You are an actuary who has moved into the financial advising business. You
run your business with a partner, who is not an actuary (or a member of any professional organization for that matter), where you each have a 50/50 ownership. Your clients are high net-worth individuals, and you generate revenues through commissions. The products you sell to your clients are primarily a combination of mutual funds and par insurance (and expensive form of life insurance with a tax advantaged investment component). Commissions on mutual funds are 1% of invested assets, and commissions on par insurance are 50% of first year premium, followed by 2% of premium thereafter.
You've just attracted a new client who has committed to investing $1 million per year for the next 10 years with your advising firm. You have assessed your client's financial situation and have determined that the optimal investment mix would be 20% into par insurance, and the remaining 80% into mutual funds. Your partner disagrees, and thinks the optimal mix is 60% par insurance and 40% into mutual funds.
You have concerns with your partner's recommendation, and you're worried that he is more concerned with earning higher commissions than the optimal investment solution for the client.
1.Which conversations you would have with your partner? Think of how you would approach your partner given your ethical dilemma
2.Specify a plan of action that is dependent on your partner's responses to your conversation.
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