What is Million Dollar Round Table (MDRT)?

dollars mdrtVery often insurance agents and financial advisers would state in their name cards that they are members of the MDRT. You can also see it in the newspaper when photographs of MDRT members are splashed in full page. So what is MDRT? Are they millionaires?

Quoting from the website HERE:

Founded in 1927, the Million Dollar Round Table (MDRT), The Premier Association of Financial Professionals®, is a global, independent association of more than 43,000 of the world's leading life insurance and financial services professionals from more than 500 companies in 67 countries. MDRT members demonstrate exceptional professional knowledge, strict ethical conduct and outstanding client service. MDRT membership is recognized internationally as the standard of excellence in the life insurance and financial services business.

As it can be seen from the above, that members of MDRT demonstrate exceptional (1) professional knowledge (2) strict ethical conduct (3) outstanding client service.

So how does a financial adviser qualify to be member of the MDRT? A check at this page HERE shows that there are altogether 14 pages of requirements. However, the entire 14 pages are details on how to calculate the production (sales) requirements either in first year commissions or first year premiums. For example for year 2016, the qualifying commissions that a Singapore adviser must earn in order to be a member of the MDRT should be at least S$128,500 to qualify for the MDRT. A least 50% of this must come from products’ first year commissions. Note that many life insurance products pay commissions over a few years. The fact that only a minimum of 50% must come from first year commission means a fee-only adviser will never qualify for MDRT!

The qualifying commissions are even higher for Court of the Table (COT) and Top of the Table (TOT).

So what about the part on “strict ethical conduct” and “outstanding client service”? It appears to me that these are “outsource” to other parties. For example, Singapore MDRT members must also be a member of Association of Financial Advisers of Singapore (AFAS), Financial Planning Association of Singapore (FPAS) or Insurance & Financial Practitioners Singapore (IFPAS). I guess the assumption is that these associations would verify the ethical conduct and client servicing quality. However, as far as I know, neither AFAS, FPAS nor IFPAS conduct regular mandatory audit on its members’ real life client cases to verify its members ethical conduct and competence (which is part and parcel of excellent client services).

In other words, membership into MDRT is purely based on your sales!

Although the MDRT has been well recognized by many financial practitioners as a measurement of their success, the organization must transform itself for the future. For instance, the focus on first year commission in its calculation of production eligibility encourages aspiring candidates to focus on short-term sales rather than long-term relationships. It also places too much emphasis on sales with little emphasis on ethical conduct and competence. Relying on outside associations which do not conduct mandatory audit on its members defeats the purpose of MDRT members demonstrating exceptional strict ethical conduct and outstanding client services.

These days, being a member of the MDRT is synonymous as having achieved a certain level of income. Those who claimed to be a member of the MDRT are indirectly saying to their customers and peers the kind of income they are earning. Frankly speaking, I find this quite tasteless. Professionals like medical practitioners, lawyers, accountants and engineers do not tell others about their income although it is a common knowledge that many of these professionals are extremely wealthy. Moreover, humility is a virtue which should be embraced. Why financial advisers focus so much in becoming member of the MDRT, COT or TOT? It is because the job of a financial adviser is ultimately a sales job. A successful salesman is strictly measured by the amount of sales he brings in to his company and ultimately the income he earns. Nevermind whether he is competent or ethical.

Someone joked with me that financial advisers are in the business of helping to plan for financial independence - not the client’s financial independence but the adviser’s own financial independence.

If you are a financial adviser, may I invite you to subscribe to my newsletter on how to be an ethical financial adviser: HERE .

Update 15 January 2016: This article was updated to the most recent MDRT figures and requirements.

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