This was a question posed to another professional I work with in my financial group. He was asked this by an IAR (Investment Advisor Representative) who holds a Series 65 license and registration. "Do the insurance contracts you offer meet fiduciary duty standards?" The question itself doesn't necessarily make sense, but I'm going to address it anyway. First things first:
"The contract is the contract is the contract is the contract."
The contract will have specific language and provisions in them.
Are they disclosed?
Do they fit and align with your financial goals and objectives?
It's not necessarily about the contract itself, but about how the contract is presented and how it enhances the client's objectives.
Now, this is far easier to determine with annuities than it is with cash value life insurance contracts. The reason is there are a lot of variations and flexibility that can be built into a life policy that isn't necessarily so with annuities.
Life insurance has similar contract provisions that should be evaluated, but they also have flexibility in how they are funded to meet the given objectives for the policy.
Huh? Let me give you an economic example.
Let's compare two cash value policies, structured differently. (I'll be referencing an older comparison I did a few years ago. Exact company name and policy info are blocked, but the economics info is still there.)
If you're a male, age 35, standard, non-smoking... and your budget is $10,000 a year for your primary objective of setting up a tax advantaged fund.
$10,000 a year can get you either:
$363,000 of death benefits,
$762,000 of death benefits.
What is the real difference? A professional will know that:
A $363,000 death benefit policy will build cash values FAR quicker than the $762,000 death benefit policy considering the budget of $10,000 a year.
Below, I show that the $363,000 death benefit policy will "break even" (cash values exceed premiums paid) probably around years 8-9. The table below shows the green policy breaking even in year 9. (You can see that amount in brackets.)
The $762,000 death benefit policy in yellow shows that it "breaks even" in years 22.
(You might be wondering why year 5 is outlined in yellow. I had a rule that I created (before the new mortality CSO tables came out for 2017), that a properly funded and structured policy should have 75% or more available cash values compared to premiums paid by the end of year 5. Well, the new tables changed that rule, but that was why I had it in yellow. These days, I look for at least 50% available cash values by the end of year 5.)
But, even though the policies can be the EXACT SAME, but the funding and structure are very different... couldn't I still say that "the minimum funded, maximum death benefit" can still be used to set up a tax-advantaged fund? Yes, it could be said, but it certainly isn't the most efficient manner to do it.
That's the difference. It's about the professional who is helping you, not necessarily the contract itself.
There is no such thing as a "fiduciary insurance contract". It's not about the contract. There IS such as thing as a professional standard of care as how these contracts are presented, structured, funded, integrated, and disclosed into a client's total picture.