A recent e-mail from a life insurance brokerage firm touted a fiduciary approach to life insurance that was somewhat intriguing. This firm is not fee-only. They do sell insurance. But they emphasized the “application of fiduciary standards requiring transparency, disclosure, and minimization of costs.”

That leads to a critical question of whether an individual or firm licensed as an agent or broker and selling insurance can really take a fiduciary approach to life insurance. I think the answer is potentially yes. But strict conditions would have to apply. Some of the important ones are cited by this firm claiming to take a fiduciary approach, particularly disclosure of commissions and other important aspects and risks of a policy, and the minimization of costs (including commissions wherever possible).

If a fee-only approach isn’t used, it would need to be at least fee-based, meaning including fees as well as commissions as sources of compensation. Most importantly, it would also require a commitment to advise the client about all the best potential sources and types of policies, including those the agent or broker advisor is not, and could not be, licensed to sell. These should include policies from no-commission companies and those from highly-rated companies that only sell policies through their own agents.

This particular life insurance brokerage firm says that they represent “families of significant wealth.” Well, that’s fine. Who doesn’t want to do that? But does that mean a fiduciary approach to life insurance is only suitable when working with deep-pocket clients whose policy purchases will provide substantial commissions even when they are minimized (if they even can be)?

A fiduciary approach to life insurance from those selling insurance would be impressive if it observed all of the above conditions – cost minimization and disclosure plus reviewing all the best products whether or not the agent can sell them – and was not confined to the wealthiest clients. Let’s see who can meet that standard? There certainly should be plenty of demand for those who might.