At Brokers International, we support a wide variety of independent financial professionals to build and grow successful businesses. Every day, I talk with men and women who ask me what they can do right now to strengthen their businesses and provide excellent service to their clients.
One of the first things I tell them is to diversify the financial products they sell so that they can provide holistic service to their clients.
If you only sell life insurance, it could be worthwhile to consider obtaining a securities license and becoming a fiduciary.
What Is a Fiduciary?
While every financial professional should always act in the best interest of their clients, not every financial professional is required to be a fiduciary.
Broadly speaking, a fiduciary is a person or entity that acts on behalf of another person or persons to manage their assets with their best interests at heart. It is the highest legal duty that one party can have to another, and the law requires fiduciaries to act in the best interest of the clients whose assets they are managing.
It comes down to doing the right thing for a client and acting for the client’s profit and not your own.
Who Can Be a Fiduciary?
Trustees are the most common type of fiduciary relationship in the business world. Other examples include lawyers and their clients as well as investment companies and their investors. A registered investment advisor (RIA) has a fiduciary duty to his or her clients. RIAs must offer sound, accurate and complete investment advice, avoid any conflicts of interest, and strive to execute trades efficiently.
These are all demonstrations of what it means to do the right thing for clients.
Currently, if a financial professional only holds an insurance license, he or she is not considered a fiduciary.
Investment advisors, on the other hand, are considered fiduciaries under the Investment Advisers Act of 1940 and are regulated by the SEC. Technically speaking, you must have a securities license, such as a Series 6, 7, 63 or 65 license from the SEC or FINRA, in order to be considered a fiduciary.
Why Would a Financial Professional Want to Become a Fiduciary?
I believe being a fiduciary is in the best interest of both clients and financial professionals. There are several reasons a financial professional may want to consider becoming securities-licensed. Being a fiduciary allows you to:
- Operate a holistic practice.
- Meet a wider range of client needs.
- Offer more financial products to clients.
- Increase the value of your business.
As good as being a fiduciary is, there are costs financial professionals should consider before gaining a securities license. It requires more continuing education and there are annual fees. Additionally, you can’t have a securities license and not use it, so if you don’t intend to actively offer securities-based products to clients, you may want to hold off on getting securities-licensed.
If you specialize in a particular line of insurance and really enjoy selling those types of financial products, you may not find it interesting or worthwhile to branch out. If that’s so, build up a network of professionals you trust whom you can refer clients to when they need a financial product outside of your area of expertise.
A Parting Word
Fiduciary duty is the law enforcing what every financial professional should be doing as a matter of conscience and practice. Do the right thing because it’s right. Put your clients’ interests first and they will reward you with loyal service and quality referrals.
If you’re an independent financial professional looking to expand your business, connect with me. I’d love to help support your practice.