National Underwriter, a leading insurance industry trade journal, published an article today titled “Life Industry May Have Won A Fiduciary Standard Battle.”
The piece describes how the life insurance industry is close to victory in its effort to lobby against key elements of the Obama administration’s financial regulatory reform proposal.
At issue is the administration’s recommendation that all financial advisors who offer investment-oriented products be held to a “fiduciary standard.” This means they always need to act in the best interest of their client (as opposed to the advisor’s best interest, or that of the firm they represent).
This is a much higher and more consumer-friendly standard than the current “suitability” requirement applied to most insurance professionals, whereby the only obligation is that they sell products that are appropriate (but not necessarily ideal or cost effective) for each client’s circumstances.
I wrote about this topic, and the negative implications for financial services brands, in an article last fall for Dow Jones MarketWatch. It continues to astound me how the insurance industry vehemently opposes the fiduciary standard without even suggesting reasonable alternatives in its place.
Insurers are focused on the cost, complexity and risks associated with a fiduciary standard – but seem to completely neglect the awful optics surrounding their opposition. What impression do you think average consumers are left with, upon hearing that life insurers are against a proposal to act in the best interests of their clients?
With these latest developments, the life insurance industry may have won the battle, but they are losing a much more important war for the trust of the individuals they seek to serve.