The New Financial “F” Word

Today’s topic is a very good one, and it is the one the consultants who follow me around would rather I avoid. They are probably shaking their heads right now. But avoiding hot topics has never stopped me before. The topic is the new financial F word.

Yes, there is one. For the longest time, the curse word in the financial business was “annuity.” Most people do not understand what an annuity is, and many are so misinformed that they make fools of themselves when they talk about it. But we know that is not true. Annuities solve for four things: principal protection, income for life, legacy, and long-term care.

Why “Fiduciary” Has Become the New F Word

Here is where I step on some toes. The new F word, at least in my opinion, is “fiduciary.” Not all of them, but some of them. The word is being used incorrectly.

You might say, Stan, are you a fiduciary? No. But I have a plaque on the wall that says I am a good guy. It literally says I am a good guy. To me, that is the equivalent of fiduciary. Why do we need a plaque on the wall to prove that someone will do the right thing? Shouldn’t that be automatic? Shouldn’t anyone in financial services put the client’s best interest ahead of their own every single time?

Some of the worst horror stories I have heard in months came from recommendations made by a fiduciary. I assume 95 percent of fiduciaries are honorable people who do the right thing. I am sure that is true. But people can hide behind certifications, just as they can with anything else.

A Real Example That Shows the Problem

A client called me recently. They had almost all their money in their house, about $2 million in equity. Then they told me they were advised by a fiduciary to take money from a reverse mortgage and buy two Indexed Annuities and a Universal Life policy. You cannot do that. It is not legal.

Yes, someone could launder the money by routing it through a bank and then falsely writing “source of funds, bank” on the application. But that advice came from a fiduciary. The client said, Stan, how is that possible. This person is a fiduciary. I do not know. And as my grandfather always said, if you tell the truth, you do not have to remember anything. I do not understand why every advisor does not simply do the right thing. But here is the truth. Even if there is a plaque on the wall, you must still do your due diligence.

A Plaque Is Not Proof of Good Advice

The plaque is not the due diligence. The plaque does not mean the advice is correct. The plaque does not mean you blindly follow instructions.

Why would a fiduciary do something like that? I do not know. And I do not know why we need a certification to do the right thing.

I have worked at Dean Witter, Morgan Stanley, Paine Webber, and UBS. I have been on that side of the table. I saw so much sales-pitch nonsense that I eventually moved to the contractual side. Someone had to address these things. I never thought I would do this video, and my consultants are probably having an aneurysm right now.

Not All Fiduciaries, but Enough to Be a Problem

For all the fiduciaries who are good people and do it the right way, I get it. I am not talking about you. I am talking about the people hiding behind your good name while taking advantage of consumers.

There are no mulligans in retirement. I am the first to say annuities are not for everyone. I am the first to say annuities have benefits and limitations. I am the first to tell someone they do not need an annuity. Happens here all the time.

We do not force square pegs into round holes. And I certainly do not use a plaque on the wall to prove my qualifications.

Why Consumers Must Stay Alert

This message will make some people mad. Some organization somewhere will not like it. That is fine. Send me the email. I am not attacking everyone. I am saying the same thing I say in the annuity world. There are really good people who do it right. And yes, there are shysters.

The ratio may be smaller in the fiduciary world, but they do exist. They hide behind the plaque and say, "Trust me." But you still must do your due diligence.

And if a fiduciary is pitching annuities, you really need to be careful. You might even want to run it by us. If their recommendation is good, we will tell you. If it is not, we will call it out.

Final Thoughts

This is serious. Thirteen to sixteen thousand people turn 65 every day, and they are looking for guarantees and truth. We must make sure the truth stays at the forefront.

My apologies to the fiduciaries who do it right. To the ones hiding behind the plaque and taking advantage of people, we are watching. Consumers are calling us. And you are hurting the people who actually uphold the title.

Stay safe out there and make good decisions.