Independent educational resource. Does not provide legal, tax, investment, insurance, or fiduciary advice. Content is for informational purposes only.
Reference
Advisor Due Diligence Checklist
A structured reference checklist for financial professionals evaluating CDA products for client suitability.
Educational checklist only. This checklist is provided for informational purposes. It does not constitute legal, compliance, or fiduciary advice. Advisors should consult compliance counsel, follow applicable regulations, and apply their own professional judgment. Requirements vary by firm, state, and regulatory context.
Checklist Sections
Product Understanding
- Can you explain the benefit base, guaranteed withdrawal rate, and fee structure in plain English to the client?
- Do you understand how the benefit base is calculated and when step-ups occur?
- Do you understand what constitutes an "excess withdrawal" and how it affects the guarantee?
- Have you reviewed the full contract, including all riders and endorsements?
- Do you understand the investment restrictions and approved investment options?
- Do you understand the surrender charge schedule and termination provisions?
- Do you understand what happens to the guarantee upon the death of the insured?
Insurer Evaluation
- What is the insurer's financial strength rating from AM Best, S&P, Moody's, or Fitch?
- Has the insurer's rating changed recently? Is it on watch or outlook negative?
- What is the insurer's claims-paying history and track record with similar products?
- Is the insurer licensed in the client's state?
- Has the insurer been subject to regulatory actions or consent orders?
- What is the insurer's reinsurance arrangement for this product?
Fee Analysis
- What is the total annual cost, including: CDA insurance charge + investment management fees + advisory fees?
- Is the insurance charge assessed on the benefit base or the account value? (This matters when the benefit base exceeds the account value.)
- How does the total cost compare to alternative strategies that might meet the client's income needs?
- Has the total cost been disclosed to the client in writing?
- Have you modeled the impact of fees on projected account value and income over time?
Investment Restrictions
- Are the approved investment options consistent with the client's investment objectives and risk tolerance?
- Does the required investment strategy (e.g., volatility-managed) align with the client's overall portfolio?
- Are the investment options competitively priced relative to alternatives?
- Does the investment platform provide adequate diversification within the approved options?
- What happens if the client's preferred investment strategy is not on the approved list?
Suitability and Fiduciary
- Does the client have a genuine need for guaranteed lifetime income that is not met by other sources (Social Security, pension, other annuities)?
- Is the client's financial situation, risk tolerance, and time horizon consistent with a CDA?
- Have you considered alternative strategies (e.g., traditional annuity, systematic withdrawal, bucket strategy) and documented why the CDA is preferable?
- Does the recommendation comply with applicable best-interest or fiduciary standards (Reg BI, RIA fiduciary duty)?
- Have you documented your suitability analysis in writing?
- Is there any conflict of interest in recommending this product? Has it been disclosed?
Regulatory and Licensing
- Is the CDA product approved for sale in the client's state?
- Are you properly licensed to sell insurance products in the client's state?
- If you are an RIA, have you reviewed the implications of recommending an insurance product under your fiduciary duty?
- Have you reviewed your firm's compliance policies regarding CDA recommendations?
- Are there any state-specific disclosure or suitability requirements that apply?
Client Disclosure
- Has the client received and reviewed the full contract and all disclosure documents?
- Has the client been informed of the free-look period and how to exercise it?
- Has the client been informed of the total cost, including all fee layers?
- Has the client been informed of the investment restrictions and their implications?
- Has the client been informed of the insurer's financial strength and the limitations of guaranty association coverage?
- Has the client been informed that the guarantee does not prevent investment losses?
- Has the client signed a written acknowledgment of the disclosures?