Investors Should Be Alert to Financial Conflicts-of-Interest

What happens when a trade group representing financial planners try to kill regulations that protect investors? Nothing good.


The struggle against financial conflicts-of-interest became more interesting this week as an association representing financial planners accused an insurance industry lobbying organization of trying to kill the adoption of a fiduciary standard for individual investors.

In a petition signed by thousands of financial planners, the Financial Planning Coalition said the insurance industry wants to kill the proposal to adopt a single fiduciary standard for financial professionals who deal with the public.

The petition and a related letter were sent to the SEC and 16 members of Congress. The Coalition is comprised of the Financial Planning Association, the Certified Financial Planner Board of Standards Inc., and the National Association of Personal Financial Advisors.

In response, the insurance lobbying group, the National Association of Insurance and Financial Advisors (NAIFA) said it was merely trying to protect individual investors.

The core problem is that the fiduciary standard seeks to eliminate the inherent conflict of interest in the sale of financial products.

Some financial professionals push products that are not the best fit for their clients because the selling broker is receiving a commission and/or a revenue-sharing payment from an insurance or mutual fund company. This creates a conflict of interest which the fiduciary standard seeks to resolve.

But since the adoption of this fiduciary standard will affect incomes and business relationships, it has become a hugely contentious issue.

Unfortunately, individuals who purchase mutual funds and annuity products are not told about these payments, which in effect will promote one product over another even though both have the same benefits and function.

What Financial Conflicts of Interest?
NAIFA has 50,000 members, and about two-thirds have securities licenses and all have insurance licenses. The group’s action was taken because if a fiduciary duty standard was adopted by the SEC it would directly affect the sale of variable annuity products.

Annuity products are very profitable for salespeople and insurance companies but carry high commissions, fees, and surrender fees.  They are not commonly recommended by many popular consumer advocates.

The insurance industry has a long history of incenting independent sales reps through sales promotions and revenue sharing.  If the salespeople operated under a fiduciary standard, it could result in lost commissions and other revenue sources.

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Chuck Epstein has managed marketing communications and public relations departments for major global financial institutions and participated in the launch of industry-changing financial products. He also has written by-lined articles for over 50 publications, five books and served as editor and publisher of nation’s first newsletter on the topic of using the PC for personal investing and trading. (“Investing Online, 1994-1999). He also is a marketing consultant, writer and speaker on topics related to investor protection and opportunities in the very dynamic cannabis industry. He has held senior-level marketing, PR and communications positions at the New York Futures Exchange, Chicago Mercantile Exchange, Lind-Waldock, Zacks Investment Research, Russell Investments and Principal Financial. He has won national awards from the Mutual Fund Education Alliance (MFEA) and his web site,, was named best small blog in 2009 by the Society of American Business Editors and Writers (SABEW).