Fee Advisors Network News

It is difficult to accept the premise that multiple illustrations address the issue of impartial and unbiased selection if all of the products represented are restricted to the commission venue. Although compensation is not the line of demarcation to the fiduciary issue, it certainly makes it necessary to look at all product venues, including fee adviser policies (no-load, low-load, non-commission products).

Thanks to the SEC, history is in replay mode, and the consumer again is at the bottom of the pile. On April 12, 2005, the SEC adopted Rule 202(a)(11)-1 (aka the Merrill Lynch rule), which appeared to ban brokers from providing financial planning services (i.e., something more than incidental advice) under Washington-based NASD's rules of fee-based services.

While the spotlight of fiduciary standards is focused on investment activity and asset management, only a small number of advisers are connecting the dots to challenge some compromising standards. Debate seems to be so narrowly focused as to miss the larger picture of consumer enlightenment and choice.

Are we sitting on a litigation time bomb with a short fuse? At the FPA Success Forum in Philadelphia, I was invited to speak on the topic of bringing value added service through the use of no-load life insurance on a fee-transaction platform. Since my handout material did not arrive in time, I took the opportunity to integrate some of my concerns about the lack of awareness and fiduciary responsibility into the area of life insurance planning. The transition from the old paradigm of insurance selling to the new paradigm of insurance planning brought to the universe of life insurance practice a fundamental change that was so subtle that most of us didn't recognize it: Fiduciary Responsibility. This paradigm shift occurred with the introduction of a new concept in life insurance design, that being universal life and later, variable universal life.

One of the most perplexing problems facing planners today is how to deal with the current estate tax provisions. The Economic Growth and Tax Relief Reconciliation Act of 2001 has been fodder for count less jokes. As one estate tax attorney stated, the only concrete plan is for the client to decease in 2010. As we all know, the controversial sunset provision reverses all of the act's changes in 2011 by restoring the tax rules in effect before enactment of the law. Hence, while the act totally repeals estate taxes in 2010, any client who survives beyond December 31, 20100, will again face an erosion of up to 60% of their taxable estate.

Illustrations are the basic selling tool of the insurance industry for variable universal life (VUL) products. Unfortunately, clients and most advisors do not understand--or discuss--the many misleading components that are instrumental in the creation and design of these hypothetical projections.