The opportunity to become a registered investment advisor (RIA) has been heavily promoted to insurance agents in recent months.
But for unregistered insurance agents who sell fixed annuities, the first question should not be whether to become an RIA. Two other issues need airing first: 1) Is the agent currently giving investment advice? and 2) what should unregistered agents do about giving advice, given that the Financial Industry Regulatory Authority and the Securities and Exchange Commission prohibit them from doing so? (See sidebar.)
It is far better for the unregistered agent to deal with the problem as an opportunity to give investment advice legally.
For a variety of reasons, the future is in advice. Most agents are able to sell pretty much the same array of fixed annuity products. Offering good investment advice will enable them to provide more value and differentiate themselves from the competition.
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The market needs and wants sound advice much more than any particular fixed annuity, no matter how good a product it may be. This is particularly true of aging baby boomers, the most promising market for fixed annuities. It also tends to be true for big cases in general. And insurance agents who specialize in fixed annuities need these big cases to make a decent living because there is a long-term trend toward lower commissions on these products.
There are several legal ways to build a practice by providing and/or implementing investment advice.
Unregistered annuity specialists could choose to affiliate with someone who is registered. In this case, the agent would be responsible for selecting the best products for client needs as part of the process of implementing a colleague’s recommendations. Or they can choose to become registered themselves, as broker-dealer representatives or investment advisors.