Ellen Schultz of the Wall Street Journal recently wrote an article about retirement mistakes people make ("Five Big Retirement Mistakes," Dec. 29, 2012). These included not paying for financial advice; investing in something you don't understand; supporting your adult children; lowballing elder-care costs; and underestimating how much you will need for retirement.
While I agree with most of what she stated, I do disagree with her comments pertaining to agents and advisors who accept commissions and, in her opinion, have a conflict of interest. Really! All the professionals I know always recommend what is in the best interest of the client, regardless of commissions. Yes, there may be a few "bad apples "out there, but they are rare and do not represent the career agents, brokers and financial advisers who accept commissions.
If Schultz had read the MDRT or NAIFA code of ethics, she would have seen that the members of these organizations must make clients' interests the priority when making recommendations.
Commissions do not create a conflict of interest. Bad judgment does. Just look at Bernie Madoff. In his case, there were no commissions involved, only fees.
And speaking of fees, the upper-middle class may be willing and able to pay the fees charged by investment advisors, but research has determined that the middle class feels the appropriate fee for advice would be $100. The typical fee-only advisor has a minimum fee of $2,500.
The problem is not the fee or the commission, but the shrinking number of agents and advisors clients can look to for insurance and financial advice. The U.K. and several other countries have outlawed insurance commissions, and this has precipitated a rapid decline in the number of advisors and agents available for consumers to turn to for insurance and investment advice.
Accepting commissions does not automatically make you unethical or create a conflict of interest. It does allow a segment of the economy to have access to advice and products they may not otherwise learn about or use. Our industry's goal is to encourage the consumer to take personal financial responsibility through the use of life insurance and related products through whatever distribution systems are required to deliver this information along with appropriate products.
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