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What Might a Best-Interest Recommendation for Guaranteed Income or Wealth Protection Strategies Look Like?

what might a fiduciary recommendation look like

With its impending rollout in April, the DOL fiduciary rule will treat nearly all financial professionals as “fiduciaries.” As you can imagine, this has brought industry-wide changes in financial services. All types of financial companies, from stock brokerage firms and asset management companies to investment advisory organizations and insurance carriers, have been preparing for compliance. Of course, it also means change for you and other Americans, whether retired or not quite there yet.

If you have worked with a financial professional for investment decisions, you may have heard of a “fiduciary standard.” It is where an advisor holds legal and ethical obligations to provide investment advice in your best interest. In other words, the advisor serves as an impartial, independent guide. He or she is there to help you to make appropriate decisions for your financial future.

Prior to the DOL ruling, financial professionals considered fiduciaries were those paid for advice on an hourly rate or paid a percentage fee based on account holdings. Many Americans are familiar with the concept of a best-interest recommendation from those settings. But with rule’s expansion, recommendations in exchange for other forms of payment, including commissions, will fall under greater scrutiny.

Now, how might this affect retirement investors today? As they retire or get closer to retirement, many people want to get out of speculation and protect their retirement assets from losing value. With two costly market corrections in the past two decades, it’s not hard to understand why growing amounts of Americans want contractual guarantees in their retirement plans – whether for lifelong income certainty, keeping amassed wealth intact, or other financial goals.

Fixed insurance products such as annuities or life insurance contracts offer these protections. But these strategies are paid on a commission basis. You may wonder how this may affect the recommendation process, especially as the DOL ruling reshapes the industry. Read on for some quick facts on what a "best-interest recommendation" for guaranteed income or wealth protection strategies, using fixed insurance products, may involve.

Basics of a Fiduciary Recommendation for Guaranteed Income or Wealth Protection

Careful steps should be taken to maintain advisor objectivity and best interest standard care. As we emphasized earlier, someone operating in a best-interest capacity is obliged to act in your best interest. Under state laws and the impending DOL ruling, financial professionals will need to abide by best interest and suitability compliance standards. Any insurance product recommendations should be what solution(s) align best, if appropriate, with your interests and your complete financial picture.

Part of an advisor’s commitment as a best-interest adherer is to maintain objectivity and impartiality. To that end, a best-interest recommendation should include careful safeguards. Some of these safeguards may include:

  • Overall, a client assessment and recommendation process that enables the advisor to maintain independent objectivity
  • A robust assessment system that accurately and clearly identifies your financial objectives, needs, and other relevant variables
  • In the client assessment, a careful data collection process that gathers objective data-points to help determine income and/or wealth protection needs
  • An independent third-party to authorize any recommendations offered
  • Fixed insurance product options from highly reputable insurance carriers – for example, insurance companies with high company ratings
  • Precise documentation to be able to demonstrate why a particular product recommendation was offered

These safeguards would be in place whether you received a specific product recommendation or no insurance product was prudent for you. Ideally, an advisor could administer and handle these safeguards with an independent planning software solution.

The recommendation should align well with your complete financial picture. Any financial recommendation should consider your complete financial circumstances. When conducting an assessment and analysis of your needs, factors that should be included are:

  • Your specific goals and objectives – for example, do you wish to enjoy an income stream with contractual assurances from a highly rated insurance company, protect assets from market downturns, or accumulate more wealth on a tax-advantaged basis? Have any different or any other goals?
  • Your time horizon – or in this case, the period during which your money is held within a fixed insurance contract. For planning purposes, the length of the contract term may need to line up with your time horizon.
  • Your risk tolerance – a profiling of your appetite for risk and when it becomes psychologically unbearable. Risk tolerance may be measured as a scale of risk preferences ranging from low to moderate to high.
  • Your liquidity requirements – or the proportion of liquid assets you need within your retirement portfolio. For example, liquidity needs may include having an emergency cash fund to pay for unanticipated events, such as emergency home repairs, emergency car repairs, or even sudden medical situations.
  • Your income and complete asset holdings – current income, future income expectations, and as for examples of asset holdings: assets in retirement saving plans like a 401(k), money in bank accounts, securities holdings, and existing insurance contracts held.
  • Timing for claiming Social Security benefits – what your Social Security income payouts are expected to be and how this affects your income picture.

These are just a handful of the variables which a client assessment may include. The point is any fixed insurance product recommendation should be what aligns best with your interests in the context of your complete retirement financial picture.

Why is All of This Important?

Whether the DOL ruling goes into force on April 10 of this year or is changed, delayed, or abolished by the Trump administration, your financial security matters. Whether you desire to keep your life savings safe from market losses or enjoy the security of guaranteed income, any fixed insurance recommendation should be right for you.

Because your future is important, financial professionals equipped to serve in a best-interest capacity may help boost confidence in safeguarding the “safe money” part of your wealth – or the money you can’t afford to lose. At, we can connect you with independent financial professionals offering insights and guidance on preserving this portion of your retirement money.

Use our Find a Licensed Advisor section to connect directly with an independent financial professional, and to request a personal strategy session to discuss your needs and goals. And should you have any questions or concerns, call 877.476.9723.

Author: Ian

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