Fiduciary & Annuities

Fiduciary & Annuities

May 09, 2024

What does it mean to be a fiduciary? Legally, it means acting in the client’s best interest. I’ve been required to act as a fiduciary since 2004 when I got my CFP® certification, and today shows what it REALLY means. A client was referred to me and was interested solely in fixed annuities - a product I don’t generally use. I did talk to her about other options I prefer like bond funds and CD’s (for reasons I won’t get into here), but she wanted to stick with annuities (she already owned several and wanted to exchange them for better rates). While I manage most investments on a fee basis, we don’t offer any fee-based fixed annuities, so I am only able to sell them for a commission. (Because once sold, they aren’t really “managed” in any way.) We searched the dozens of companies that meet certain criteria and one company was offering the best rates. Curiously, their 4 and 6 year terms paid better than their 5 and 7 year terms.  It turns out they offer those more attractive rates because they pay a lower commission on those terms. I would suspect some commission based agents not held to a fiduciary standard (and some that are) may push the terms with the higher commissions, but I presented the entire lineup and highlighted the higher rates. We ended up with a 6-yr from this company and a 7-yr from another company (to add to her existing 5-yr annuities). I learned from my father early on that doing what’s best for the customer is ALWAYS the right thing to do - fiduciary standard or not. My investment picks do not always have the best results - but I assure you that everything I recommend is because I believe it is part of the ideal portfolio for each client and their needs and risk tolerance.  On the insurance side - we even recommend Medicare Part D plans that don’t pay commissions because it’s the right thing to do. You can trust us to give you completely impartial advice guided only by your unique situation.

Actual performance and results will vary. This case study does not constitute a recommendation as to the suitability of any investment for any person or persons having circumstances similar to those portrayed, and a financial advisor should be consulted for your specific situation.