July 28, 2010
I am not in favor of establishing a single fiduciary standard as it does fairly represent the mix of my business that is used with my clients. For example, some of my 401k clients ask me to manage there fund choices. For this, I am a fiduciary and an advisor. I am licensed as such and held to a fiduciary standard.
However, if a client asks me to sell them term insurance, this should be based upon a suitability standard, not a fiduciary standard. Why should I be held liable if the client insists on buying a product that is not the right product for their needs? The same is true with Long Term Care Insurance. I might recommend a certain benefit structure and the client might purchase a completely different plan. If the client goes on claim and the benefit structure is less than what I recommended, do they have the right to sue me because the benefit was not appropriate?
In my world as a Financial Planner, there are many products and services that are offered to a client. It is incumbent upon me to do the very best I can for my client and what is in their best interest no matter what license I have. However, when it comes to law suits, it is very important to understand the differences in the products and services offered and be governed on the basis of the merits of that product or service. Thus, the two standards are necessary, and to be governed by.