of course she would lose out. I tried as I could to explain to her that she could JUST AS EASY and NOT LOSE A SINGLE PENNY roll that retirement savings into an IRA at any one of a handful of providers -- get a bonus for doing so in most cases -- and buy low-cost index funds.
If you already have a trustworthy financial adviser, the IRA rollover approach may be best. Some 401(K)s have limited investment options. Some, sadly, lack good service and support. Rolling your old accounts to an IRA can give you a broader range of investment choices. But beware when seeking advice. Some brokers and non-fiduciaries encourage rollovers, then prod you to buy pricey and inappropriate funds that pay them over-the-top commissions.
The key being TRUSTWORTHY.
I realized at this point that I could never respect those Team Leaders in the way that I had up until that point ever again. No longer was being associated with Primerica -- even if the ultimate goal was ONLY to get the licenses and to port those to another employer -- a tenable situation so I ceased immediately.
It became apparent to me near the end that I could achieve the goal of Primerica in general -- bring financial and investing awareness to my friends and family -- doing what I already do: Writing on Seeking Alpha and elsewhere.
Friends Don't Let Friends Invest in Front Loaded Funds.
Disclosure: I/we have no positions in any stocks mentioned, and no plans to initiate any positions within the next 72 hours.