Index Annuity "Advisors" Lose Cutter SEC Case, Raising Alarm About "Fiduciary" Advisors Selling Fixed Index Annuities
A recent SEC case against Cutter Financial Group highlights an alarming truth: many investors still don’t understand how an advisor who claims to be a fiduciary can sell annuities and not be held to the best interest standard. The consequences of not understanding this can be costly!
The SEC v. Cutter Financial Group Case
Cutter Financial Group, an SEC-registered investment advisor based in Massachusetts, and its founder Jeffrey Cutter, were charged in 2023 with deceptive practices tied to the sale of fixed index annuities. Between 2014 and 2022, the firm earned over $9 million in upfront commissions by switching clients from one annuity to another — often without disclosing the hefty commissions involved or the financial implications for the client.
These switches triggered $640,000 in surrender charges, loss of annuity bonuses, and extended surrender periods for over 430 clients, many of whom were retirees. The SEC argued this violated fiduciary standards under the Investment Advisers Act. Learn more about the Cutter trial here.
Fiduciary in Name Only
Experts like Knut Rostad, president of the Institute for the Fiduciary Standard, argue this case reflects a disturbing erosion of fiduciary principles. Rostad emphasizes that disclosure alone is not enough — true fiduciaries must actively avoid conflicts of interest and refuse compensation structures that distort advice.
Ron Rhoades, professor and fee-only advisor, agrees: “It’s impossible to act as a fiduciary and simultaneously represent a product manufacturer, like an annuity provider that compensates via commission.”
What Investors Should Know
A fiduciary must always put your interest first. However, some advisors wear “two hats” – they offer certain services as a fiduciary, but also sell commission-based products (like fixed index annuities) that aren’t held to a fiduciary or best interest standard. This conflict of interest is often glossed over by reference in fine print within a 80+ page document.
Unfortunately, many financial advisors who wear "two hats" operate under the SEC's radar. Only RIA firms with assets under management greater than $110 million fall under the SEC's regulatory oversight. RIA firms below that threshold fall to state securities regulators who typically lack the manpower and resources of the SEC. Therefore, it is critically important for consumers to understand that just because an advisor claims to be a fiduciary or a fiduciary planning organization doesn't mean that they always work in your best interest. We recommend having your advisor sign a fiduciary oath that says they will always and only serve you in a fiduciary capacity.