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Know the Difference Between an Insurance Broker-Dealer and an Investment Adviser

There are increasing instances of an insurance broker advisor adopting the role of an investment advisor and mixing up his/her fiduciary responsibilities. While it is true that insurance is a part of the financial services industry but it is quite distinct from the stock markets, the currency markets, the commodities market, or the banking services. An investment advisor is a market specialist, who understands all these market segments within the financial services industry. S/he will offer advice to you based on your financial situation, especially the amount of money you can realistically invest for future benefits. Such advice could very well include investment in insurance policies in addition to other modes of investment. 

Concentrating all or most investments on insurance 

One critical point of difference between an investment advisor and an insurance broker-agent advisor is that the latter will end up advising you to make most or all of your investments in insurance products. That’s because his/her horizon would be limited to insurance only and hence his/her knowledge would be limited to insurance products. 

Insurance products are meant to fulfill certain areas of anxiety in the life of an individual that is cumulatively known as risks. Hence, you have different kinds of insurances that cover you against these risks. For instance, disability concerns relate to a serious risk of losing the ability to work and earn an income and this can be best explained by an insurance agent. 

It’s true that insurance coverage is indispensable

There is little doubt that insurance coverage is indispensable today, especially those that can cause anxiety to you when you hear disability news stories of people who lost everything. That can happen to anybody and if such a person has not covered himself/herself adequately against disability, the price could be very high. 

Interestingly, insurance providers have to conduct a disability insurance awareness month every May to inform people of the need to cover against disability. You may want to prioritize this insurance above life insurance depending on your financial situation. Your insurance agent is best placed to advise you on that.  

An insurance agent can upgrade to an investment advisor 

Normally, you won’t listen to advise on mutual fund investments by your insurance agent although after reading disability articles, you will listen to his/her advice to get cover against disability. This doesn’t mean your insurance advisor cannot become an expert in mutual fund investments. If s/he is focused on broadening his/her horizon to cover all financial services, it is quite possible. 

However, unless s/he makes the grade to become an investment advisor, s/he must not try to advise you on investments other than insurance. If s/he is an agent of just one kind of insurance, then s/he must stick to that. Some insurance agents just try to sell you policies you don’t need as soon as they get wind of some disposable income in your hands. 

On your part, you need to watch out for such insurance agents and stay away from them as much as possible. Use your resources and also do your research to find out about the agent. If you are looking for an investment advisor, then too, you need to refer your resources and do your research. 

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