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The fiduciary duty between clients and beneficiaries

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“Coming together is a beginning. Keeping together is progress. Working together is success.”
–Henry Ford 

With market uncertainties and constant changes, it has become increasingly important to remain dedicated to providing the most efficient guidance to our clients. As financial advisors, our duty is to place clients’ best interests ahead of our own. What so many do not realize is that we must also educate our clients on their responsibilities in providing benefits to other members of their families. 

Oftentimes we focus primarily on our client’s personal requests and building a client-specific, robust financial plan. Yet we may overlook dedicating adequate attention to their duties as a fiduciary. A vital part of a financial advisor’s responsibility is to guide our clients through the planning process with recommendations suggested based on the current market. By applying this tactic to the relationships between clients and their beneficiaries, we can assist them in making decisions in the best interest of the beneficiary. 

The goals of the beneficiary

One suggestion advisors often make to their clients when it comes to life insurance is to use an irrevocable life insurance trust (ILIT) to own the policy for future beneficiaries. Clients frequently forget or are unaware of their responsibility in this situation to make sure the life insurance policy, which is an asset owned by your client, is on track to meet the projected goals for the beneficiary. 

Our duty as part of the advisory team is to help our clients fulfill their fiduciary responsibilities, as we maintain our own by keeping their best interests in mind. We must periodically help them review the policy to ensure its viability. If your client has an older policy, encourage them to take a look at new products in the market, current insurability and consider upgrading their policy to something that may be more effective considering today’s lower mortality rates and policy guarantees.

Maximum benefits to beneficiary

As a fiduciary, our clients are entrusted with making decisions that are in the best interest of their beneficiary. By putting the needs of our clients’ in front of our own, we can adequately teach them the benefits of carrying the same service over to those they wish to protect financially. Life insurance professionals can offer invaluable service to clients who hold policies, ensuring the delivery of maximum benefits possible to the beneficiary.

Teach your clients to act in the best interest of their beneficiaries.

Philip E. Harriman, CLU, CHCF, 2007 MDRT President, is a partner with Lebel and Harriman, LLP. Responses and questions can be sent to [email protected].



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