Advisers can and should offer fiduciary advice

I am really confused about the letter “Many don't need fiduciary advice” (March 14) from Jon Lovecchio, principal of Jon Lovecchio Financial Services Inc.

I am really confused about the letter “Many don’t need fiduciary advice” (March 14) from Jon Lovecchio, principal of Jon Lovecchio Financial Services Inc.

Using The Committee for the Fiduciary Standard’s five-point mom-and-apple-pie definition of “fiduciary,” specifically, which of the following items does he think should be jettisoned when providing advice to clients: put the client’s best interests first, act with prudence, that is, with the skill, care, diligence and good judgment of a professional; don’t mislead clients; provide conspicuous, full and fair disclosure of all important facts; avoid conflicts of interest; or fully disclose and fairly manage, in the client’s favor, unavoidable conflicts?

I might add, why don’t most investors “need this level of advice,” and why should it cost more than biased advice?

Do most investors really crave advisers who put their own interests first, act without prudence, mislead clients, revel in conflicts of interest and not only fail to disclose but manage conflicts to their own personal advantage?

In his letter, Mr. Lovecchio wrote that “most advisers and brokers are incapable of providing fiduciary services.”

Balderdash! I obviously have a far greater respect for advisers and brokers than he does.

Harold Evensky

President

Evensky & Katz Wealth -Management

Coral Gables, Fla.

Taking issue with letter on cost comparisons

In response to the letter “Cost comparisons used for RIAs, reps misleading” (March 21), from Orrin B. Webber, owner of Compass Group Insurance and Investments, he attempted to make a point about a previous writer’s choice of a specific exchanged-traded fund used in making such comparisons.

In his letter, he pointed out that the ETF’s expense ratio of 0.09% is well below the average, which it is. Then Mr. Webber did the same thing in his own example, choosing a mutual fund with an expense ratio well below the average in its category (0.61%, versus the Lipper average of 1.07%).

He went on to contend that most of the registered investment advisers that he knows “haven’t been in the business for 10 years as RIAs.” I fail to see the point of that statement unless Mr. Webber knows so many RIAs personally that they form a representative and statistically significant sample of the entire population of RIAs.

One thing he wrote that I agree with is that it is the performance of the investment net of fees that really matters.

J. Brent Everett

Vice president and chief investment officer

Talis Advisory Services LLC

Plano, Texas

GMIB versus GMWB causes confusion for RIAs

I had to laugh at the letter “RIAs more careful on VAs than brokers and agents” (March 21) from Ron Pearson, proprietor of Beach Financial Advisory Service, objecting to the suggestion made by Kevin Loffredi, vice president of Morningstar Inc.’s annuity solutions group, in the article “The GMWB and why it’s so popular” (Feb. 14) that RIAs don’t fully understand and appreciate how guaranteed-withdrawal benefits work on variable annuities.

Mr. Pearson argued that registered investment advisers don’t sell variable annuities with GMWBs, not because they don’t understand them but because they understand them better and therefore realize that “they are largely worthless marketing ploys.” He attempted to make his point by citing a real-life case.

Unfortunately, the case that Mr. Pearson selected had a guaranteed-minimum-income benefit on it rather than a guaranteed-minimum-withdrawal benefit. By demonstrating that he doesn’t understand the difference between the two, he actually proved Mr. Loffredi’s point.

And though Mr. Pearson correctly articulated the annuity setback rules that hamper the attractiveness of a GMIB, he clearly doesn’t understand the proper way to receive income from a GMIB. Had he understood the product, he would have advised the client to withdraw 5% (or 6%, depending upon the contract) of the “phony money” until the maximum annuitization age was reached.

Only then should the client consider annuitizing the “phony money.”

Scott Stolz

President

Raymond James Insurance Group

St. Petersburg, Fla.