Who's Your "Guy" - A Broker? An Insurance Agent? Or a Financial Planner?

We are all called Financial Advisors… for now. 

The SEC is proposing restrictions on the use of "Financial Advisor" for brokers and insurance agents.

Why do they care?  Why should you care?

Because brokers and insurance agents are salespeople.   And while there is nothing wrong with salespeople, an informed client is an empowered client.  If you are dealing with a salesperson, you should know you are dealing with a salesperson. 

Here's why:

I'm at brunch with friends and the soon-to-be-dad lamented that he needs to finish his life insurance application.  The already-dad mentioned how cheap and easy term life insurance is.   Knowing I'm a financial planner, he then leans over to me and says, "I also bought a little whole life insurance."   Without even looking up, I said "Northwestern Mutual?".   "Yup" was all he responded. 

A little background is needed:  99% of financial planners do NOT recommend whole life insurance for young clients.  It's expensive insurance, a lousy investment and totally inappropriate for young clients.   Term life insurance is cheap and appropriate and the only life insurance a young family needs.  

So why did my friend's "Financial Advisor" at Northwestern Mutual - an insurance company - "recommend" a whole life insurance policy? 

Well, duh.   BECAUSE HE'S AN INSURANCE AGENT!  His job is literally to sell insurance. 

But his business card doesn't say "Insurance Salesman".   It says "Financial Advisor". 

Do you think if my friend saw "Insurance Salesman" instead of "Financial Advisor" on this guy's business card he would have bought a whole life policy he doesn't need?  

Probably not.

And that's just one anecdote of many.

Cross your fingers that the SEC passes this proposition.    It should be perfectly clear if you are working with a broker, an insurance agent, or an actual financial planner.