Weekend Reading: When Advisors Violate Their Fiduciary Duty

This article appears as part of Casey Weade's Weekend Reading for Retirees series. Every Friday, Casey highlights four hand-picked articles on trending retirement topics and delivers them straight to your email inbox. Get on the list here.
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Weekend Reading

At Howard Bailey, we take pride in the fact that our team is held to a fiduciary standard. Simply put, this means we are responsible to act on behalf of our clients, and must continually put their needs ahead of our own. It’s a duty we don’t take lightly, but it can also come along with blurred lines in the financial world.


Analyzing annuities: Past Retire With Purpose podcast guest, David Blanchett, recently expressed his thoughts on advisors who recommend guaranteed income products (annuities), and why not doing so could actually breach fiduciary duty. The comment sparked controversy, as some believe presenting these types of financial vehicles might instead mean crossing a fiduciary line. Why? It begins with the bias surrounding annuities and the sales-y label they often receive.

Income-to-assets-ratio: If you look beyond the negative buzz of some annuities, however, you might find that Blanchett poses a point worth consideration. In certain cases, lifetime income annuities can help ensure you don’t outlive your savings. As the author states here, “constrained investors” in particular could reap the most benefits from annuities. Constrained investors can be identified by pinpointing their income-to-assets-ratio, which is generally a three-to-seven percent surplus of liquid assets. As a result, they require protection against retirement risks such as timing, inflation and longevity, many of which can be accounted for via annuities.

Make note: Confusing enough, advisory firms that hold themselves out as “fee-only fiduciaries” have limited-to-no-access to guaranteed income products, which is clearly an ongoing violation of their fiduciary duty to clients.