Let’s Call the Title Thing Off!

Americans for Asset Protection (AAP) is always vigilant to ensure that the marketplace for insured asset protection products is competitive and consumers have access to licensed and skilled professionals who understand and specialize in insurance solutions – regardless of the license they hold.

That is why we have become increasingly concerned with the growing noise from DOL Fiduciary Rule cheerleaders about the need to regulate who gets to use the term advisor and who does not.

There’s a fun song by Cole Porter called “Let’s Call the Whole Thing Off” lamenting a romance that has gone flat. The refrain is a litany of different pronunciations of certain words – potato with a hard “a” versus a soft one.

Recently a collection of interested parties is calling for banning the use of the term “advisor” by anyone who is not a “practicing” fiduciary. It seems the adage “be careful what you ask for” is very much in play here. After years of asking for a fiduciary standard from the DOL - and now the SEC and the NAIC - and seeing their most fervent wishes come true, they now realize that with victory comes unintended consequences. Oh No - Now Everyone Can Call Themselves an Advisor!

Most of the noise is to appropriate the term advisor with an “o” and not adviser with an “e.” What’s the difference? When it comes to the law, the vowel is the difference. The official U.S. Government document that defines and regulates the provision of investment advice is titled the “Investment Advisers Act (IAA) of 1940.” And throughout the Act, the spelling is “adviser.”

Most Registered Investment Advisers and Investment Adviser Reps use the “e.” On the other hand, brokers, insurance producers and financial planners usually use the “o” version. However, all too frequently, some practitioners tend to use both terms interchangeably.

AAP believes that only practitioners who are regulated by the IAA should use the term adviser with an “e” because of its legal implications. So, who’s making all the noise? The Consumer Federation of America recently lamented:

"It has become increasingly common over the past few decades for insurance producers, like broker-dealers, to recast themselves as financial advisors or retirement planners in order to attract clients seeking objective, professional advice about their retirement and other investments," the CFA says. "Doing so involves downplaying the sales-driven nature of the relationship and characterizing it instead as one of trust and reliance in which the interests of the customer always come first."

However, as the CFA knows, the Rule calls everyone a fiduciary when you make a recommendation to take some action with your qualified funds. The NAIC proposal follows in those same footsteps and, from what we read, the SEC intends to make the same distinction.

'Advisor' Redefined

So, if the trigger for the fiduciary duty is when you “advise” investing funds in an IRA or ERISA plan, the fiduciary cheerleaders belatedly realized their coveted term “advisor” is now reasonably applied to any licensed individual who makes the recommendation and triggers their fiduciary duty.

What CFA is also forgetting is that the DOL Fiduciary Rule and impartial conduct standards no longer permit a “sales-driven relationship,” and the very requirements of the fiduciary duty are trust and reliance on the fact that the customer’s interests always come first. Therefore, the term “advisor” is a necessary bi-product of a fiduciary requirement. CFA appears to want to “have its fiduciary rule and eat it, too.”

Others have joined the “Title Train” and are urging the Securities and Exchange Commission to consider regulating “titles” as it considers a fiduciary standard. The CFA Institute stated recently:

“The Commission can effectively begin to regain control of this [uniform fiduciary rule] issue by regulating the titles that those who provide personalized investment advice can use…”

It naturally follows the control would also regulate the titles those who give personalized insurance advice cannot use.

Nevada recently revised the definition of financial planner "to remove the exclusions for a broker-dealer, a sales representative and an investment adviser, thereby making such persons subject to the provisions of existing law governing financial planners."

Does that mean that all brokers, sales reps and investment advisers can call themselves financial planners? It would seem so!

A recent online article informed us that the “CFA institute recommends that the SEC require that ‘anyone wishing to refer to their title and/or activities as advisory in nature (e.g. 'adviser' or 'advisor') adhere to the Investment Advisers Act and the fiduciary duty implied by common law interpretation of the Act.’”

Will any of this help consumers? Do I care if I’m helped by a service rep or a care specialist at Costco? If during my wanderings around the store, someone comes up to me and says, “I am a Costco Customer Service Rep, I am not a Care Specialist, may I help you?” Will it matter? No, what matters is if they help me or not.

Titles Should Never Mislead

More importantly, how does the financial services industry know if titles matter to consumers? Not one consumer advocacy group has produced any empirical evidence that consumers care if you call yourself an advisor, agent, producer or broker, financial planner, etc. That is why the AAP Board of Directors continues to search for funding to provide first-hand consumer research.

Titles should never mislead customers into thinking you are licensed and authorized to make a recommendation when you are not. AAP supports the NAIC Model Laws on Use of Certifications and Professional Designations and Advertisements of Life Insurance and Annuities that have been adopted as law or issued as bulletins/notices in all states.

These laws make it clear that using any title, certification or professional designation that is misleading is strictly prohibited and subject to disciplinary action. Consumers do not need any more laws regulating title, designations or certifications for insurance professionals.

But, insurance professionals, insurance planners, insurance producer/agent/advisor/representative are all appropriate and informative titles helping the customer understand the products and services provided by the individual. As our song (with apologies to Mr. Porter) ends:

So, if I like advisors and you like advisers
If I like agents and you like producers
We all know we need each other so we
Better call the calling off off
Let's call the whole thing off!

Kim O’Brien is a 35-year veteran of the insurance industry specializing in guaranteed annuities and life insurance. She is the current CEO of Americans for Annuity Protection and Founder of AssessBEST, Inc., a sales and compliance software system. Visit www.AAPnow.com or www.AssessBEST.com for more information.

This article is provided for educational and informative purposes only and not for the purpose of providing legal advice. Readers should consult with their own legal and compliance counsels to obtain guidance and direction with respect to any issue or question. Contact Kim at [email protected].

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