"Guaranteed" Variable Annuities - Companies are changing the rules

From Michael Kitces

This shouldn't be unexpected

What I'm reading today...

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What I'm reading today...

Guardian: Whose side is your financial adviser on anyway? By the Author of Pound Foolish

An excerpt:

There are some financial helpers who are fiduciaries already. That includes certified financial planners and Registered Investment Advisors – usually known as RIAs. Their job description includes warning you away from any financial cliffs. Unfortunately, these people are a small part of the financial advice world – they make up less than 20% of the universe.

When most of us go looking for help with our investments, whether we go to the bank or the friendly professional we first heard about via a commercial on CNBC, we encounter people who call themselves financial advisers. That's a fancy word for a salesman.

These salesmen are not fiduciaries, but they do need to adhere to something called the suitability standard.

Think about it this way: say you are shopping for a dress or a suit. If you went to the store where a saleswoman was working to the fiduciary standard, she would have to sell you the best fitting, least costly outfit that's most appropriate for the occasion.

The store working to the suitability standard? It could be the most expensive item in the store, in need of costly alteration, but as long as it sort of fits and sort of looks good … hey, it's okay. At least it's not sitting on the rack any more.

It gets better. The financial services industry has been arguing that they should not be subject to the fiduciary standard as it is currently written; they believe that if they are forced to act in the best interests of their clients, they will not be able to give advice while making a profit.

I hope I get to read this soon:

http://www.nber.org/papers/w17929

Do financial advisers undo or reinforce the behavioral biases and misconceptions of their clients? We use an audit methodology where trained auditors meet with financial advisers and present different types of portfolios. These portfolios reflect either biases that are in line with the financial interests of the advisers (e.g., returns-chasing portfolio) or run counter to their interests (e.g., a portfolio with company stock or very low-fee index funds). We document that advisers fail to de-bias their clients and often reinforce biases that are in their interests. Advisers encourage returns-chasing behavior and push for actively managed funds that have higher fees, even if the client starts with a well-diversified, low-fee portfolio