Groundhog Day or April Fools?

As I write this, it's 4/1/10...April Fool's Day. So when I saw the IPO for Primerica roll out of Citi today and close up over 31%, naturally, I thought it was an April Fool's joke. How could the least sophisticated, multi-level marketing, slightest educated and lowest in the food chain of financial product distribution forces hit the street with such resounding success? It must be a joke...right?...Nope, it actually happened. Who knows where the stock goes from here and now that it's out from under the umbrella at Citi, whether the warts will begin to show. But today, it's no joke....they hit the street running.

The phrase often used for product and commission driven distribution folks like Primerica goes like this; " To a hammer, everything looks like a nail". Primerica grew to 100,000 reps by hiring auto mechanics, teachers, butchers and anyone who would sign on to find whole life insurance policies and replace them with term insurance so they could "invest the difference". A compelling idea, except that human behavior being what it is, few ever invested the difference. But to Primerica, every person was a nail and the only tool in the box was the hammer of term insurance and a highly loaded mutual fund. Sounds horrible, except it's happening in too many facets of the business even in the more so called sophisticated of markets.

If you're an insurance agent focused on the retiree market selling 12% commission equity indexed annuities, you'll be pulling that hammer out of your tool box every chance you get. Many B/D advisors seem to focus single mindedly on the rollovers where the only hammer they have is a variable annuity. The same could be said about the fee only segment of the business. If all they have in their tool box is asset management for a fee, that tool will be the only thing coming out of their box as well. As a participant and observer of the financial services business, particularly the retail segment, I've been hopeful that the long anticipated financial services reform would bring clarity and closure on the future direction so we could march forward accordingly with positive, lasting change for the better. With the advances made in our society over the past several generations, a day like today is a reminder that our financial services business hasn't really advanced much at all. It's the movie "Groundhog Day" all over again, and again...and again.

But change will come. It's probably going to be more of the evolutionary type than wake up one day and find regulations completely revolutionizing the entire industry as we may have thought would happen a year ago. The fact that Primerica is still standing today with the regulatory and legal issues being what they are is really amazing. It tells me that the appetite for retail financial services is unlimited and if a firm like Primerica can have any semblance of success, then for firms that really know what they're doing, the sky is the limit. But then again, maybe it will prove to be an April Fool's joke after all. We'll see....