We’ve heard it touted many times. Financial advisors often emphasise their credentials as MDRT members, and it sounds impressive. But as much as we’d like to appreciate it, consumers and those outside of the industry have little idea of what this ‘title’ really means.
MDRT is an acronym for ‘Million Dollar Round Table’. Founded in 1927, the Million Dollar Round Table is a global and independent association consisting of more than 500 companies in 70 nations and territories. The MDRT aims to help financial advisors establish best business practices and develop ethical and effective ways to increase client interest in financial products.
Since we often come across financial advisors when dealing with our personal finance matters, it’s relevant to dive deep into MDRT and understand what it means for us consumers.
How does a financial advisor attain the MDRT status?
There are three main methods for MDRT calculation: the commission method, the premium method, and the income qualification method. MDRT requirements differ across nations and territories, and also changes annually. The requirements are adjusted according to the standard of living and economic status for the nation or territory that particular year.
Let’s break down the three types of qualification methods using Singapore’s MDRT requirements:
The commission method measures the total value of commissions that a financial advisor has earned throughout the year. For 2021, the minimum commission required to qualify is S$69,900.
The premium method calculates the total premium paid for insurance contracts by all of the advisor’s clients. For 2021, the minimum premium amount required to qualify is S$209,700.
Income qualification method
As the name suggests, the income qualification method measures the gross income a financial advisor earns throughout the year. For 2021, a minimum of S$121,900 in annual gross income is required from sales of insurance and financial products.
First-time applicants can use only either the commission or premium method to demonstrate qualification for MDRT membership. Advisors who qualified from prior years are allowed to use the income method to apply for membership.
There are three membership tiers in MDRT: Member, Court of the Table, and Top of the Table. With each membership tiers, there are different sets of criteria to meet.
Members are financial advisors who have simply met the basic requirements to apply for the MDRT membership. The Member is the most basic tier in the MDRT membership.
Court of the Table
Financial advisors who meet the Court of the Table tier have achieved three times the amounts indicated in the basic requirements of a MDRT member. The Court of the Table is the second tier in the MDRT membership.
Top of the Table
To qualify for Top of the Table,financial advisors must have achieved six times the amounts indicated in the basic requirements of a MDRT member. The Top of the Table is the highest tier in the MDRT membership.
What does MDRT mean to a financial advisor
For a financial advisor, attaining the MDRT membership means being internationally recognised as being one of the industry’s top performers. MDRT membership can also help advisors climb the ranks, making them more favourable candidates for leadership positions and be seen as a respected leader in the financial industry.
Back in the early 1900s, qualifying for MDRT meant that the financial advisor had sold at least 1 million dollars worth of life insurance. Today, even though the qualifying criteria have evolved, MDRT can demonstrate the type of commitment a financial advisor has to their clients.
Code of ethics of MDRT
According to the MDRT website, there are 7 ethical codes of conduct members should uphold. They are:
- Always place the best interests of clients above their own direct or indirect interests
- Maintain the highest standards of professional competence by seeking to maintain and improve professional knowledge, skills and competence
- Hold in strictest confidence, and consider as privileged, all business and personal information pertaining to their clients’ affairs
- Make full and adequate disclosure of all facts necessary to enable clients to make informed choices
- Maintain personal conduct which will reflect favourably on the insurance and financial services profession and the Million Dollar Round Table
- Determine that any replacement of an insurance or financial product must be beneficial for the client
- Abide by and conform to all provisions of the laws and regulations in the jurisdictions in which they do business
MDRT vs non-MDRT advisors
There are some inevitable stereotypes about MDRT and non-MDRT advisors in the industry. It is important to bear in mind that a MDRT advisor isn’t always necessarily better than their non-MDRT counterpart. Ultimately, the success and trustworthiness of an advisor boils down to the individual, and achievements such as making the MDRT are just a bonus.
On paper, MDRT advisors, being the top performers in their industry, are expected to be highly ethical. Upon attaining MDRT membership, advisors are expected to uphold the MDRT’s and their agency’s code of ethics. MDRT advisors are also proven to possess the ability to effectively advise their clients on the financial products most suitable for them. This should come on top of the basic code of ethics that all financial advisors should abide by: to uphold principles of integrity, objectivity, competence, and confidentiality.
However, there is no foolproof way to measure a person’s ethics. An advisor’s ethics should not be tied to whether he has attained MDRT or not. It is difficult to tell whether an agent really has their client’s best interest at heart or has intentions on maximising their own commissions at all costs. Ethics as just as it is: it boils down to an individual’s integrity.
It helps to remember that the idea of ‘need’ is almost always employed in a sales pitch, and it’s a term that’s highly open to interpretation. In most cases, you would probably need to do additional research or seek a second opinion before deciding whether you really need a particular insurance plan or financial product. Alternatively, word of mouth is also a relatively reliable method to gauge the ethics of a financial advisor.
But what does MDRT mean for the consumers?
If a financial advisor qualifies for MDRT consistently, it is a suggestion that they are doing something right with their service. Some may be comforted by the stamp of trust that other clients have given to the advisor.
Still, whether your financial advisor is a MDRT member or not does not matter as much as having an advisor who listens and provides professional advice. MDRT can suggest that an advisor has some level of experience, but it does not necessarily demonstrate a higher level of ethics because it is still dependent on individual financial advisors.
In a nutshell
MDRT is a career milestone for those in the industry and an indicator of experience and trust from others. Ethics should be a basic requirement of any financial advisor, not just the MDRT ones.
While MDRT is a prestigious award, it isn’t everything. There are credible advisors out there who have worked extremely hard but did not manage to meet the requirements for MDRT membership, while some may have qualified with some luck, after closing one or two big cases that year.