Life insurance agents who are limited to selling proprietary products may find it difficult to meet a fiduciary standard as it is being defined by a task force helmed by a fiduciary advocate.
The first draft of the guidelines was developed in June by a task force headed up by Don Trone, founder of 3 ethos. The group is charged with writing guidelines for the sale of life insurance products, as a preliminary step in setting standards for financial planners when they offer clients life insurance within the context of a comprehensive financial plan.
However, the best practices could leave captive insurance agents — that is, those who sell one company's products — on the sidelines.
That's because the task force's standards state that an adviser's or agent's compensation, distribution structure or use of proprietary products should not conflict with the recommendation of a life insurance strategy to a client.
WHO GETS NEW BUSINESS?
“A number of agents have a proprietary relationship and are affiliated with a career company, which means new business should be offered to their primary company first,” said Terry Headley, an agent and managing partner at Headley Financial Group, a special market development office of The
Principal Financial Group Inc.
How captive agents will accommodate the best practices is still to be determined. But disclosure of potential conflicts is a starting point, said Joseph W. Maczuga, executive director of Fee Advisors Network, a consulting firm.
He also is a member of the task force that drafted the standards.
“You have to disclose that you get additional perks for the sale, be-cause if you don't, it's an area of conflict,” Mr. Maczuga said.
Gary Sanders, vice president of government relations at the National Association of Insurance and Financial Advisors, declined to comment on the draft standards, saying he hadn't reviewed them.
Tom Korb, a spokesman for the Association for Advanced Life Underwriting, said it doesn't comment on the work of other groups.
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