Is Your Wealth Adviser Independent? Sometimes, It Isn’t Easy to Tell

Since the 2008 financial crisis overshadowed the major Wall Street banks and brokerage firms, the ranks of independent financial advisors have grown faster than in other categories. Enhancing their appeal has been a standard known as the fiduciary rule, which legally requires such advisors to always put their clients’ interests first and generally avoid conflicts of interest.

However, investors should be aware that some financial professionals may appear more independent than they really are. They may have relationships with insurance companies that are not conspicuous without digging deeper into their websites and disclosures. This can be important for investors who prefer advisors that are not affiliated with insurance companies and their financial products.

The three major advisory firms in the Northeast US — BayState Financial in Boston, Barnum Financial Group in Connecticut, and Fortis Lux Financial in New York — appear to be independent based on their names and what they feature on the pages. their main destination. In fact, their brokers work for MML Investors Services LLC, which the companies disclose at the bottom of their websites.

The problem can be a problem for investors who prefer advisors that are not affiliated with insurance companies. MassMutual says its affiliates adhere to industry standards and codes.


Alex Nabaum

MML is owned by the Massachusetts Mutual Life Insurance Company (thus owned by its policyholders, which are not publicly traded). It ranks 4th by assets among the top U.S. life and health insurers, according to AM Best Co., a credit-rating company that specializes in insurance. And page 14 of the 29-page disclosure document provided to clients when they open a brokerage account says that some MML brokers may have incentives — sometimes including higher earnings — to sell their brokers. MassMutual insurance products. Some brokers must meet minimum sales of MassMutual products to stay in business, the disclosure said, and such sales make them eligible for Medicaid and retirement benefits. . (At other times, brokers may have an incentive to sell other insurers’ products, but not to keep their jobs and benefits.)


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To be sure, BayState, Barnum and Fortis Lux do not call themselves independent and their connection to MassMutual, though not front and center, can be found on their website. However, several former advisors who have worked at companies as recently as two years ago say that, based on their observations, many clients are unaware of the companies’ ties to the insurance industry.

In general, it can be costly for investors to make assumptions about the objectivity of a financial professional, consumer advocates and some competitors say.

Bernie Clark, Charles Schwab’s head of advisory services, says whether they call themselves independents or just ostensibly independent, advisors are affiliated directly with an insurance company or brokerage “in the country”. to some extent still have the right to sell their products. Corp.

Schwab provides support to about 15,000 independent advisors, whose subsidiaries have no obligation to sell the product, he said.

The arrival of some companies “shows a level of objectivity that may not be there,” Micah Hauptman, director of investor protection at the American Federation of Consumers, said of the industry at large. Ultimately, he said, “what matters is how financiers and their firms are compensated and what their motivations are.”

MassMutual’s response

MassMutual says that about half of its affiliates do business under the MassMutual brand, and the other half operate under other names, known as DBAs — short for “business as is.” It is not the only insurance company that allows this.

It says its affiliated agents comply with industry standards and rules governing required sales, disclosure and advertising practices, among other things, and that “mostly” invest in and sell insurance of affiliated dealers are those of non-MassMutual products.

“We provide flexibility and choice to our affiliates and financial professionals in terms of how they run their businesses, including the ability to offer products from MassMutual and other retailers. provide other services,” the insurer said in a statement.

While MassMutual says its DBA agencies “clearly disclose their relationship” with MML Investor, the three companies Baystate, Barnum and Fortis Lux do so at the bottom of their landing pages. — and do not flag there that the MML is a MassMutual unit. MassMutual says that a Google search for “MML Investor Services” reveals the name MassMutual, and it says the three companies are not doing anything deceptive.

Baystate, Barnum and Fortis Lux declined to comment of their own, turning to MassMutual instead.

Maggie Seidel, a spokeswoman for Finseca, a trade group in the insurance industry, acknowledges that companies may choose to turn off insurance connectivity for marketing reasons but also says it’s not a scam.

The reach is quite large

The three branches of MassMutual are quite large.

Barnum says on its website that it has $30 billion in assets under management and 320 professionals. Baystate has 300 advisors, 200 support staff and 16 offices in New England, according to its website. And Fortis Lux has about 170 reps by 2021.

MassMutual ranks second among insurers in terms of number of stockbrokers, with 7,933 as of 2020, just behind Lincoln National Of Corp.

LNC -3.12%

Lincoln Financial Network, according to Boston-based market research firm Cerulli Associates. MassMutual’s broker ranking doubled after 2016 when it acquired MetLife’s retail advisory force Inc.,

MEET 0.06%

which includes Barnum and Baystate.

Asset managers affiliated with insurers have faced challenges in recent years, and several major insurers have pulled out of business.

Donnie Ethier, senior director at Cerulli, said advisors affiliated with insurers are often limited by products that some investors consider expensive, such as annuities and insurance lifetime, and believe that “they may not offer as extensive a financial menu as products like third-party exchange-traded funds and mutual funds. According to Cerulli, such agents sell relatively more insurance products than independent advisors.

Eric Raether, president of Canopy Wealth Management in Middleton, Wis., who worked as a consultant at Northwestern Mutual Life Insurance Company from 1992 to 2018, says that while at Northwestern, he noticed that some clients potentials do not want to see him “because they are afraid that they will be sold insurance products. ”

Another challenge came when Obama-era federal regulators threatened to expand the fiduciary rule to include advisors to brokers and insurance agents. Amid opposition from trade groups in the insurance industry, a less stringent rule known as the “Best Interest Rule” was finally adopted. Reg BI requires brokers — and insurance agents registered as brokers — to disclose and take steps to reduce conflicts of interest, but only when recommending securities trading and strategies . Unlike brokerage firms, subsidiaries usually obtain informed written consent for any conflicts in the entire client relationship.

Today, property advisory firms are governed by a “different set of regulations” for investment advisors, brokers and insurance agents, said Michelle Richter, consultant at Fiduc Trust Insurance Services LLC, which advises money managers, including those affiliated with insurance companies, said. Sometimes, the same professional has to notify clients when they are and are not acting as a fiduciary, she said. Generally speaking, she says it can be “misleading” for people with strong insurance affiliations to appear independent.

Read reveal

Some insurance companies, such as Northwestern Mutual, have exclusive sales and consulting forces that are required to display their insurance brands under the DBA name. But others, such as Guardian Life Insurance Co. USA and Lincoln Financial Network, which are less stringent, allow their open model DBA advisors to disclose their insurance connections in a less prominent way.

Guardian and Lincoln say there’s nothing deceptive about the practice and they’ve done nothing wrong. And their affiliations, and the conflicts and incentives they create, can be found in disclosure documents required by the Securities and Exchange Commission. That includes Form CRS and Reg BI disclosures to brokers, says Melanie Senter Lubin, president of the North American Association of Securities Administrators.

Ms. Lubin said the information is for investors. “It is extremely important that they read it,” she said.

Mr. Smith, a former financial reporter for The Wall Street Journal, is a New York-based writer. You can reach him at

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