Financial Advisor, Financial Services, Insurance Brokers, Personal Finance

What Is a Fiduciary Financial Advisor?

When you are figuring out how to manage your finances, it’s important to know not only about the different strategies for financial planning but also how the money management industry works. When you are entrusting your savings and income to someone, you want to be confident that this individual is responsible for acting in your best interests. Unfortunately, this is often not the case. Therefore, it’s crucial to vet financial advisors carefully to see if they are the right fit for your financial situation and goals.

Fiduciary duty acquired a much deeper meaning in April of 2016 when the Department of Labor released their Fiduciary Rule. It was vacated later, but a newer version was approved by the Biden administration in February of 2021.

The new rule basically separated the world of financial advisors into two different categories: fiduciaries and nonfiduciaries. If anything, this just added to the confusion and risk for investors. The problem stems from the fact that there is no legal definition of the term financial advisor. In other words, basically anyone and everyone can use the term. And yet, most clients are not aware that the term financial advisor does not stipulate the ethical standards under which the advisor must operate.

A 2019 survey by wealth manager Personal Capital revealed that almost 50% of Americans incorrectly believe that all advisors are legally bound to act in their clients’ best interest. Unfortunately, this creates a situation in which many clients unknowingly pay for financial advice from advisors who are free to put their own interests in front of their clients. In actuality, only financial advisors who are fiduciaries are obligated to act in their clients’ best interests.

What Is a Fiduciary?

A fiduciary is a person or entity that has the power to act on behalf of someone or something else. Essentially, a fiduciary must act as if they are who they represent and make decisions that are in that person’s best interest.

The most well-known example of a fiduciary is a trustee of a trust. In this case, the trustee or fiduciary has discretionary authority over the assets in the trust. Similarly, a fiduciary financial advisor has the authority to buy and sell securities in an account on the client’s behalf without their express consent. For this reason, fiduciaries are held to a higher standard than nonfiduciary advisors.

What’s the Difference Between a Fiduciary and a Financial Advisor?

The difference between fiduciary and financial advisor lies in the definition of the terms. A person who advises others regarding their finances can be either a can be either a fiduciary financial advisor or a nonfiduciary financial advisor. A fiduciary, however, must act in their client’s best interest. And they don’t have to be financial advisors. They can also be attorneys or guardians or trustees or other professionals.

What’s the Difference Between the Fiduciary Standard and the Suitability Standard?

On account of the Department of Labor ruling, we now have two different standards in the financial industry: the fiduciary standard and the suitability standard. The problem becomes even more pronounced when brokerage firms fail to mention which standard they are working under.

The main difference separating the fiduciary standard and the suitability standard lies in how an advisor makes his or her decisions. Prior to making a recommendation, a fiduciary must go through a thorough process to determine a client’s best interest. They must also explain the recommendation in detail to their client, so there’s no misunderstanding about it and the reason for the fiduciary to suggest it.

For financial advice to meet the suitability standard, the advisor need only have sufficient reason to think that it meets the client’s financial needs. Basically, the advisor would only need adequate information regarding the investment and his or her customer’s finances prior to making the recommendation.

Suitability Standard and Conflicts of Interest

Clearly, the suitability standard doesn’t require the same level of discussion as the fiduciary standard. Moreover, it does not ensure that advisors put their clients’ best interests ahead of their own; it also does not preclude any conflicts of interest.

A nonfiduciary can direct clients towards products that line his pocket, as long as they could be suitable for them. A fiduciary, on the other hand, can’t recommend a higher commission product because paying more in fees wouldn’t be in the client’s best interest.

Although not every advisor under the suitability standard is putting their needs before their clients, it’s critical to know that they are allowed to legally. Furthermore, the compensation structure and incentives at their firm may result in conflicts of interest.

Anytime you involve someone in your personal finances, you are placing a great deal of trust in them. Thus, it’s important to know the type of financial services you need and to find the right type of financial professional to provide them. Regardless of the type of financial advisor you choose, you need to be clear about how they make their money and the value they offer for what you pay them.

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Insurance
Financial Advisor, Insurance Brokers, Investing, Personal Finance

What is Financial Advisor Job?

It’s hard to get your ducks in a row and set financial priorities when you are just getting started on a career, especially if you have huge student loans, which take a big bite out of your paycheck.  Plus there are other expenses that make it difficult to save for the future.  If you’re lucky, your employer sets you up with a 401(k) and continues to make contributions on your behalf – hopefully you are matching those contributions, and, if not, you’re setting a little money for the future, right?  Perhaps you’ve been savvy enough to plan for the future, and, have a nest egg above and beyond that small “rainy day account” for financial emergencies.  Or, maybe you live paycheck to paycheck and need someone to implement an investment plan for your future.  Finally, if you won that big Power Ball jackpot the last go around, it might be time to seek a consult with a financial advisor.  Whether your monetary status is too little or too much, a financial planner can assist you in planning for the future.
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Homeowner's Insurance, Insurance, Insurance Brokers

Insurers under Critical Observation in Puerto Rico

As if Hurricane Maria hasn’t already taken a toll on most Puerto Ricans. Insurance companies are under scrutiny in Puerto Rico with 13,600 Hurricane Maria claims still open. This has resulted in thousands of Puerto Ricans being forced to close their businesses, drain their savings, or accept the idea of living with structural damage as they fight insurance companies over millions of dollars’ worth of claims. Claims that have gone unanswered or unpaid more than a year after Hurricane Maria.

What the Experts Have to Say

According to experts the Category 4 storm caught insurance companies off-guard and left them reeling financially after they were hit with nearly 279,000 claims. Real Legacy, a major insurer has already folded, leaving more than 1,500 claims worth a total of $70 million up in the air. It’s not a surprise that many worry other companies may follow. Commissioner Javier Rivera believes that it’s too early to say what will happen with Real Legacy. He also believes that the other company that exceeded its reinsurance limits, Triple-S, has enough capital to avoid the similar outcome. Executive Director of Puerto Rico’s Association of Insurance Companies, Iraelia Pernas, said “the industry has never faced such an astronomical number of claims.” “No one was prepared for that, not the federal government, not the insurance companies, no one.”

Hurricane Maria Caught them Off-Guard

Fines have already been issued by the Office of the Insurance Commissioner of Puerto Rico totaling more than $2.4 million against at least seven companies for delays in resolution and payment of claims. Exceeding reinsurance limits is highly unusual and indicates that even in the companies’ worst case scenario, Hurricane Maria was difficult for them to envision. There are two insurance companies in Puerto Rico that are also under review with negative implications.

The Aftermath of Hurricane Maria

Not only was Hurricane Maria the strongest storm to hit Puerto Rico in nearly a century, but it caused more than $100 billion in estimated damage, destroying the power grid and forcing businesses to remain closed. Hurricane Maria has taken a toll on the insurance industry, with losses amounting to $32 billion. Insurance companies in Puerto Rico have paid a total of $4.4 billion in claims, but more than 13,600 claims have not been closed.

Taking a Closer Look into Insurance Companies

An audit was recently launched into all companies by the commissioner’s office, and according to Rivera he is looking at some more closely than others. His office has received about 1,600 complaints, which is triple the amount of reports received in a normal year. Pernas says that the pending claims from Maria are complicated and involve mostly businesses, municipalities, government agencies and condominiums – which have to be reviewed with great care because they’re big.

Businesses that have Disappeared

Many people were forced to close their businesses due to Hurricane Maria. Among those was a 48 year old man who owned a restaurant in the northern coastal town of Dorado that he opened four years ago. He reported damages exceeding half a million dollars, but has only received $93,000 from the insurance company. Due to these circumstances he has used up all his savings, sold his home and transferred his daughter to a more affordable school. By December he will make the decision between staying or leaving Puerto Rico and joining the estimated 155,000 who fled to the U.S. mainland after such a catastrophic hurricane.

No Responses from Insurance Companies

Gov. Ricardo Rosello has already sued various insurance companies after officials said they did not respond quickly enough to claims filed after Hurricane Maria. These lawsuits help because they aim to prevent companies from dropping claims that have allegedly expired. The lawsuits seek $2.6 billion in damages for those who have not been compensated. Attorney, Francisco Amundaray is representing several clients pursuing a response from insurance companies. Among those waiting for full payment is a woman, who owns a pharmacy in the southern coastal town of Salinas. She reported $50,000 in total losses after Maria. She has called the insurance company several times about her claim but has only been told that it’s being processed. This has resulted in her being forced to refinance her house, cancel her daughter’s university housing, cut her staff at the pharmacy by half and reduce operating hours.

Planning for the Future

By law, insurance companies in Puerto Rico have 90 days to resolve a claim. Companies are now making contingency plans and expect to fly in claims adjusters ahead of any major storms in the future.

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Financial Advisor, Insurance Brokers, Investing, Personal Finance

What Does a Financial Advisor Do?

Financial AdvisorIt’s hard to get your ducks in a row and set financial priorities when you are just getting started on a career, especially if you have huge student loans, which take a big bite out of your paycheck.  Plus there are other expenses that make it difficult to save for the future.  If you’re lucky, your employer sets you up with a 401(k) and continues to make contributions on your behalf – hopefully you are matching those contributions, and, if not, you’re setting a little money for the future, right?  Perhaps you’ve been savvy enough to plan for the future, and, have a nest egg above and beyond that small “rainy day account” for financial emergencies.  Or, maybe you live paycheck to paycheck and need someone to implement an investment plan for your future.  Finally, if you won that big Power Ball jackpot the last go around, it might be time to seek a consult with a financial advisor.  Whether your monetary status is too little or too much, a financial planner can assist you in planning for the future.
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Health Insurance, Insurance, Insurance Brokers, Types of Insurance

What Are The Types of Health Insurance?

Types of Health Insurance
If you are a worker bee, like the majority of Americans who have health insurance, your workplace picks a plan and you just basically go with the flow; if you’re lucky, the plan includes dental and optical as well, and, if you really lucked out, there is a disability policy in place for you too.

If, however, you are a single subscriber because you are in business for yourself, or have lost your job and must obtain health insurance, there are wide range of options out there to choose from.  In the past, if you couldn’t afford it, you might have gone without health insurance, but, since the advent of the Affordable Care Act (“ACA”) or “ObamaCare”, it is the law that you must have health insurance in place or pay a fine.

Below are some salient points to help you muddle through understanding the various types of insurance – remember that you can always make it easy on yourself, by consulting with someone whose skill and expertise in the insurance field will make the choices easy for you to understand – such a person would be John Savadjian, an insurance broker in New Jersey.  A top insurance broker like John Savadjian can go over all of your insurance needs with you and can help you choose the best plan for the best price.
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Homeowner's Insurance, Insurance, Insurance Brokers, Types of Insurance

What Are The Types of Homeowners Insurance?

Types of Homeowners InsuranceInsurance premiums may sometimes seem to be the bane of your existence, but, think of the alternatives, if you had no insurance for your vehicle or/or home and there was catastrophic damage to either one?  Your home is probably your largest asset, and, without adequate insurance in place, quite possibly, your finances could be wiped out in a matter of moments.  You often hear stories of devastating tornadoes, and, in their aftermath, you view the shocking photos of a home with only the foundation remaining and a family gathered together looking at the devastation, but thankful that their lives were spared.  When you see devastation from a tornado, a fire – or even a robbery, having good insurance in place, will help to make you and your family whole.
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Insurance Brokers, Insurance Purchasing Process

Questions to ask an Insurance Broker

Insurance Broker QuestionsPurchasing insurance can be a very complex process. There are so many providers and policies to choose from it’s not just a simple decision anymore and it can be difficult to choose the perfect one. When you are going through a broker it can be a lot simpler since they can help you navigate through to match your insurance needs with appropriate solutions. A broker acts as a liaison between insurance companies and customers. It’s important that you fully find a top insurance broker that you can trust. If you are not sure what types of questions you should be asking you can be clueless. Here are some key questions you should ask your insurance broker.
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Types of Life Insurance
Insurance, Insurance Brokers, Types of Insurance

Types of Life Insurance

For the top insurance broker, one question they hear frequently is about the different type of life insurance. They are often asked which type is the best and if everyone needs a life insurance policy. The primary purpose of life insurance is to protect families in the event that the primary earner in the family dies. It was initially designed for younger families who were in the phase of accumulating wealth. Early on, there’s not a lot of wealth to be had and it takes years of established employment to preserve wealth and set up the family for future years. Life insurance gives individuals a way to protect themselves and their families from exposure to personal risks such as having to pay off debts after a death, providing income for remaining family members, paying funeral expenses, or fulfilling other goals like helping to put kids through college. If a person provides the primary income for a family or are in business for themselves, life insurance can provide essential protection. It is important to know the types of life insurance available to you to help you protect your family.
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Financial Services, Insurance, Insurance Brokers

How Does Insurance Work?

How does Insurance WorkInsurance got its start during the days when cargo ships were heavily used and when they got destroyed, their cargo was lost. Merchants began dividing their cargo among a number of boats so they were not as likely to lose all their merchandise and reach complete financial ruin. This way, even if one boat was lost, merchants didn’t lose everything but were more likely to only lose a small portion of their goods. They “shared the risk” between the boats which is the foundation of the insurance industry today. Insurance is basically parties agreeing to sharing risks.
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