This past week we had two clients approached by “Financial Advisors” in their bank or credit union offering Annuities and Long-Term Care insurance. Both these individuals are retired and have enough income; their biggest financial concern is NOT income from annuities.  So why are the products beneficial to the client?  More importantly as one of the clients asked, how are the financial advisors in the bank pushing these when they are fiduciaries and don’t fit my needs?

They are not fiduciaries!

Financial institutions can operate in different capacities when dealing with clients. They may act as custodians, brokers, or advisors, among other roles. Each role carries different levels of responsibility and legal obligations.

A fiduciary relationship arises when a financial institution explicitly agrees to act as a fiduciary. If they are registered or agree to being such, they are bound by a fiduciary duty to always act in the client’s best interests, not their own.

However, if a bank is simply offering an annuity as a financial product without explicitly acting as a fiduciary, their primary obligation may not be to act solely in the client’s best interest. While they should still act ethically and provide accurate information, they may not have the same level of fiduciary responsibility.

A fiduciary is a person or entity that is entrusted with the responsibility of acting in the best interests of the client first and foremost, not themselves or their company. When someone is designated as a fiduciary, they are legally and ethically obligated to prioritize the interests of the party they are representing and to avoid any conflicts of interest.

In our client’s situation, if the bank is asking them to buy a certificate and an annuity, it's important to understand the nature of the relationship with the bank.  If the bank is acting as a fiduciary, they should be providing advice and recommendations that are in the best interests of their client. However, if the bank is not acting as a fiduciary, they may not have the same legal and ethical obligations to prioritize your interests over their own.

At Capstone, all advisors and employees are required to act as Fiduciaries and make recommendations based on the client’s best interest.  We go a step further and advise on what we would do personally given the same set of circumstances.