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Life Health > Running Your Business

How important is a Series 65?

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There are a number of threats to the life insurance business that hover over us and never seem to go away. One that’s been around for many, many years is the threat of taxation on the inside buildup of values within an insurance policy. Another more recent concern is the very real potential of the business having to adapt from a suitability standard of care to a fiduciary standard.

Regular readers will recall that Life Insurance Selling’s editor Brian Anderson has looked at this issue and its ramifications in a series of fine commentaries over the past year or so. And as Brian points out, even though the threats posed by a shift to a fiduciary standard are not immediately imminent, they are serious and wide-ranging enough that producers ought to be thinking about what the potential change means for their business.

In this month’s roundtable, I talked with three of the more proactive and productive producers I know about the potential for a fiduciary standard, and how they see it affecting their — and, by extension, your — day-to-day operations. Sharing their insights this month on the fiduciary standard and how they are preparing for potential changes are the following top producers: William H. Black Jr., CLU, ChFC; Robert B. Plybon, CLU, ChFC; and Adam A. Solano Jr.

For the first part of this roundtable, see:

Advance preparationsor not

Hirsch: What, if anything, are you doing in your own business to prepare in the event a uniform fiduciary standard becomes a reality?

Plybon: We do a significant amount of work in the qualified plan market, where we have always assumed we had a fiduciary liability. Almost all of our plans are set up under an RIA — Registered Investment Advisor — arrangement. On the life insurance side, it is very complicated, as contractually, most agents have a primary duty to the carrier, particularly where they are captive agents. In other countries, agents have been forced to declare themselves either captives or brokers, with brokers carrying a higher level of responsibility. We have operated as independent agents for a long time and use call reports and other methods to document our files as to what we do and why it is in the client’s best interest at the time of sale. Generally, if a client is going to become dissatisfied, it will be years, if not decades, downstream, and going back and proving that all options were considered and the product recommended was the very best in the market would be difficult, if not impossible.

Solano: I spend time each year trying to streamline processes and create efficiencies in my practice, but I do those things because I want to be a prudent leader and businessman. I think that kind of stewardship will help my practice if and when a greater demand — i.e., fiduciary standard — is made of me professionally. In some sense, I can’t imagine there being even more “compliance.”

I use Copytalk to dictate my meeting notes and important phone calls and SmartOffice is my CRM. Both are invaluable tools to document and track client activity and protect me professionally.

Black: Frankly, I’m doing nothing in preparation, as I’m, perhaps naively, not expecting it to happen anytime soon.

RIA, IAR and Series 65

Q: Do you foresee the time when producers like yourself will need to get a Series 65 or become an RIARegistered Investment Advisoror IARInvestment Advisory Representative? How dramatically would that alter your own business?

Black: I do foresee this happening, as the regulatory winds are shifting in that direction. It seems the regulatory agencies want more and more control over the business and, in particular, the equity indexed portion. We know additional regulatory oversight does little to benefit the client, as proven by Madoff and several other examples.

Plybon: I believe there will be significantly more disclosure of what capacity the advisor is acting, at a minimum. As stated, we are already acting in many situations under an RIA agreement. In our business, we believe we are operating in the best interest of our clients at all times because it is simply good business. However, doing it and proving it are two different things. This would require significantly more documentation in every step of the planning process, which would be expensive. It would also shrink the number of advisors available, which is great for those who survive, but not good for the consumers who are underserved already. Many countries have driven advisors to a fee-based system and it could happen here as well.

Solano: I already have those licenses.

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