INSURANCE AND FINANCIAL FORUM

Transcription

1 FOUNDED IN 1927 AS SAN ANTONIO ASSOCIATION OF LIFE UNDERWRITERS (SAALU) INSURANCE AND FINANCIAL FORUM Fiduciary or Suitability or Both? By Frank Bearden, PhD, CLU If you provide investment service to your clients, do you tell a potential client that you offer investment advice in your clients best interests? Do you use the term "fiduciary" when you talk about your relationship with a client? If the answer is "yes" you may be taking on more responsibility than you intend. The point of this article is to review the ethical and regulatory responsibility of serving investment clients at either the fiduciary or suitability level, or both. Ethics What is a fiduciary? In legal and commonly accepted terms, a fiduciary has the obligation to act in the best interests of another party. So, when a financial advisor tells a potential investment client that he or she provides service in a client s best interest, the advisor is saying he or she has a fiduciary relationship with the client. The fiduciary relationship assumes two key points: First, when the advisor provides financial advice to the client, the client s best interest is the advisor s highest concern. Second, all other personal or professional interests the advisor has that might conflict with the client s best interests are eliminated, reduced as much as possible if they can t be eliminated, and clearly disclosed. The prospective client then can trust that the advisor holds no conflicts of interest, or what s more likely, can openly view the conflicts the advisor does have. Then the client can make a fully informed decision about doing business with the financial advisor. Pretty basic stuff, so far, right? The professional posture of putting the client s interests first becomes more difficult when we remember what a conflict of interest really is: any interest we have, inside or outside of work that could impair a financial advisor s professional judgment on behalf of the client. What are examples of interests that could be considered conflicts (Continued on page 6) SEPTEMBER 2005 VOLUME 2, ISSUE 1 FIDUCIARY/SUITABILITY 1 CONTACT INFORMATION 2 LIFE INSURANCE AWARENESS MONTH MESSAGE FROM THE PRESIDENT COMMITTEES 4 MEMBERSHIP UPDATE 4 EDUCATION UPDATE 4 PROGRAMS IN A BOX 4 WOMEN & RETIREMENT 5 SEPTEMBER LUNCHEON 6 SPONSORS 7 YAT Group 8 Jack E. Bobo Award 8 TAIFA REPORT 9 SCHEDULE OF EVENTS 10 CALENDAR

2 Page 2 President OFFICERS President-Elect Vice President Vice President Michael Steadman (210) Mary Rodriguez, RHU, LUTCF (210) Jason Talley, CSA, LUTCF (830) John Ward, CLU, ChFC, FLMI (210) Immediate Jay Moyer Past President (210) National David Sweeney Committee Person (210) Jerry Mathis, CLU, ChFC, LUTCF (210) Hannah Jacoby (210) Laura Strahan (210) x23 Kate Sachse (210) EXECUTIVE DIRECTOR VOLUME 2, ISSUE 1 DIRECTORS Back Office Support Services Lynn Getz, FLMI, ACS, AIAA & Sheryl Raineri (210) Whatever you can do, or dream you can begin it. Boldness has genius, power and magic in it....goethe If you are interested in advertising in our newsletter, please contact Lynn or Sheryl at NAIFA - San Antonio P.O. Box San Antonio, TX Phone: Fax: info@naifasanantonio.org Important Numbers to Remember NAIFA - San Antonio NAIFA Member Support TAIFA TDI MDRT U.S. Senate Joins U.S. House of Representatives in Supporting Life Insurance Awareness Month On Thursday, July 28, 2005, the U.S. Senate voted to join their colleagues in the U.S. House of Representatives to support Life Insurance Awareness Month. There was a unanimous vote of support in the Senate. The Senate resolution originally had been introduced by Senators Saxby Chambliss (R-GA) and Ben Nelson (D-NE), but due to a technicality, it was reintroduced on Thursday as S. Res.223. Senators George Allen (R-VA), Tim Johnson (D-SD), John Thune (R-SD), Susan Collins (R-ME), David Vitter (R-LA), and Mel Martinez (R-FL) co-sponsored S. Res.223. Both the Senate and the House voted in the same week to support Life Insurance Awareness Month. This is a tremendous validation of the goals of the month: to encourage families to work to secure their financial futures. We will work now to ask President Bush to issue a Presidential Proclamation in honor of the month, said David F. Woods, CLU, ChFC, LUTCF, the chief executive officer of NAIFA and president of Life and Health Insurance Foundation for Education ( LIFE ). Senators Chambliss and Nelson have championed Life Insurance Awareness Month in the Senate and we appreciate their efforts as well as the Senate's unanimous show of support. To help raise public awareness about the importance of life insurance and to encourage consumers to evaluate their life insurance needs, the life insurance industry has designated September 2005 as Life Insurance Awareness Month. The National Association of Insurance and Financial Advisors (NAIFA) is a major sponsor of the month. September 2005 will be the second Life Insurance Awareness Month and the industry hopes it will be an annual event.

3 San Antonio PAGE 3 MESSAGE FROM YOUR PRESIDENT, MIKE STEADMAN NAIFA SAN ANTONIO BUILDING FOR THE FUTURE ON OUR TRADITIONS Today we begin anew, with a fresh start, and a new beginning that is what happens as we move from one Association year to another. Those words made up the opening lines of my President s Remarks at the July luncheon. Although it is true that we are beginning anew, with a fresh start, it doesn t mean that we are getting rid of the old or throwing out those traditions of the past which have served this Association so well for almost 80 years. As we approach this milestone, we need to keep focused on those issues that will move us solidly into the future, while at the same time preserving those entities that past generations have worked so hard to put into place. Last year, in order for the Association to survive, our Board had to make some very hard and difficult decisions. I am happy to report that these decisions and actions taken resulted in significant steps toward stabilizing and rebuilding our organization for future growth. Many people were involved in this process to make sure it became a reality and for that I am grateful. It is this type and kind of involvement that we all need to be a part of to make sure that our Association is around for the next generation of financial service professionals. The underlying theme for this year is going to be building on the accomplishments of the past to meet the challenges of the future. We know that the guiding principals from the past have focused on those things that make us better practitioners to serve our clients needs. It is these principals of membership services, professional development and education along with advocacy that will be our cornerstones this year. Taking these as our guide we will continue to build for the future. With just a little over a month into the new Association year, I wanted you to know that your Board has been very busy getting their programs up and running. Shortly, you will be hearing what each Committee has planned for the balance of the year. From my vantage point, it sounds and looks like we are going to have a really exciting and fun year! Additionally, I want you to know that your Board and other interested members have done the following: attended and participated at the State Convention in Austin, scheduled LUTC courses for the Fall, arranged for free CE courses, secured guest speakers, registered a delegation to attend the National Convention in Baltimore, initiated plans for our next Charity Golf Tournament and negotiated to share programs and resources with a fellow financial services association. In closing, I am proud to be serving as your President, and ask that you become involved in your Association, so that together we can make a difference for us and the clients that we serve. Mike Steadman, President

4 Page 4 Committees have been formed and we need volunteers: Membership Committee: Chair Laura Strahan (210) x23 Professional Development: Chair Jason Talley (830) Golf Tournament Committee: Chair Jay Moyer (210) If you have interest in helping out in any of the areas above, please contact the appropriate chair or call or info@naifasanantonio.org Volunteers are not paid not because they are worthless, but because they are PRICELESS! MEMBERSHIP UPDATE: Welcome New Members: James Boren, FIC Bret Davenport Phillip Calderon William Hrynshyn Ray Vasquez Shirley Heskew James McClain Denise Shepard Russell Stehling VOLUME 2, ISSUE 1 We re looking for renewals from: Edward Cuellar Theresa Iglesias Debra Lawrence Alisa Lesueur Leroy Smith John Test Teresa Villanueva George Long Art Rodriguez OFFICE SPACE AVAILABLE: Three office suites from 837 sq. ft. to 1,950 sq. ft. Unique environment ideal for small agency or planning practice. DSL and Roadrunner. Private restroom facilities, individually controlled H/AC. Centrally located near Quarry Market Olmos Park on Contour Drive. Priced from 80 cents per foot for 1-year lease. Longer terms available. Call Upcoming Educational Opportunities: LUTC Classes: September 12, 2005 Essentials of Long Term Care Insurance 8-week course with exam date of 11/7/05 Moderator: Joe Skarda, MassMutual (210) September 20, 2005 Foundations of Senior Planning 8-week course with exam date of 11/15/05 Moderator: Rob Rooney, Phoenix Life (210) CE Classes: September 8, Disability Income Protection a necessary part of any financial plan 1-hour credit Immediately following the luncheon at Oak Hills Country Club November 10, hour credit Immediately following the luncheon at Oak Hills Country Club Programs In A Box Library #11 Improve Your Bottom Line with LIFE s Products #12 Asset Allocation: Putting Your Client s Eggs in the Right Baskets #13 Successful Life Insurance Selling in a Multiline Agency #14 Maximizing Health Savings Accounts Opportunities #15 Values & Ethics: Being Compliant and Profitable These programs are available for viewing at Gold Star Offices Call for more information

5 San Antonio PAGE 5 How Women Can Adequately Prepare For Their Retirement A generation or two ago, our mothers and grandmothers probably relied on their husbands retirement and Social Security incomes and for some of our parents and grandparents, Social Security was a given, but not anymore. The future of Social Security is almost anyone s guess and most of us will need additional income to supplement our retirement and Social Security incomes, especially since today it is estimated that baby boomers will need between approximately $1 million and $2 million at retirement to maintain middle-class lifestyles.* And for women, gathering this amount of retirement funds can be even more difficult. Below are a few of the unique challenges facing women: Women live an average of 6 years longer than men.** In fact, 85% of married women will outlive their husbands.*** This means that they ll have a longer war against inflation and there s a possibility that they will outlive their money and lose their independence. Living longer can also mean larger health care bills and greater expenses for nursing care and assisted living. Additionally, some women deferred to their husbands on money matters and will now, if widowed, have to take on this responsibility, a task they may or may not be up to. They earn less than men. Women earn, approximately, $0.73 to every $1 earned by men, which translates into less money available to invest for retirement. And nine out of 10 women earn less than $45,000.*** Women tend to spend less time in the workforce than men. Due to caring for children and/or assisting ailing parents, women receive fewer retirement benefits. They are often financially on their own. Due to death and divorce (47% divorce after their first marriage, 49% divorce after their second marriage), many women are finding themselves with only one income.**** What can women do to ensure they have enough for their retirements? They can begin by taking the following steps to help protect their futures: Analyze their needs ο Project their retirement expenses ο Add up their potential income sources ο Identify specific, realistic goals for their retirements Seek professional advice A financial advisor can help women define their goals, provide advice on specific investments and help them understand and manage risk Understand their investment options Whether women decide to invest in stocks, bonds, CDs, mutual funds, or annuities, understanding what options are available and what is the best strategy for them, is very important. Create a tax-smart strategy and stick with it! ο Diversify ο Take into consideration inflation s impact ο Start early and invest regularly ο Rebalance as needed For women, taking control of their financial futures requires the same determination and tenacity that women give to other aspects of their lives, such as pursing educational goals, juggling careers and raising children. Contacting a financial advisor is one way women can start taking control of their finances and secure a financially stable retirement. Sources: * Women and Investing: It s Your Money NASD Publication, September 1999 ** U.S. Census Bureau, 2002 and IRS 2000 *** Women s Institute for a Secure Retirement, October 2001 and Top 5 Reasons Why Retirement is a Challenge for Women Workers (WISER), 2002 **** The National Center for Women and Retirement Research, 2001

6 Page 6 VOLUME 2, ISSUE 1 Fiduciary or Suitability or Both? (Continued from page 1) SEPTEMBER LUNCHEON PROGRAM ο Gene Hildabrand, How to Network Like A Pro Gene will dispel the myths, misconceptions and misunderstandings about networking. He ll define networking and relationship marketing: The Key to Business by Referral! ο DIBroker will be our sponsor and representative, Howard Hanger will provide attendees with the opportunity to earn a free 1-hour CE credit immediately following the lunch. ο Junior Achievement is our guest at the luncheon they will give us a short presentation and have information available at the registration table. ο Registration begins at 11:30am, lunch begins at 11:45 and program starts at 12:00 noon. For more information and to RSVP us at info@naifasanantonio.org or call ο Cost Free to members, $20 for guests of interest? Strong pre-existing business or personal relationships with a potential client are good examples, as is a contractual commitment to one source of products alone. In fact, the commission form of compensation is a potential conflict of interest. A financial advisor s promise to work for a client s best interest rings hollow when the potential client without any disclosure from the advisor recognizes the undisclosed conflicting influences that will compete with his or her best interests. And if the prospective client doesn t recognize an advisor s conflicts, it s even more important to act ethically and eliminate, reduce, and disclose. If a financial advisor does not make the effort to be able to work in a client s best interest by addressing conflicts of interest, the advisor is more ethical not to promise that level of service. Plenty of high quality investment service is provided by advisors who serve on the suitability (as opposed to the fiduciary) standard, striving to know a client s essential facts and recommend high quality, suitable products to satisfy the client s needs and wants. If a financial advisor promotes but fails to provide a fiduciary level of service, the advisor s clients may hold the advisor to the standard when discrepancies in service become apparent. Regulatory Concerns Financial advisors who promote fiduciary relationships with investment clients should strongly consider registering with the SEC and state securities organizations as registered investment advisors (RIA) or registered investment advisor representatives. The SEC and state organizations allow for two exemptions from RIA registration for financial advisors: Advisors and other financial practitioners who provide financial advice regarding investments that is incidental to their primary work of buying and selling financial products, and advisors and practitioners who do not receive distinct compensation for investment advice. Specifically, the recent SEC rule 202(a)(11)-(b) identifies three situations in which investment advisory services offered by a financial advisor are not considered incidental to buying and selling financial products and thus force the advisor to register as an RIA or RIA representative: 1. If the financial advisor charges a client a separate fee for investment advice; 2. If the financial advisor promotes himself or herself as a financial planner or as providing financial planning service, or delivers a financial plan to a client; 3. If a financial advisor has discretionary investment accounts for clients. With any investment client, a financial advisor may have RIA accounts (involving fiduciary responsibility) and brokerage accounts (that rely on the suitability standard). (Continued on page 9)

7 San Antonio PAGE 7 NAIFA - SAN ANTONIO SPONSORS Phone: I ve learned that it s those small daily happenings that make life so spectacular. Rooney

8 PAGE 8 Volume 2, Issue 1 Stone Oak Area Office Condos On Stone Oak Parkway 2 blocks outside Loop 1604 Conveniently located in the city s most dynamic growth area 760 to 12,000 square feet Flexible floor plans with finish-out allowance Equity and tax benefits of ownership Call Robert at for an appointment Jack E. Bobo Award of Excellence Whether you're new to NAIFA, or have been a member for several years, YAT provides you with resources geared specifically to your career development needs as a young insurance or financial advisor. It provides you with a variety of tools that you can use to better equip yourself to overcome challenges and achieve your professional goals. Learn ideas on how to grow your business, take advantage of NAIFA's first-rate sales and skills training and receive discounts on a range of professional resources. NAIFA created the Young Advisors Team (YAT) for members who are 40 years of age and under. The purpose is to research the needs of young advisors and to ensure that they receive the vital tools, resources, and networks necessary to succeed in the financial services industry. YAT also serves as a NAIFA think tank to influence and develop future programs and membership initiatives. YAT's mission is to serve the needs of NAIFA's young advisors by providing the resources to succeed in the financial services industry. The NAIFA San Antonio Board of Directors has established a local YAT group which is headed by Kate Sachse. If you are interested in becoming a member of this group or would like more information, please contact Kate by at katherine.bibb-sachse@coloniallife.com The NAIFA San Antonio Association received the coveted Jack E. Bobo Award of Excellence, presented by the National Association of Insurance and Financial Advisors (NAIFA). The award recognizes associations in the NAIFA federation that excel in areas critical to their success and growth over a one-year period. Those areas are member benefits, advocacy, membership and governance. NAIFA recognizes NAIFA's state and local associations and their leaders who excel in all facets of association management. Those associations are honored each year with the Jack E. Bobo Award of Excellence, which was developed at the recommendation of the Transformation Task Force Report of April It replaces the six separate association awards given in past years. Perfect for insurance professionals. Office space for lease Northbrook, Located behind the Alamo Café at Bitters & Hwy to 1668 sf of office space. 24-hr access. Shown by appointment only, great location. Bruce Baumann Real Estate, Inc. (210) The will to win, the desire to succeed, the urge to reach your full potential these are the keys that will unlock the door to personal excellence. Eddie Robinson A web exclusive article in the Advisor Today! An article written by your own Executive Directors is featured, Virtual Office Solutions Search Archives by Issue 2005 / August

9 San Antonio Page 9 TAIFA POLITICAL ACTION COMMITTEE Do you know where your raffle ticket money goes? Running for political office costs money. Every candidate needs campaign money to: Research issues Purchase advertising Travel the state or district Print and mail campaign literature PACs support the political and legislative process by providing: Funds to candidates with legislative interests similar to its investors Noticeable impact on elected officials with collective funds. Large numbers of seriously interested investors who vote. Unique industry expertise and perspectives to elected officials. TAIFAPAC is widely recognized and respected in Texas. PURPOSE TAIFAPAC's primary purpose is to make our voice heard...to foster a good working relationship between members of the State Legislature and Congress and organized life and health insurance agents and financial advisors. BENEFITS Becoming a TAIFAPAC contributor provides you with these membership benefits: TAIFAPAC members actively participate in choosing leaders for our country and state. TAIFAPAC dollars back candidates who address the interests of business and good public policy in both Austin and Washington, D.C. TAIFAPAC provides insight into legislative issues that impact insurance and financial advisors. TAIFAPAC members are more politically astute and involved than the average citizen. TAIFAPAC members are actively shaping Texas and the United States on many levels. RESULTS TAIFAPAC MAKES OUR VOICE HEARD IN POLITICS! Fiduciary or Suitability or Both? (Continued from page 6) Summary So what s the point, that investment service provided on a fiduciary level is better than investment service provided on a suitability level? No, the point of this article is that they are different. A financial advisor should decide which level of service to provide, or if he or she wants to provide both. Ethically, providing investment advice on a fiduciary level requires elimination, reduction, and disclosure of conflicts of interest, so a client s best interests can be observed. Again, an advisor serving at this level with investments should consider registering as an RIA or RIA representative. Providing investment service on the suitability level has no ethical requirement to eliminate, reduce, and disclose conflicts of interest, though doing so is a good idea, in my opinion. Serving on the suitability level with investments requires limited or general securities representative registration, not RIA registration. Pick your level of service, and do what s needed to do it well! In an upcoming edition of this newsletter, we will discuss providing fiduciary and/or suitability level service to insurance clients.

10 SCHEDULE OF EVENTS FOUNDED IN 1927 AS SAN ANTONIO ASSOCIATION OF LIFE UNDERWRITERS (SAALU) Newsletter Editor: Back Office Support Services Gold Star Professional Offices 7800 IH10 West, Suite 100 San Antonio, TX Phone: (210) Fax: (210) V ISIT US ON THE WEB! W WW.NAIFASANANTONIO. ORG OUR ORGANIZATION IS A FORUM OF INSURANCE AND FINANCIAL ADVISORS DEDICATED TO ASSISTING THE CONSUMER BY DEVELOPING THE SKILLS, TOOLS, AND KNOWLEDGE OF ITS MEMBERS. NAIFA-SAN ANTONIO September Life Insurance Awareness Month! September 7, 9:00am Membership Committee meeting at the Benefit Mall offices, 7550 IH10, Suite 310 September 8, 11:30am Membership Luncheon at Oak Hills Country Club. CE Class immediately following lunch September 10 14, NAIFA 05 Convention and Career Conference in Baltimore, Maryland September 12, LUTC Class Essentials of Long Term Care Insurance. 8- week course moderated by Joe Skarda at MassMutual. Call Joe at for more information September 20, LUTC Class Foundations of Senior Planning. 8-week course moderated by Rob Rooney at the Gold Star Professional Offices conference room. Call Lynn or Sheryl at for more information. October 13, 7:30am Membership Breakfast Oak Hills Country Club Never let anyone tell you no who doesn t have the power to say yes....eleanor Roosevelt Why use Copy Talk When your local execs offer the same, but better service? Our Virtual Secretary service: Is available 24/7 Dictate your meeting notes immediately after your appointment while they re still fresh in your mind Notes are processed and disseminated per your instructions no more items falling through the cracks! NAIFA members special pricing $45.95/mo. Call or visit our website for more information SEPTEMBER 2005 Sun Mon Tue Wed Thu Fri Sat 4-5-Labor Day 11- Grand Parent Day 6-7- Mmbrsh ip com Mbr Lunch / CE class LUTC st Day of Fall OCTOBER 2005 Sun Mon Tue Wed Thu Fri Sat LUTC, Rosh Hashanah Columbus Day 16-Natl Bosses Day /8 11-LUTC Breakfast Mtg, Yom Kippur LUTC LUTC LUTC Halloween