Thank you for thinking about how you can use your insurance background to make the world a better place, and thanks for sharing your thoughts.
I have c 15ish years’ experience in the insurance arena, having worked as an insurance actuary, financial (ratings) analyst specialising in insurance, and a strategy consultant for the insurance space. I’ve also been on the board of several (>5) charities in the UK and consulted for ~10 more charities globally.
I’ll give some opinions about
What can you do to maximise impact through your work
Long-term business prospects for an insurance brokerage firm
How should you position your firm to maximise success
About structuring as a non-profit
First comment – you didn’t state your location, but I’m assuming you’re in the US.
What can you do to maximise impact through your work
You mentioned helping seniors navigate medicare. This is no doubt a good outcome, however I expect that focusing on wealth management and encouraging clients to donate more is likely to be higher impact, taking into account replaceability. As a quick calc, assume you have $10million of assets under administration (not an aggressive target for an established adviser); if you can get 1% of that to be donated per annum that otherwise wouldn’t have been, that could easily outperform your donations (unless you’re particularly profitable/frugal)
Note that financial advisers are currently short on tools to help them make more effective donations. My organisation SoGive is working on this in the UK, and Agora was doing this in the US (although I think they no longer are)
Long-term business prospects for insurance brokerage firms
Financial advisers in the UK and several other European countries is have often (until a few years ago) had a fairly low-stress, moderately high-income life. Which suggests that you might be onto something.
Some argue that this is because insurance providers paid them loads of commission, and this was only possible because commission is not transparent
Several European regulators, led by the UK, introduced new rules which banned commission (UK Retail Distribution Review 2012), introduced penal new training requirements, and broadly made a financial adviser’s business more regulation-heavy and painful. I don’t know how likely this is to happen in the US, but American regulators will certainly be aware of it.
The insurance intermediary sector is also at risk from disintermediation (especially if the commission payments are made more transparent) Having said that, your comment about a well-run online platform suggests that maybe you may be interested in actually *being* one of the disruptors, in which case you would stand to benefit from this risk. If you are going down this route, I don’t anticipate that it will be the easy life that some brokers have had.
How should you position your firm to maximise success
For a vanilla financial advice service, I am sceptical about the value of advertising the non-profit nature of your business. It risks creating confusion about the positioning of your service
However, if you provided financial advice covering ethical investments, structuring your business as some kind of non-profit may have some brand value. Even then I’m doubtful.
Note that “some sort of non-profit” includes options which are much cheaper/easier than a full-blown 501(c)(3), see below for more
Offering ethical investment advice could also (maybe) make sense from an impact perspective; if you advertise yourself as offering ethical investment advice, you could, as part of the advice, explain why donating is likely to outperform (i.e. because of counterfactuals).
If you are focusing on providing investment advice, I would encourage you to position yourself as a “holistic” adviser or “financial planner”, or failing that, at least a “tax specialist”; I would encourage you away from “investment specialist”. (Let me know if you would like me to expand on this point; also not sure if these terms transfer well across the Atlantic)
About structuring as a non-profit
As mentioned by other commenters, it’s unlikely for you to want to structure your organisation as a 501(c)(3) – lots of cost/effort and little upside. If your donations are going to tax-exempt (501(c)(3)) organisations, there’s no real tax benefit from you doing this
I haven’t checked if other commenters have covered this, but other options include a straightforward ltd company with adjustments to the constitution to stipulate that the profits must be donated, or maybe even just a non-legally-binding pledge. (I know this is possible in the UK, I imagine it’s possible in the US too). You could also be a B Corp. In the UK there is also the option to be a Community Interest Company (or CIC) – I don’t know of any similar option in the US (B Corp might be the closest thing you have to this)
Lastly, if you’re open to more wacky ideas, I’m more positive about micro-insurance than earning to give in the US. Your personal circumstances may not allow for this, but a few years working as a broker in the US, saving (not donating much) and then a few years selling insurance to the very poor (or trying to!) is likely to enable you to have more impact than this plan, assuming you have flexible skills and are able to learn lots of new skills quickly. (note: I can’t promise that everyone will agree with me on this) This attempt may fail, however it would likely teach you about what is needed to make insurance sales work better for the bottom billion, which may then make you better placed to work in micro-insurance sales for a micro-finance institution or become an entrepreneur.
Finally I’ll mention that I only check the forum occasionally, so apologies if I forget to look back soon and therefore provide slow responses to any more questions on this.
Thank you for thinking about how you can use your insurance background to make the world a better place, and thanks for sharing your thoughts.
I have c 15ish years’ experience in the insurance arena, having worked as an insurance actuary, financial (ratings) analyst specialising in insurance, and a strategy consultant for the insurance space. I’ve also been on the board of several (>5) charities in the UK and consulted for ~10 more charities globally.
I’ll give some opinions about
What can you do to maximise impact through your work
Long-term business prospects for an insurance brokerage firm
How should you position your firm to maximise success
About structuring as a non-profit
First comment – you didn’t state your location, but I’m assuming you’re in the US.
What can you do to maximise impact through your work
You mentioned helping seniors navigate medicare. This is no doubt a good outcome, however I expect that focusing on wealth management and encouraging clients to donate more is likely to be higher impact, taking into account replaceability. As a quick calc, assume you have $10million of assets under administration (not an aggressive target for an established adviser); if you can get 1% of that to be donated per annum that otherwise wouldn’t have been, that could easily outperform your donations (unless you’re particularly profitable/frugal)
Note that financial advisers are currently short on tools to help them make more effective donations. My organisation SoGive is working on this in the UK, and Agora was doing this in the US (although I think they no longer are)
Long-term business prospects for insurance brokerage firms
Financial advisers in the UK and several other European countries is have often (until a few years ago) had a fairly low-stress, moderately high-income life. Which suggests that you might be onto something.
Some argue that this is because insurance providers paid them loads of commission, and this was only possible because commission is not transparent
Several European regulators, led by the UK, introduced new rules which banned commission (UK Retail Distribution Review 2012), introduced penal new training requirements, and broadly made a financial adviser’s business more regulation-heavy and painful. I don’t know how likely this is to happen in the US, but American regulators will certainly be aware of it.
The insurance intermediary sector is also at risk from disintermediation (especially if the commission payments are made more transparent) Having said that, your comment about a well-run online platform suggests that maybe you may be interested in actually *being* one of the disruptors, in which case you would stand to benefit from this risk. If you are going down this route, I don’t anticipate that it will be the easy life that some brokers have had.
How should you position your firm to maximise success
For a vanilla financial advice service, I am sceptical about the value of advertising the non-profit nature of your business. It risks creating confusion about the positioning of your service
However, if you provided financial advice covering ethical investments, structuring your business as some kind of non-profit may have some brand value. Even then I’m doubtful.
Note that “some sort of non-profit” includes options which are much cheaper/easier than a full-blown 501(c)(3), see below for more
Offering ethical investment advice could also (maybe) make sense from an impact perspective; if you advertise yourself as offering ethical investment advice, you could, as part of the advice, explain why donating is likely to outperform (i.e. because of counterfactuals).
If you are focusing on providing investment advice, I would encourage you to position yourself as a “holistic” adviser or “financial planner”, or failing that, at least a “tax specialist”; I would encourage you away from “investment specialist”. (Let me know if you would like me to expand on this point; also not sure if these terms transfer well across the Atlantic)
About structuring as a non-profit
As mentioned by other commenters, it’s unlikely for you to want to structure your organisation as a 501(c)(3) – lots of cost/effort and little upside. If your donations are going to tax-exempt (501(c)(3)) organisations, there’s no real tax benefit from you doing this
I haven’t checked if other commenters have covered this, but other options include a straightforward ltd company with adjustments to the constitution to stipulate that the profits must be donated, or maybe even just a non-legally-binding pledge. (I know this is possible in the UK, I imagine it’s possible in the US too). You could also be a B Corp. In the UK there is also the option to be a Community Interest Company (or CIC) – I don’t know of any similar option in the US (B Corp might be the closest thing you have to this)
Lastly, if you’re open to more wacky ideas, I’m more positive about micro-insurance than earning to give in the US. Your personal circumstances may not allow for this, but a few years working as a broker in the US, saving (not donating much) and then a few years selling insurance to the very poor (or trying to!) is likely to enable you to have more impact than this plan, assuming you have flexible skills and are able to learn lots of new skills quickly. (note: I can’t promise that everyone will agree with me on this) This attempt may fail, however it would likely teach you about what is needed to make insurance sales work better for the bottom billion, which may then make you better placed to work in micro-insurance sales for a micro-finance institution or become an entrepreneur.
Finally I’ll mention that I only check the forum occasionally, so apologies if I forget to look back soon and therefore provide slow responses to any more questions on this.