A New Era of Better Outcomes: The New Fiduciary Standard in Life Insurance

Life Insurance Is Changing

Traditionally, life insurance recommendations followed a “suitability” standard, meaning policies were considered appropriate if they met a client’s basic needs. Now, the new approach emphasizes client-centricity through the CFP Fiduciary Standard and NY DFS Reg 187.

The CFP Board first adopted fiduciary duty in 2007, requiring CFP professionals to act as fiduciaries when providing financial planning or material elements of financial planning. In 2020, the CFP Board expanded this fiduciary duty to apply to all financial advice provided by CFP professionals, including life insurance. This standard requires all CFP professionals to act in the best interest of their clients when providing financial advice.

While the NYS DFS Reg 187 regulation has legal weight in New York and other states depending on different factors, the core principles of the fiduciary standard hold significant ethical weight across the nation. This, along with the CFP Board Standard for CFP® professionals, is influencing the entire life insurance industry towards a more client-centered approach.

New York State Laws and regulations are often used as a benchmark for acting in the client’s best interests within financial planning for many reasons, such as:

• Strict Regulations: New York has some of the most stringent financial regulations in the U.S, providing a strong foundation for fiduciary standards and high levels of consumer protection.
• Legal Precedents: New York’s legal system has a rich case law history related to fiduciary duties, establishing a proven framework for consistency and clarity.
• Influence and Reputation: As a major financial hub, New York's laws and regulations are highly respected and often set the standard for other jurisdictions.
• Comprehensive Coverage: New York’s fiduciary laws cover an extensive range of financial activities and services, making them applicable and beneficial for organizations in various locations.

These factors contribute to why organizations, even those outside New York, adopt their fiduciary standards.

The Fiduciary Standard

The fiduciary standard for life insurance aims to elevate the expectations for life insurance professionals with the CFP designation. Life insurance agents are legally and ethically obligated to prioritize individuals' best interest . This means you are entitled to:

• Unwavering Commitment to Clients: Agents must act with the utmost care, skill, and prudence, mirroring how a responsible prudent person would manage their affairs.
• Focusing on Your Individual Needs: Agents must thoroughly evaluate each policy’s cost, potential performance, and associated risks to ensure it aligns with the client's unique financial situation and goals.

Simply put, life insurance agents must prioritize the client’s interests over their own. The CFP Fiduciary Standard has evolved over many decades to ensure that Certified Financial Planners (CFPs) act in the best interest of their clients. The concept of fiduciary duty can be traced back to the Investment Advisers Act of 1940, which cited that Investment Advisors have a fiduciary obligation to their clients.

Knowing the fiduciary duty that CFPs must act upon is essential to understanding your rights. Do any of these statements resonate with you?

1. Are you frustrated by life insurance brokers' lack of transparency or conflicts of interest?
2. Are you concerned that the “full story” is unavailable with the typical life insurance illustration analysis?
3. Are you disappointed that agents can’t determine which policy will improve outcomes?

If you answered yes to these questions, it’s time to speak with a professional agent to determine your options.

What Does This Mean?

The fiduciary standard empowers you! When partnering with life insurance specialists, you can expect more care and transparency with each interaction. Here’s how this translates for you with OneDigital:

• Premier Pricing and Service: Clients receive access to the only patented pricing and performance research for life insurance. While the research costs $500 per report, we provide this research to fiduciaries and our clients at no cost.
• Understand the Impact of Any Risk or Uncertainty: Clients may receive the Monte Carlo simulation for the policy in question, providing a unique technique to model the probability of different outcomes and various variables.
• In-Depth Needs Assessment: Every client receives one-on-one time to address their specific needs and financial goals.
• Transparent Options: A variety of life insurance options that meet the fiduciary standards and align with your best interests are presented.
• Ongoing Support: Every client receives commitment beyond the initial selection, including ongoing support to ensure your coverage continues to meet your evolving needs.

The UPIA, NYS DFS Reg 187, the OCC, FINRA, and adjudicated lawsuits provide additional guidance for life insurance.

The era of prioritizing your well-being in life insurance is here. At OneDigital, our professionals are here to guide you toward the best possible coverage for your needs. Contact us today to discuss your life insurance needs and experience the OneDigital difference.

Want to learn more about life insurance? Check out this article: How Much Life Insurance Do I Need? A Step-by-Step Guide to Determining Your Coverage.

This information is for general and educational purposes and is not intended as legal or tax advice. Nor is it intended to provide specific advice or recommendations for any individual or entity. To determine what is appropriate for you, please contact a OneDigital Financial Professional. Information obtained from third-party sources is believed to be reliable but not guaranteed.

Investment advice offered through OneDigital Investment Advisors, an SEC-registered investment adviser and wholly owned subsidiary of OneDigital. Securities Offered Through M Holdings Securities, Inc. A Registered Broker/Dealer, Member FINRA/SIPC. File # 7187241.1