According to the annual report, Primerica's success is because 'Members of our sales force primarily serve their friends, family members and personal acquaintances through individually driven networking activities'. Accessing a continuous warm market requires perpetual recruitment. We believe that for representatives,this is an unsustainable business model

To get an idea of how successful Primericans access new prospective clients, we looked at a collection of 'Primerica napkin presentations' produced by an RVP in 'Team Unstoppable'. He explains that at Primerica, they simplify financial services. Making concepts easy to understand is the 'reason we get paid the money we do'.

He developed a series of 5 minute stories designed to gain interest. The goal is to introduce yourself, and Primerica, to a new prospect in a way which leaves them ready to book a full appointment. Sharing these strategies with a large team of recruits was a key to his success.

It all starts with how you describe your occupation. They suggest you 'bait the hook', and explain that you work for a company that teaches people things financial companies don't want you to know, 'because it would put them out of business'. We don't agree with this tactic, suggesting that you have access to some secret information is not just untrue, it's unethical behavior.

If you are about to become a Primerica client, these napkin presentations will give you an idea of what to expect. Just like any financial planner, the services can be summarized into, insurance, debt management, tax planning, and wealth creation.

What Services Does Primerica Offer Clients

The napkin presentations gave us an idea of the services offered, and how they sold. Their goal is simplify the services offered by Primerica, and to highlight the benefits of a specific service. One presentation explains that a financial plan is like a house. The strong foundation is life insurance, then after that is in place you can focus on debt reduction and wealth creation.

It is no surprise that the primary focus is on life insurance, we believe that this pays the best commission to repesentatives. Life insurance, and legal protection, are the only products provided directly by Primerica. All other Primerica services are through third party providers.

There are three different presentations about debt management. They all involve getting out of debt faster by making extra repayments. They say they will teach you how to do this once your mortgage is with Primerica. If you have extra funds available, you should speak to your current bank about making extra payments. No need to pay fees for switching lenders unless you are going to make a large saving in interest rates. Here are some free tips we shared a while back about getting out of debt faster

The wealth creation strategies covered in the napkin presentations cover both diversification and dollar cost averaging. They will explain that mutual funds are less risky than owning a single stock because you are protected if something goes wrong with that company, this is diversifiction. Dollar cost averaging is done by making regularly monthly investments into your mutual funds. This means that as prices drop, you buy more units (with the same monthly amount). When prices eventually recover, you have lowered your break even cost.

We saw something about the Rule of 72, they use this to explain that your money will grow faster if the rate of return is higher. They have a table comparing the difference between investing $1,000 at 3% or at 12% over 66 years. 12% being the historic average return of the stock market since the early 1990's. They suggest that investing in mutual funds can achieve this rate of return in the future. Giving investors this expectation is problematic because we all know that, past performance is not an indicator of future performance.

There is nothing new about these strategies, any financial adviser would explain the same concepts. Some financial planners would explain that index funds are even better than mutual funds. Rather than trying to 'game' the market by selecting specific shares, index funds buy the shares in a proportion which copies the index. You won't beat the market with index funds but your investments will always closely match it. Our own research found that most investors underperform the market with mutual funds.

Mutual funds are generally more expensive to operate than index funds. They have to employ people to analyse markets and decide when to buy and sell shares. Index funds just buy shares to match the index and hold them. Index funds charge lower fees, which results in better returns for investors. You can save fees, and potentially improve your returns if you invest through index funds instead of mutual funds.

Primerica heavily promotes their term life insurance. If you have a whole life policy, they will recommend that you switch to term life, and invest the difference. Buy term and invest the difference, is described by Primerica as the 'cornerstone' of their customer offerings. What they don't explain is that with whole life, you are already investing the difference. This is because these policies have an investment component built into them.

The returns you can achieve within a term life policy will depend on which investment options you select. The returns you can achieve with Primerica also depend on which investment options you choose. You might even be able to invest in the exact same mutual funds.

Another important point Primerica seems to have overlooked, is that term life becomes more expensive as you get older, where as whole of life does not. Even though term life might look a lot cheaper while you are young, whole life could end up being the cheaper option if you keep the policy in force until retirement.

So far we have not been overly impressed with this 'one size fits all' approach to investment advising. There is no such thing as a financial strategy that suits everyone. Your personal circumstances will determine which products work best for you. It is possible that you can improve your finances by paying off your home faster or setting up a Roth IRA, but there is no guarantee that these strategies are best for you.