What is the BEST in Best Interest? – Insurance News

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Gradually we are all settled for the requirements of DOL transitional rebel rules. By June 9, 2017, all recommendations related to qualified money should follow fair conduct standards.

DOL requires advice to agents and advisors that are in the “best interest” of retirement saver. The best interest standard has two main components: conscience and loyalty. Under the conscience standard, the advice should meet a professional standard of care as specified in the lesson of discount.

Under the loyalty standard, the advisory advisor or firm should be based on the interests of the customer rather than the competitive financial interests. This means that the advisor cannot charge more than appropriate compensation or make any misleading statement about investment transactions, compensation and conflict of interest.

But what is the best interest in the best interest? Is this the best product in the universe of financial products? Or the best product of its type with the best features? Or is it the lowest compensation that is the cheapest or the same with the cheapest or “best” for the customer? Is this the highest interest rate or best projection for returns?

Recently we were reading “Point Made: How to Right Like the Nation’s Top Advocates” by Ross Gubarman. The book includes an quotation of Chief Justice John Roberts which is very rarely known outside legal education, but is an important application for our question.

This quote was taken from a briefly taken with the US Supreme Court when Roberts was a lawyer and filed a ninth circuit decision petition about the Clean Air Act:

Determination of ” Best ‘Control Technology is similar to asking different people to take’ best ‘cars. Mario Andrettly can choose a Ferrari; A college student can choose a voxigon beetle; a family of six mini-vans. A Mini-Van’s choice. A Minnesoton choice is for-wheel drive. Space, speed, handling, and similarly.

It is clear how this quotation and its meaning is equal with our application of best interest for annuity and life insurance recommendations. While Chief Justice Roberts does not discuss the role of the seller, especially in his analogy, we all understand that a seller is likely to be involved in the purchase of any product.

Questions that require answers

So, what does the best mean exactly under the rule? The best product in the universe of products?

not necessarily. If you sell Ferrari, you cannot know much about other make and models. You are probably not familiar enough with motorcycles and bikes to discuss your specific benefits, benefits and features. And knowledge is a major component of conscience. You should not advise you about products you do not know or expert.

The Labor Department has become quite clear and believes that under the DOL Rules, the advisor does not need to take advantage of it or himself for the entire universe of the products, but can determine the ‘shelf’ of the product solutions that can determine the ‘shelf’ of the firm that serves its business practice and customers – the best – to use and follow the standards for selection. “

To pursue the point house, DOL said in a pending trial response that the rule “The best product does not require advisory to reflect the Earth.”

Best product type?

Then, not necessary. Either a Ferrari or a Volkswagen beetle can suit Mario. Or, he may need both to meet his family’s transport needs. Cars serve various tasks and provide various solutions such as annuity and life insurance. And, equally mutual funds, stock and real estate. Andreti will help the family needs and service of cars or cars, which will help determine the type of car or car to buy.

The lowest commission/ fee or highest interest rate/ potential return?

Well you guessed, not necessarily! As a former insurance product developer, we learned that the lowest compensation is not automatically equal to the lowest price product. Like a car, there are many cost components for annuity and life insurance. The commission is only one. Other costs include guaranteed and non-collective benefits and features, product development, marketing, legal and compliance.

Instead, as Roberts says, the decision should not be based on the lowest compensation, highest guaranteed interest/participation rate or highest possible returns. The decision should be based on what the consumer needs, how much damage they can and when they will need the product to fulfill their objectives.

The lowest priced car that does not offer the most important features for the buyer (for example, a braking mechanism or guaranteed income) is probably not the best for those.

‘Neutral factor’

And, when looking at compensation – commission or fee – there are other factors to consider while deciding between two or more products or advisory services. Most DOLs and ERISA experts call these “neutral factors” and may include the time taken to provide product features and benefits of services provided with the types, experience, insurance or investment solutions, customers, strength and rating of the company.

You are probably thinking, what is the best in the best interest?

To borrow from James Carville’s famous Quip – this process is stupid. It is not that any person reading it is stupid, but we use it to make a point. The best customer’s interests in the best interest have to be kept before you. To do this, you have to install the best practices and processes.

DOL considers one of one of the “main components” one of the “main components” for a fair conduct, and our legal experts tell us that a prudent process involves to evaluate products and recommends. The process should define factors that will use to meet advisory analysis and advise the customer on the product or products he recommends.

For example, factors such as financial requirements and objectives that meet the recommendation; Planning time horizon; Require of risk tolerance and safety and market losses (diversification); And, of course, the argument of compensation.

For exemption of 84-24 it is necessary that advisors and financial institutions install policies and procedures to follow fair conduct standards and meet the requirements for exemption. With the impact of the transitional rule by July 2019, a good news will now be the resolution of the year to bring you to the place.

Fortunately, there are many tools, which have processes manufactured to help meet fiduciery duty. Call your marketing organization or supervisory firm for suggestions.

Register for our free suitability and fidukari training course today and on completion, we will send you a certificate of completion and CE Credit Voucher. Register here.

Kim O’Brien is a 35 -year -old experienced of the insurance industry who specializes in guaranteed annuity and life insurance. He is the current CEO of Americans for annuity protection and a sales and compliance software system, accessabest, ink. Is the founder of. For more information, go to www.aapnow.com or www.assessbest.com.

This article is provided only for educational and informative purposes and not for the purpose of providing legal advice. Readers should consult with their own legal and compliance counsels to get guidance and direction in relation to any issue or question. Contact Kim (email protected).

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