Business Innovators Radio - Interview with Kerry Morris, CFP® Founder of HonorShield Discussing Fiduciary Standards

Episode Date: November 2, 2023

Kerry Morris, Author of When Retirement Goes Bad, Life Sucks, Certified Financial Educator, and CERTIFIED FINANCIAL PLANNER™ professional.Kerry Morris has been serving families for the past twenty-five years as a financial planner and advisor. He has recently launched HonorShield, LLC., as a way to challenge the current thinking and behavior of consumers and financial advisors preparing for the potential high cost of aging.He has spent several of his twenty-five-year career advising hundreds of families experiencing the nightmare of paying for care. The question, always, was “how to make the money last”?Morris has watched too many families, too many men and women not be fully prepared for retirement. The financial industry has put this cost-of-care issue on total “ignore” mode, often shoving it onto a small-but valiant band of “insurance specialist” around the country. Only about 1 in 100 Americans embrace this model. That is a problem for American families and our country.Morris found a better way, a win-win solution that more American’s could feel good about embracing. It’s a whole new way to approach and solve this problem: the LCAP—the Longevity Care Allocation Plan. Every person, every family deserves to know how an LCAP works. Kerry Morris has made it his life’s goal to ensure that those he helps can hold their head high and know that no matter what curve balls retirement throws at them, they will be prepared.“One of the most important things I’ve learned in my 25 years in the business is that a great life is supported by three areas, Health, Relationships, and Money. My job is to make sure that a family’s money is working effectively to accomplish that job.”Learn More:http://www.honorshield.com/Influential Entrepreneurs with Mike Saundershttps://businessinnovatorsradio.com/influential-entrepreneurs-with-mike-saunders/Source: https://businessinnovatorsradio.com/interview-with-kerry-morris-cfp-founder-of-honorshield-discussing-fiduciary-standards

Welcome to influential entrepreneurs, bringing you interviews with elite business leaders and experts, sharing tips and strategies for elevating your business to the next level. Here's your host, Mike Saunders. Hello and welcome to this episode of Influential Entrepreneurs. This is Mike Saunders, the authority positioning coach. Today we have back with us, Carrie Morris, who's the founder of Honor Shield, and we'll be talking about fiduciary standards. Carrie, welcome to the program. Thanks, Mike. It's good to be back. Yep, good to have you. I always love your clear descriptions of some of these topics that, frankly, sometimes people are scratching their heads on.

And I think that this is a topic where we need to start, first of all, with what is a fiduciary standard? Kind of what does it mean? And then at the same breath, what does it not mean when referring to financial advisors? Yeah, well, that's a good question because you don't hear that second part covered very often, you know? Like, we're bombarded with this. term. It's become a catchphrase fiduciary standard and what it means and so forth. And then the media picks it up and then the public picks it up from the media. But they don't really ever talk about what doesn't mean. And so I think to unpack that a little bit and maybe give some context and some everyday language, hopefully that'll be helpful today, you know? Yeah. Great. So let's start with what does it mean? Well, I tell you, I think it's best when compared to other standards. It's

almost easier to understand it when it's compared to, okay, here's the fiduciary standard. You hear that all the time. Well, what are the other standards, you know, and how's that compare? So let's just start with fiduciary. And the best way to put that into a one-liner is that the client is being placed really above the advisor's interest in every way. So let's just kind of say, okay, you usually hear that talked about in the client's best interest, client's best interest, and what's in the best interest of the client. But it also involves like conflict of interest disclosures, all those technical stuff. You can find tons of that on Google.

But let's just picture the client being placed above the advisor in every way, number one. Number two, the suitability standard is what you don't hear talked about much, and that's been around for years. And by the way, Mike, guess how long the fiduciary standards really been around? Any idea? I will say 20 years. The Investment Advisors Act of 1940. Wow. So the fiduciary standard is no new thing.

So to an investment advisor who has a series 60, who's passed a Series 65 exam or a certified financial planner who are both automatically held to a fiduciary standard, it really goes way back to the Investment Advisers Act of 1940 when that standard is set. And that's why you can kind of hear guys like me with just a little bit of sarcasm in my voice about it, like being a big. thing in the news, you know? And so the suitability standard, though, that has been around a long time as well. And that really kind of comes out of the stock broker world, right? And so if you're a

stock broker, guy calls you for a stock, really the suitability standard there is like, hey, you're supposed to still, let me just kind of like read it to you this way. It only requires that the advisor reasonably believe that any recommendations made are suitable for the client, in terms of, here's the key part, in terms of the client's financial needs, objectives, and unique circumstances. So that sounds pretty similar, right? And then the third, the third category is what about insurance sales? You know, I don't hear that talked about. And really, it depends on the type of insurance, mostly the same, it's mostly the same as the suitability standard. So most insurance sales are held to that. We've seen some new regulation lately on like annuity sales and things.

There's a thing called a best interest contract. But I'll tell you, at the end of the day, it really goes back to most advisors operate with a higher standard than any of these, Mike. And that's really a moral imperative, you know. And so most advisors are great individuals. They're in the business. It's not an easy business. They're in the business, you know, to help people and things like that. But obviously the regulators are trying to create some uniformity in standards and some guidelines to make sure that investors are given certain disclosures and things like that. And I'll tell you, the paperwork, I remember when I first, I wrote my first life insurance app in April of 1997, Mike.

And that was my second time of really having a license. I was like 20 years old the first time I got an insurance license. but I was in college and way too young to be doing that stuff, you know. But I remember that was a term life insurance application and it was on three pages. And it was carbon. So it was three pages and it's carbon. An application these days, I don't know, 15 plus. Yeah, I was going to say 23 easily.

Yeah, yeah. So there's the amount of disclosures have just gotten bigger and bigger and bigger and bigger. So a lot of people get hung up. Are you a fiduciary? or fiduciary, hey, it's a great question to ask. It really goes back more to licensure. And, you know, we can get into things like, for example, asking questions, you know, well, so why do you recommend this?

You know, it really boils down to finding out what's in that advisor's head about how does this compare to, say, two other things close to it? Or why did you recommend this from this perspective? What about a cost perspective? How does it rank in that? respect, things like that. There's a lot more than just finding out about that fiduciary. Yes, it's more than just a yes or no answer. Did this do that? Yes. But it's more of, tell me how you arrived at that conclusion. And that provides some color to it. I think that's a really great

explanation. So then what does fiduciary standard not mean? Let's flip the script and turn it from the other perspective. Right. Exactly. So what does it not mean? And that kind of goes along with, you could even say, you know, what can even the fiduciary standard, this great standard of putting the client first, what does it not protect investors from? And that kind of thing. And so what it doesn't mean is that everything that investor touches is going to be perfect. You know, it doesn't mean that, you know, if they do their due diligence and they research a certain investment and it meets all the standards, it meets the fiduciary standard, it clearly seems in the client's best interest. And according to that. But then,

maybe that particular investment goes, you know, has a really hard time. Maybe it goes down. Maybe the investors even losing money. We saw this a lot in 2008, you know. The, the advisor who is operating in that fiduciary on the, on the front end of that to make that recommendation, can't can't necessarily control the back. Well, not even necessarily can't control the back at all. Right. Right. It makes me think about when you were describing suitability, you know, if all the lights are lit up and the client is suitable with the right assets and foundation. And then we're going to, and let's just pick the, you know, the Dow Jones Industrial average, you know, whatever all that, you know, entails.

So we're going to make a wise investment in that. Well, what if the market drops? That what didn't mean that the Dow Jones Industrial average all of a sudden became a horrible investment because it's got hundreds of years of track record. It just means that there, that there were some volatility there. So, yeah, it's doing what's right by that client. And actually, I really liked how you described that, which is part of the law. The rule is putting the client's needs above the advisor.

And boy, when you do that, you know, that really frames and colors that advice really well. Yeah, so you can you can do all. You can put the, you know, the client first. You can do all those. And then, you know, like you just mentioned with the Dow Jones. the advisor can't control the outcome. So in other words, that happened because there was a risk there from the beginning, right? So as long as that risk is acknowledged and everybody understands, okay, here is this risk and it's in paper.

It's in the paperwork that the client signs. Then there's not anything the advisor can do after that happens because unless the advisor is not managing that actual investment itself. He's just, he or she is just simply making the. that recommendation. And so even, you know, with the moral imperative and everything in that advisor's repertoire of being able to assess it, they're making the best recommendation they can. And so at the end of the day, the client has to assume some responsibility as well, obviously for those decisions to invest in certain things, you know. And so together, you make a good team. And most of the time, it works out just fine, you know, but sometimes things are going to

happen in the investment world, right? Yep, because we live in a world that change is inevitable. And you know what? I think that probably does not go into fiduciary standard is, you know, the empathy and care and intent of the advisor. When you've got that advisor you're working with that knows that you really are caring for them, then the fiduciary standard should, in my opinion, just be the starting point. It should just be, of course I'm going to do all this, but let me just make sure that.

And, you know, I really care that you're getting the best. And so I think that it's just that mindset and mentality and it's great that you can hold, you know, that fiduciary standard out there. So you've done a really good job kind of coloring. What does it mean? What does it not mean? Let's just kind of finish up that thought process with makes me think of other standards out there. You know, how is it different than other standards out there? Because are there some standards that, you know, you can comply with that don't go as deep as the fiduciary standard?

Yeah, absolutely. you know, for example, let's say you have a retiree who's looking for protection or some type of retirement product from an insurance company, you know, and that's where the advisor is the representative of that product of that insurance company, so to speak. They don't necessarily need a fiduciary standard. Many are. So a lot of advisors like myself have an insurance license and maybe a securities license and other credentials. but really that boils down to the, you know, asking that insurance professional questions like, hey, you know, what else? And that's where the best interest standard comes from.

We've heard some verbiage of around annuities lately is like what other similar insurance options has the advisor compared the two, you know? And so you want to ask the advisor questions like, okay, are there other, what's a couple other products in this same type genre that do the same thing that you've that you've looked at. And so why did you choose this one over that? Right. You know, that's really good. And if maybe you only compared it in your personal notes before making the recommendation, if you only compared it to one or two other options, was that enough? Yeah. And a lot of times that that is enough. And I'll tell you why, because a lot of times what you're after to

provide and what the clients after to get out of the, out of that product. there may be only two or three carriers really at the top of that game. So if it's an insurance professional who's working in a certain area all the time, they know who the top dog is. They know where that most consumer-friendly product is. It's always a good exercise to still check a couple of other companies' numbers. But sometimes it really gets specific. I know, for example, with HonorShield, you know, we're working in the longevity space, Mike, right?

And so you have a lot of people, I mean, you know this from all the podcasts you've done. The boomers have saved most of their money in pre-tax or post-tax savings vehicles. I would say mostly pre. Exactly. IRAs, 401Ks, right, ever since 1978, 1980. So when you've got this whole generation coming into retirement and they've saved all this money in IRAs and so forth and so on, and then you want to find an efficient way to turn that into maybe. longevity protection, protection against how to pay for what we call the high cost of aging

or how to pay for, you know, home health-assisted nursing home, then there's only a couple of ways to do that without having a big taxable event. Fortunately for us, they're really good carriers. So that's just an example of, you know, a lot of these products aren't trying to be all things to all people. They're very specialized in, and so there's usually a handful of those in the marketplace. So, Kerry, playing the devil's advocate. I'm going to ask this question, like from the perspective of, that sounds all fine and good, but there's got to be some holes or cracks in the process. What can even the fiduciary standard not protect investors from? Yeah.

So it can't protect investors from outcomes. I mean, the first thing that comes to my mind is it can't protect the outcomes of particular investments after their. after their researched and started. And if the client chooses to use them from the advisor's recommendation, and both the client and the advisor did everything they could to assess that on the front end, read all the disclosures, everything, and looked at the risk and said, okay, that's an acceptable risk for the outcome we're trying to achieve. Then, you know, just a regulatory standard of putting the client first is met in that

scenario and then the outcome can still be bad. But I think I think a lot of times the public wants to kind of look back all of a sudden in time and say, well, you know, the fiduciary standard didn't do its job or something like that. And so, you know, you have to look back and see sometimes and you've got to break it apart. But it's usually done in hindsight. But yeah, I don't hear this talked about at all. And so I appreciate you bringing that up today. Yeah, it's almost like, hey, I bought a car, it's a brand new car. And it worked great for about six months, but then I wrecked it. And you can't go back to the car manufacturer or the salesperson or the dealership.

Well, it was great when I gave it to you. You smiled and you drove off the lot and everything was great for a year. And then life happened. So, you know, I think it's taking ownership that way and realizing, you know, I really could have driven a lot safer or it's it's life, you know, maybe some of the parts are going to, you know, change or break down on need to upkeep. So there's those things that are beyond the control. That salesperson, you can't go back on them and say, why did you put me in that car? Because at that moment at time, the car was safe and great and wonderful. Yeah. So I think it's just a matter of,

you know, fiduciary standard, suitability standard, the rules, best interest contract, and all these different regulatory kind of oversight type things. I really think it's, it's safe to say, we have to just look at them as one brick in the wall, right? One brick in the wall of protection for the consumer. You know, and we've mentioned the market and risk and volatility and Dow Jones, all these just, you know, places that we can put our money. How does all of this relate to buying protection or retirement products from insurance companies? You've mentioned insurance companies before, but I know that sometimes people don't think of insurance companies as being part of a retirement plan when it could be. but talk a little bit about how this relates to buying products from insurance companies. Right.

And that's where I was referring to, and it's good to kind of go back over this again, is that insurance agents have their own standards that they have to abide by. But at the end of the day, they're appointed by insurance companies to distribute their products, right? And if an insurance agent doesn't have any other licensure that requires them to be a fiduciary and so forth, it doesn't mean that they're still not acting in the best interests of the client. They just don't have the licensure that requires that because most of them I do that I know do act in that way. And so when retirees first kind of especially talking about the 401 kid generation, you know, retirees are realizing more and more that we'll what is insurance? It's a transfer of risk, right? So there's certain parts of retirement when people realize, wow, you know, I'm not contributing anymore. I don't really have a long, long time to recover. So retirees want more and more of the ability to transfer that risk, whether it's building

a guaranteed income stream for later or protection against some type of loss or peril, like we mentioned earlier, you know, the high cost of aging. That's like we do at Honor Shield. you know, helping with those things. And so that's where it comes down to ask that advisor, you know, what are, you know, what are, not that you're going to understand the jargon and hopefully they won't come back with a bunch of jargon, but say, hey, in common sense terms, you know, what are the two or three companies that that you're looking at or how many companies are you looking at in this space, you know, that provide these things?

And why did you choose this one over, say, the one next to it? because, you know, for a real professional who's working on that for a client, the client doesn't realize a lot of times how much research is actually done to look at the nuances of those contracts. So we refer to those what some people call policies. I've always called contracts because that's what they are. It's a contractual relationship between you and the insurance company. And again, you're looking to either get a guaranteed. outcome from that or some type of transfer of risk and some type of reimbursement or

remuneration if a certain thing happens, right? Because they're trying to create either lifetime income or keep you from having catastrophic loss in an area across the board. That's what insurance is. It's a transfer of risk. So make sure you ask all those questions, ask, hey, what if this needs to, what happens if this needs to end early? But I'll tell you, a lot of people ask about commissions and things like that, right? And that's how the insurance industry is operated for hundreds of years. It pays the agent of commission. What I've found, though, is that, you know, doing this for 26 years is that all of the products in a particular genre, a particular type of product generally pay about the same.

You know, there's really not incentive in that world like you hear sometimes off the Wall Street world. there's really not incentive financially for agents in the situations I've seen to really write product A over product B that they would just do it for, you know, every once in a while I'll see a carrier advertise a bonus on something or something like that. But for your regular advisor who's out there, you know, working every day to do the right thing for people, they don't pay that any mind, you know. Because it's not so dramatically different that you're going to to be pushing one product over the other. It's just, is this insurance product viable for the

client? Again, circling back to, is it a fiduciary decision? Does that make sense for the client above the interest of the advisor? Yeah, exactly. And let's just, we can end this with the fact that this is confusing. You know, like, it's tough being a consumer. You feel vulnerable. You know, you're trying to figure out who to trust, who to work with. And so all these things kind of add up together. So the standards helped, the questions helped. But it also, you know, always realize what area you're dealing with. Are you on the insurance side where you're looking for guarantees and things for insurance companies? Are you on the investment side where there's always certain risks to consider? I mean, you know, most, you could, you could make

the statement that there's always some type of risk in everything, right? That's pretty fair. But in most of the insurance products, for example, you're only talking about if the insurance company goes out of business, that it would fail to be able to supply the guarantees that it's making. And that because of the way the system is regulated and controlled, very, very, very rarely do insurance companies ever go out of business? They normally are taken over by another company, et cetera, et cetera. And that's for another day, maybe. but yeah, it's confusing. So I just want to express that, that, you know, we understand it is. And, you know, the client is bombarded sometimes with jargon that's unfamiliar.

And so it's a group, it's kind of like a joint process. You have to work together to help a client get to the point where they understand the pros and cons of the different investments or insurance choices. Yeah. Well, it's been such a good. conversation, Carrie, of you enlightening us on the depth of trust and transparency as it relates to fiduciary standards. So thank you so much for clarifying that. And if someone is interested in learning more about what you do and how you do it, what's the best way that they can reach out and connect with you? Yeah, just honorshield.com. One word, honor shield.com is the best way

you can reach me right from there. Excellent. Well, Carrie, thank you so much for coming back on. It's been a real pleasure talking with you. Hey, great to talk with you again, Mike. We'll see you next time. You've been listening to Influential Entrepreneurs with Mike Saunders. To learn more about the resources mentioned on today's show or listen to past episodes, visit www. www.Influentialentrepreneursradio.com.