Credit bureaus can be misleading: they can make a potential agent look good if you don’t know how to find the skeletons in the closet.
“Hidden within the credit bureau is a lot of useful information that people don’t pay attention to,” said Ian Robinson, president of Greengrass Group, in a session entitled “Hiring Smart,” on employment screening techniques. Robinson said determining the potential of a prospective agent all starts with the credit bureau. “First thing we do when screening [a potential hire] is a credit bureau check.”
He said many just view the process of hiring an agent casually. But that’s when they are dealing with a ticking time bomb.
“Before the credit crunch, we figured that 5% of the people we screen had debt or credit issues.” However, that figure has now shot up to just under 12%. “Those issues could be credit-related, or debt- related, or persistency-related.”
While many debts are just a few hundred dollars, they could be as high as $4.2 million – the biggest debt Robinson has uncovered so far.
Ascertaining an agent’s authenticity
Robinson said the first step is to check the person’s name, as you may sometimes find a number of aliases. He said it could just be that the person’s name has been inputted incorrectly, and so may not be a big deal.
However, Robinson suggested a first clue that something’s amiss: “You go on to residence. Is there stability in the residence addresses? If you’ve got ten addresses, that means the guy is moving when the rent’s due. People don’t pay attention to that. But that’s something you should [consider].”
The next check should be the person’s employment history. If there are many jobs listed over a short span of time, it’s a red flag. “It’s going to show you whether the person has moved around as an employee.” There’s no point in hiring someone who can’t hold a job for long, “because you’re about to invest a lot of time and money into training them,” he said.
And it’s not only how many places, but also the type of work that offers useful telltale clues. “If you’re hiring somebody, you want to know if they have a market,” he said. “Well, if they worked at Tim Hortons, with all due respect, you need to dig a little bit deeper.”
Further, he said, it would be wise for employers to look at the file summary section of the credit bureau. This reveals, among other things, legal items such as bankruptcies and collections.
“Bankruptcy on the credit bureau stays for seven years, and then it drops off,” said Robinson. “But when you go bankrupt again, it comes back, and it will show that there was a previous bankruptcy.
“If you see people with legal items such as collections, I don’t think you should be hiring them, because it shows they can’t pay their bills,” he added. To state the obvious, if a financial advisor can’t control his or her own finances, how can he or she be expected to control those of other people?
The subsection Legal of File Summary uncovers the number of inquiries an individual has had. A very high number of inquiries suggests the person may be a credit seeker, said Robinson.
Another good line in Legal of File Summary is ‘High,’ which shows the highest credit to a person’s name – the most he or she has ever borrowed while on file.
High credit means high monthly payments, which are also embedded in this line. “If he or she’s got to pay $4,000 or $5,000 a month and is only doing $2,000 or $3,000 a month in commission, is he or she a good risk?” asked Robinson rhetorically.
Robinson expanded on why this line is important to look at: the person could “start writing bad business, because he or she’s going to have collection agencies [breathing down] his or her neck.” You want to hire somebody that’s going to succeed, not fail, he said.
Another interesting thing to check is if the person’s inputted date of birth matches the file date of birth. A discrepancy could be merely that the previous person who checked him or her out had, in fact, put in the wrong date of birth, Robinson said. “But it’ll give you a flag.”
Buried in the Banking section of a credit bureau are some further clues: accounts of stolen, forged, worthless and NSF cheques. “They’re your first clues that he or she’s good or bad.”
Robinson said to always look at the individual’s balances. “[If] he or she’s making minimum payments . . . he or she’s not attempting to clear it off.” High credit and high balances are the first step to an agent going bad. This often leads to them moving MGAs. “Because they owe [an MGA] some money, [they’ll] find another MGA [to] jump over to. [The latter] says ‘we’ll take your business’, not knowing that [the first MGA] is chasing them around to get its money back.”
Generally, agents only move for two reasons: because they’ll get an extra five points in commission, or because they owe their MGA, said Robinson.