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  • Writer's pictureDavid H. Kinder, RFC®, ChFC®, CLU®

F.A.Q. #1 - Are You A Fiduciary?

Updated: Jan 18, 2023

I have an Android phone. I check my Google Chrome application at least daily. Because of my profession, I get a fair amount of articles that relate to my profession that show up in my "news feed" of sorts.

This one showed up today:

The entire industry has been swept up in this whole "fiduciary debate". Why is this a problem? Because various people, associations, and political parties want to make a name for themselves for "curbing the abuse against our citizens" (or something like that). (Always remember that politicians on both sides have to become masters of 'spinning' - making a topic fit their narrative.)

There is still current legislation within the SEC and the FINRA self-regulatory organizations about "Regulation Best Interest".

Here's the spin: If the agent, advisor, or broker earns a commission, that commission is evil. Why is it evil? Because it *may* not be in your best interest compared to something else - that may have a lower cost, better risk/return ratios, etc.

Here's my fun retort on that: If my fixed indexed annuity is evil, but your Series 65 'fiduciary securities advisor' is NOT evil... then why do they charge between 2-2.5% per year, every year, regardless of performance? On a $500,000 portfolio over 10 years, that can be between $100,000 to $125,000 just in fees alone!!! (Fun fact: The average commission on a fixed indexed annuity is about 7%. Suppose that it was appropriate to put all $500,000 in such an annuity... your agent would be paid a $35,000 commission... that would NOT come out of your annuity! Sure, there would be surrender charges if you liquidated more than 10% of the annual balance in a given year... but which is the greater evil: $125,000... or $35,000??)

Now, every time there is new legislation being presented, there is going to be a winner... and a loser.

Who would be the winner if these fiduciary rules get passed and why? (Let's leave the consumer out of it because every side would cite that "we're doing it for the consumer".)

  • Series 65 Registered Investment Advisory firms: because they can continue to say that "they have the client's fiduciary standard and best interests at heart".)

  • The CFP Board of Standards: because they can claim that they have sought to promote a fiduciary standard ever since 20xx (pick a year) and it fits their marketing narrative.

  • National Association of Personal Financial Advisors (NAPFA): This is an organizations that is for the development and promotion of fee-only advice. They are a very active group of (last I heard) about 1,500 advisors who choose to never receive an "awful commission".

What's the problem? The problem is, is that the public won't be served properly by these advisors who choose to "shun commissions of all kinds just because they don't want any 'conflict of interest' with their clients."

There's an industry magazine publication called "Wealth Management". In February 6, 2015 they published an interview with Lee Munson - who was once a member of NAPFA and bought into that mindset. Here's a few quotes from the article:


In short, Munson says now that there is a place for commissions, NAPFA is a “cult,” and despite what some financial-planning purists may think, it is okay to make a lot of money in this industry.

“I was a NAPFA cult member—if it wasn’t fee-only, it was evil,” Munson says. But he found his new firm wasn’t really able to offer the kind of holistic financial planning that he intended. “I realized that I wasn’t really hitting the mark with people. I wasn’t really able to do anything other than manage stock and bond portfolios. It just wasn’t satisfying to me, and it certainly wasn’t satisfying to a lot of our clients.”

Offering insurance, he felt, was a big way to close that gap. He partnered with Tracy Ann Miller, a chartered life underwriter who specializes in insurance consulting and financial planning, in January 2014.

So after denouncing the commission model for years, he did an about-face, ditching the fee-only mantra in order to make money on the insurance side. Insurance now accounts for about 10 percent of their business.

“The fee-only thing is a real disservice,” Munson says. He compares it to Alcoholics Anonymous; financial planners are basically saying they cannot be trusted to engage with any financial product that pays a commission. “I have a problem, and I can’t control myself. So I have to join this cult called NAPFA, and I have to tell everybody, ‘I’m not allowed to drive because I’ll get drunk and crash.’”

In fact, Munson was doing some insurance work for clients while he was fee-only, but not getting compensated for it.

“Basically I do all this work, but somebody else is getting a big fat check,” he says. When he asked other NAPFA members how they did it, they suggested he charge an hourly fee for the work, which Munson considers “double-dipping.”

“Economically, I don’t play these little shenanigans. Economically, this money is being generated; it’s going to somebody. Have it go to the person who’s actually doing the work.”


What I've found over the years, is that those who buy into this "fee-only" mentality (where commissions are "evil") are also depriving themselves and their clients of what else is out there! They aren't driven to learn about life insurance, annuities, or other strategies, because they're not allowed to capitalize on such sales.

I think this "fiduciary debate" creates lazy investors and clients.

Imagine this: You arrive at an advisor's office. You start out by asking "Are you a fiduciary?" and they respond with "Yes." "Good. Here's all my accounts and transfer them all to your firm and invest them according to my risk tolerance and I'll complete that questionnaire right now."


By what standard are we judging your products and plans?

There are many facets to investing in various financial products and insurance contracts. The question is... what do you want for your financial life? And are you given enough of the information you need to make a complete decision to either stay doing what you're doing... or to change things to improve them for what you want?

Tom Hegna talks about why he was against the fiduciary ruling: The only enforcement would be through the courts and no one can really agree "what is the best standard?"

Even your "fiduciary securities advisor" can still earn commissions.

Below is a paragraph of the disclosure of a friend of mine's Registered Investment Advisor firm's ADV Part 2. This is a required disclosure document that is required to give to each client who engages with that firm for their services.

This paragraph discusses Outside Business Activities:

This paragraph shows their intention to act as a fiduciary to ensure that whatever is recommended will meet the client's best interest standards regardless of compensation.

Shouldn't EVERY ethical agent be doing the same? Yet, the RIA firms get to tout how much "better" they are because they are "fiduciaries". Give me a break. It's a marketing tactic, nothing else. This is why I refer to them as Fiduciary Securities Advisors.

"David, are you a fiduciary... or not?"

I will answer the question this way: I am a fiduciary educator. My job is to share with you how wealth works and consider how wealth works in the kind of financial plan you want to have for you, your family, and your retirement. I will show you the consequences of your decisions and allow YOU to make educated and informed decisions that feel right to you.

Then I will show you what's possible and have YOU make a complete and fully informed decision based on what you want in your financial life. If you DO want what I share with you... great! I will earn a commission on your business.

If you DON'T want what I share with you... great! The IRS and the investment advisors you work with will earn a HUGE commission on your business too. We will part on friendly terms knowing that I did my job to share with you what's possible, and you decided NOT to move forward with me. That's okay!

As long as I shared with you everything you need to make those decisions, I have upheld and done my duty.



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