Is your wealth advisor independent? Sometimes it’s not easy to say

Since the 2008 financial crisis tarnished the big banks and brokerages on Wall Street, the ranks of independent wealth advisers have grown faster than other categories. Improving their appeal is a standard known as the fiduciary rule, which legally requires these advisers to put the interests of clients first at all times and generally avoid conflicts of interest.

Investors should be aware, however, that some finance professionals may appear more independent than they actually are. They may have ties to insurance companies that are not readily visible without diving deeper into their websites and disclosures. This could be important for investors who prefer advisors who are not affiliated with insurers and their financial products.

Three major consulting firms in the northeastern United States – BayState Financial in Boston, Barnum Financial Group in Connecticut and Fortis Lux Financial in New York – may seem independent from their names and what they highlight on their main landing pages. In fact, their brokers work for MML Investors Services LLC, which the companies disclose at the bottom of their websites.


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MML is owned by Massachusetts Mutual Life Insurance Co. (which in turn is owned by its policyholders, not publicly traded). It ranks 4th in assets among major US life and health insurers, according to AM Best Co., an insurance rating firm. And page 14 of a 29-page disclosure document made available to clients when they open a brokerage account indicates that some MML brokers may have incentives, including sometimes higher earnings, for selling products. Mass Mutual insurance. Some brokers must meet minimum sales of MassMutual products to keep their jobs, the disclosure says, and those sales help them qualify for medical and retirement benefits. (At other times, brokers may have an incentive to sell other insurers’ products, but not to keep their jobs and benefits.)

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Granted, BayState, Barnum and Fortis Lux do not claim to be independent and their connection to MassMutual, although not prominent, can be found on their websites. Still, some former advisers who worked at the firms just two years ago say that, based on their observations, many clients were unaware of the firms’ ties to the insurance industry.

Generally speaking, it can be costly for investors to make assumptions about a finance professional’s objectivity, say consumer advocates and some competitors.

Whether they say they are independent or appear to be, advisers directly affiliated with an insurance company or brokerage “are to some extent still required to sell their products,” says Bernie Clark, head of consulting services at

Charles Schwab Corp.

Schwab provides support services to about 15,000 independent advisors, trustees who don’t have those kinds of product sales obligations, he says.

The appearance of some companies “suggests a level of objectivity that may not exist,” says Micah Hauptman, director of investor protection at the Consumer Federation of America, speaking of the industry generally. Ultimately, he says, “what matters is how the finance professional and their company are compensated and what their incentives are.”

MassMutual’s response

MassMutual says about half of its affiliated agencies do business under the MassMutual brand, and the other half operate under other names, known as DBAs, short for “doing business as”. It is not the only insurer that allows it.

It says its affiliated agents adhere to industry standards and rules governing sales practices, required disclosures and advertising, among other things, and that “the vast majority” of its agencies’ investment and insurance sales affiliates are non-MassMutual products.

“We offer flexibility and choice to agencies and finance professionals who affiliate with us in how they run their business, including having the ability to offer products from MassMutual and other operators,” said the insurer in a press release.

While MassMutual claims its DBA agencies “clearly disclose their affiliation” with MML Investors, the three companies Baystate, Barnum and Fortis Lux do so at the bottom of their landing page – and fail to indicate that MML is a unit of MassMutual there. . MassMutual says a Google search for “MML Investors Services” reveals MassMutual’s name, and he says the three companies aren’t doing anything misleading.

Baystate, Barnum and Fortis Lux declined to provide their own comment, deferring to MassMutual.

Maggie Seidel, spokeswoman for Finseca, an insurance industry trade group, acknowledges that companies might choose to disable the insurance connection for marketing reasons, but also says the practice is not misleading.

Considerable reach

The three subsidiaries of MassMutual are important.

Barnum says on its website that it has $30 billion in assets under management and 320 professionals. Baystate has 300 advisors, 200 support staff and 16 offices in New England, according to its website. And Fortis Lux had around 170 representatives in 2021.

MassMutual ranks second among insurers in the number of stockbrokers, with 7,933 in 2020, behind only

Lincoln National Body

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Lincoln Financial Network, according to Boston-based market research firm Cerulli Associates. MassMutual’s brokerage ranks doubled after 2016 when it acquired the retail advisor strength of

MetLife Inc.,

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which included Barnum and Baystate.

Wealth managers associated with insurers have faced challenges in recent years, and some large insurers have gone out of business.

Donnie Ethier, senior director at Cerulli, says advisors affiliated with insurers are often limited by products that some investors perceive as expensive, such as annuities and whole life insurance, and by the belief that “they might not offer an equally rich menu of other financial products such as exchange-traded funds and third-party mutual funds. These agents sell relatively more insurance products than fully independent advisers, according to Cerulli.

Eric Raether, president of Canopy Wealth Management in Middleton, Wis., who worked as an advisor at Northwestern Mutual Life Insurance Co. from 1992 to 2018, says that at Northwestern he found that some potential clients were hesitant to meet with him “because they were afraid of being sold insurance products.

Another challenge presented itself when Obama-era federal regulators threatened to extend the fiduciary rule covering advisers to insurance brokers and agents as well. Amid opposition from insurance industry trade groups, a less stringent rule known as “best interest regulation” was eventually adopted. Reg BI requires brokers – and insurance agents registered as brokers – to disclose and take steps to reduce conflicts of interest, but only when recommending securities transactions and strategies. Unlike brokers, trustees generally obtain informed written consent for any disputes in the overall client relationship.

Wealth advisory firms today are governed by a “fragmented set of different regulations” for investment advisers, brokers and insurance agents, says Michelle Richter, consultant at Fiduciary Insurance Services LLC, which advises fund managers, including those affiliated with insurers. Sometimes the same professional needs to tell clients when they are acting as trustees or not, she says. Generally speaking, she says it can be “misleading” for those with a strong insurance affiliation to appear independent.

Reading Disclosures

Some insurers, such as Northwestern Mutual, have exclusive sales and advisory forces that are required to display their insurance brands with the DBA name. But others, like Guardian Life Insurance Co. of America and Lincoln Financial Network, are less stringent, allowing their open-model DBA advisers to disclose their insurance link less prominently.

Guardian and Lincoln say there is nothing deceptive about this practice and they are doing nothing wrong. And their affiliations, and the conflicts and inducements they generate, can be found in the disclosure documents required by the Securities and Exchange Commission. This includes the CRS form and Reg BI disclosure for brokers, says Melanie Senter Lubin, president of the North American Securities Administrators Association.

The information is there for investors, says Ms. Lubin. “It’s extremely important that they read it,” she says.

Mr. Smith, a former financial reporter for the Wall Street Journal, is a writer in New York. He can be reached at reports@wsj.com.

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