About The Fiduciary Standard & Annuities
Palante Wealth Advisors
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You know, it drives me nuts how the “industry” fights against a fiduciary standard this advice. So so much risk rests on the head of getting good advice in retirement, and when that gets clouded by the “expert advisor” due to their ability to advance their own interests (i.e. their pocketbook) over a better outcome for the client (who isn’t an expert)….AND you add the fact that in retirement, you can’t easily go back to work to overcome being led astray…there’s no good argument that resonates with me about why the fiduciary standard should not be adopted.?
On the other hand, the constant railing against commissions for insurance products is also…wrong. (See attached screenshot.)?
First, I’ve NEVER received a commission of 8% for a product I’ve placed, never mind 14%-15%. The most I’ve received is 7% and the typical commission is about 5.5%. To be clear, I only offer “really good” products instead of “really bad” products (see screenshot above), and as a consequence, the insurance company is making less guaranteed profit on the product, and offers me less compensation.
Even so, assuming that the average contract term for an annuity is 10 years…even if I was getting paid the max commission I see for my products (7%), my financial interest is actually not to recommend the annuity, and instead to keep the money managed at a custodian like Schwab, where I charge an average fee of 1%…which will net me 10% over the same 10 year period (and perhaps more if the account grows over those 10 years).?
So, the fee-only zealots that believe that commissionable products are the same as being a satanist at the client’s expense…(1) haven’t done the math, and (2) are turning a blind eye to the fact that NOT offering commissionable products, in fact, fails to satisfy the fiduciary standard.?
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Listen, there’s always a conflict of interest. If I am asked whether a client should withdraw $400k to purchase a house, I have a conflict in my answer because saying “yes” depletes the account of $400k and $4k/yr of revenue from that client. The end game shouldn’t be to live in a conflict-free environment — it should be to have a set of professional standards (i.e. the fiduciary standard) to which professionals, like financial advisors, can be held accountable.
It’s worked for a few hundred years for lawyers…and somehow the legal industry has not been ground out of existence due to “lack of competition” created by stricter regulations.?
And in the end, I’m often alone howling at the moon because my fellow advisors doing the right thing for clients welcome more regulation, stricter standards, and a tightening of the industry against predatory practices…but, we are the minority, already among the converted at church, and lacking the financial (and lobbying) power to make an impact.?
Darn…I guess I just wrote a blog post…what is this, 2012?
My thanks to ?? Lynn Grillo for sharing this article and prompting me to write something in response.