MW Retirement investors assume financial pros are held to high standards. That's not always the case.
By Brett Arends
It's more important than ever to ask any financial adviser or insurance salesperson these key questions
Don't always expect to have a "special relationship of trust and confidence."
A new court ruling makes it more important than ever to ask tough questions of anyone trying to sell you any financial product, especially when it comes to your retirement plans.
The U.S. District Court for the Northern District of Texas has finally thrown out an attempt by the federal government to hold some insurance agents and brokers to a higher regulatory rule known as the fiduciary standard.
That standard would have required agents to always act in the best interest of their clients.
The suit was brought by a wide coalition of life-insurance industry organizations, led by something calling itself the Federation of Americans for Consumer Choice, or FACC.
Those opposing the suit, and fighting to keep the fiduciary standard, included AARP and the Certified Financial Planner Board.
The ruling itself, long expected, particularly relates to a subset of the life-insurance industry involved in selling products to federally regulated retirement plans such as 401(k)s, and to those handling rollovers where 401(k) assets are transferred to an IRA.
But the case was a small flashlight that cast a wide beam, revealing how the insurance industry views its own business and you, the customer.
In particular, the insurers flatly denied in court that their agents had any "special relationship of trust and confidence" with their customers. That concept - a special relationship of trust and confidence - was crucial for defining fiduciary rules. Insurers said it didn't apply to them.
This might come as a surprise to their customers, many of whom are investing tens or hundreds of thousands of dollars of their hard-earned savings in complex financial products, such as fixed or variable annuities, based on the recommendations and advice of those same insurance agents.
As AARP pointed out in its submission, the overwhelming majority of Americans (wrongly) think all financial professionals offering them financial advice are already held to high standards that put their interests before those of the adviser or salesperson.
"AARP studies show that most retirement investors assume that financial professionals offering investment advice - even on one-time transactions - are held to high fiduciary standards of care, prudence, and loyalty under ERISA," AARP told the court, referring to the federal law that governs the establishment, operation and funding of most nongovernmental workers' retirement plans. "This is often not the case," it added. "Due to current regulatory gaps, many financial professionals are free to offer biased or conflicted advice, putting commissions or other compensation above the investor's best interests."
The issues involved aren't small potatoes. Last year Americans bought another $460 billion worth of annuity products. Notably, most of the products sold were of the complex type, such as variable and indexed annuities, that typically generate the highest fees for the salespeople. By contrast, the simple annuity products that convert your savings into a guaranteed income for life, so-called life annuities, accounted for a tiny fraction of the total - even though they are the only kind of annuity widely recommended by retirement experts who aren't working on commission.
"I've seen my share of less savvy investors who have had brokers and insurance salespeople put their IRAs into deferred variable annuities," says North Vale, N.J.-based financial adviser John Coumarianos. "That is almost always a way to extract higher fees from a client without delivering any extra benefit."
Coumarianos adds: "I've walked a few clients through all the expenses they're paying on insurance products for retirement savings, and they've been astounded, negatively, at how much their salesperson has extracted from them."
The insurance industry argues that its agents are already subject to various regulatory standards, typically at the state level. These include the so-called best-interest model recommended by the National Association of Insurance Commissioners.
The insurance industry was therefore in the peculiar position of saying its agents were already being held to very high standards, while simultaneously expressing enormous relief that a court had freed them from ... being held to very high standards. Make of that what you will.
The ruling is good news for the 470,000 insurance salespeople that the Labor Department estimates are working in the U.S. But anyone buying a financial product from them - or from any other financial professional - should ask them some simple but tough questions first.
Among them: How much commission will you make on this sale? Have you bought this product yourself? Have you sold it to your parents, or grandparents, or children? And if not, why not?
You are usually better off going to a fee-only financial adviser (those can, for example, be found through the National Association of Personal Financial Advisors), who will charge you for the advice but won't charge you extra for the product.
Financial advisers who aren't on commission almost always recommend that investors buy low-cost financial products. The cost of financial products comes straight out of your returns.
Asking what the advisers will do with their own money usually speaks volumes. (As long as they tell you the truth.)
-Brett Arends
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March 20, 2026 15:15 ET (19:15 GMT)
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