Search This Blog

Monday, December 21, 2020

Fiduciary Advisers Who Offer Insurance Products Are Just Out To Make Money

Just to be clear, this blog is about Financial Myths and the name of this post is indeed a myth.  Or can be.  There are "advisers" who sell insurance products in the absence of a financial plan in order to make a quick buck.  But at prevailing money management fee rates (1.02% as of 9/2020)
an adviser would make twice as much over a ten year period selling asset management vs. an annuity for example.
As this article points out, "selling" insurance products is a "hot-button" issue, unjustifiably so.  The celebrity "advisers" (hack, gag) often use this as a deal killer, "run in the opposite direction" they say, if your adviser offers annuities or life insurance.  Unfortunately, life isn't this simple.
A true fiduciary recognizes the importance of risk management through transference of risk, the law of large numbers, and risk pooling.
Risk management starts with identifying, measuring the impact of and weighting a client's existing and future risks.  Then the practicality and cost effectiveness of solutions are explored.  Then the practical and cost effective solutions are implemented.
Which involves transference of risk, normally to a legal third party such as- for example -an insurance company or options seller thereby taking advantage of the law of large numbers (as the size of a statistical population increases, its behavior and outcomes become more precisely predictable) through risk pooling (combining resources with others on a mass scale).
It is impossible to be a fiduciary and ignore or- worse -disparage well-proven yet boring actuarial science.

Your Constructive Comments are Welcome!