August 7, 2010
Please understand up front that, as a Certified Financial Planning Professional, I am already and voluntarily held to a fiduciary standard. The reason I am commenting is that I believe the problems suggesting the standard is a solution are not as well solved by it as enforcing existing suitability standards on companies.
As a 28 year producer and 20 year professional educator it is my firm belief that many company compliance departments are little more than rubber stamp units. I happen to work with a company that is very stringent in applying the existing standards of both FINRA and the NAIC as well as IMSA so I am regularly stunned when competing companies turn a blind eye to inappropriate replacement of both guaranteed insurance contracts and reasonably priced investment management accounts. In the past year I have witnessed brokers replace mature insurance contracts with permanent minimum guarantees of 4.5% (which are no longer available through any carrier) with higher fee, lower guarantee variable accounts. I have also witnessed insurance brokers replacing well managed transparent fee investment accounts with index annuities sporting annual floating fees not disclosed as fees (spreads, caps and surrender charges) or variable contracts with layered fees (resulting in a substantially lower guarantee than expressed) by playing upon client fears. Shame on the unethical producer, but greater shame on the "compliance" officer that accepts it whether they are a securities or insurance firm. Start holding companies liable and you'll see compliance much more seriously applied. That will prevent consumers from being hurt as opposed to offering relief to the few who ever are able to determine that they've been misled.
Laurie Adams, CFP, CLU, LUTCF
President of NAIFA-Illinois