Can a lawyer who is also a licensed insurance agent sell annuities through the law firm to the firm's estate planning clients?
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This page answers the general question as of 2001. Ezel answers yours: whether it's allowed on your facts, under the current Ohio Rules of Professional Conduct, with citations.
Currency note
The Board withdrew this opinion on August 7, 2020 in Advisory Opinion 2020-08, so it is not current guidance; it is indexed here as historical research only.
This opinion also issued in 2001, before Ohio's adoption of the Ohio Rules of Professional Conduct (effective February 1, 2007). The DR 5-101 and DR 5-104 provisions discussed here are now addressed by Ohio Prof. Cond. R. 1.7 and 1.8. The opinion also relied in part on the "appearance of impropriety" concept, which the current Rules do not carry forward as a general standard. Treat this page as historical context, not current guidance. Verify against current rules and Opinion 2020-08 before relying on anything here.
Plain-English summary
The Board addressed whether a lawyer who is also a licensed insurance agent may sell annuities, for a fixed commission, through the law firm to the lawyer's estate planning clients. The question followed Opinion 2000-4, in which the Board had said the Code did not prohibit providing financial planning services through a firm in connection with legal services. Here the Board concluded the annuity sale was improper.
The Board reasoned that the lawyer's interest in selling an annuity and the client's interest in receiving independent professional legal counsel free of compromise are differing interests. It concluded that even if full disclosure and meaningful consent could be obtained, an appearance of impropriety would exist. The Board also identified a confidentiality concern: a lawyer's sale of annuities through the firm may jeopardize the preservation of client confidences or secrets, because the records of a licensed insurance agent are subject to inspection by the state superintendent of insurance under Section 3905.19 of the Ohio Revised Code.
Common questions
Q: Could a lawyer who is a licensed insurance agent sell annuities to the firm's estate planning clients?
A: No. The opinion concluded it was improper for the lawyer to sell annuities, for a commission, through the law firm to the lawyer's estate planning clients.
Q: Would disclosure and client consent make it permissible?
A: No. The opinion concluded that even with full disclosure and meaningful consent, an appearance of impropriety would exist because the lawyer's commission interest and the client's interest in independent counsel are differing interests.
Q: Why did the opinion raise a confidentiality concern?
A: The opinion stated that a licensed insurance agent's records are subject to inspection by the state superintendent of insurance under Section 3905.19 of the Ohio Revised Code, which could jeopardize the preservation of client confidences or secrets.
Background and rules framework
The opinion interprets former Ohio Code of Professional Responsibility DR 5-101(A) (a lawyer's own financial, business, property, or personal interests that may affect professional judgment) and DR 5-104(A) (business transactions with a client where interests differ), against the backdrop of the appearance-of-impropriety concept then used in the Code. Those conflict-of-interest subjects are now addressed by Ohio Prof. Cond. R. 1.7 and 1.8 (Model Rules 1.7 and 1.8).
Citations and references
Rules of Professional Conduct:
- Former Ohio Code of Professional Responsibility DR 5-101(A), DR 5-104(A)
Statutes:
- Ohio Revised Code Section 3905.19 (inspection of a licensed insurance agent's records by the superintendent of insurance)
Other opinions cited:
- Ohio Bd. of Comm'rs on Grievances & Discipline Op. 2000-4 (2000), financial planning services through a law firm
See also
- Ohio BPC Op. 2000-004: Providing Financial Planning Services Through a Law Firm
- Ohio BPC Op. 2000-001: Accepting a Referral Fee From a Financial Services Group
Source
- Landing page: https://ohioadvop.org/advisory-opinion-index/
- Original PDF: https://www.ohioadvop.org/wp-content/uploads/2017/04/Op-01-004-1.pdf
Original opinion text
Reproduced from the official source for research purposes. The linked source is authoritative.
The Supreme Court of Ohio
BOARD OF COMMISSIONERS ON GRIEVANCES AND DISCIPLINE
41 SOUTH HIGH STREET-SUITE 3370, COLUMBUS, OH 43215-6105
(614) 644-5800 FAX: (614) 644-5804
OFFICE OF SECRETARY
OPINION 2001-4
Issued August 10, 2001
Withdrawn by Adv. Op. 2020-08
[CPR Opinion-provides advice under the Ohio Code of Professional Responsibility which is
superseded by the Ohio Rules of Professional Conduct, eff. 2/1/2007.]
SYLLABUS: It is improper for a lawyer, who is also a licensed insurance agent, to sell
annuities through the law firm to estate planning clients of the lawyer. A lawyer’s
interest in selling an annuity and a client’s interest in receiving independent professional
legal counsel free of compromise are differing interests. Even if full disclosure and
meaningful consent may be obtained, there exists an appearance of impropriety. Also, a
lawyer’s sale of annuities through a law firm may jeopardize the preservation of client
confidences or secrets, for the records of a licensed insurance agent are subject to
inspection by the state superintendent of insurance under Section 3905.19 of the Ohio
Revised Code.
OPINION: This opinion addresses whether it is ethically proper for a lawyer to sell
annuities to estate planning clients of the lawyer.
Is it proper for a lawyer, who is also a licensed insurance agent, to sell
annuities, for a fixed commission, through the law firm to estate planning
clients of the lawyer?
This Board previously advised that “[t]he Ohio Code of Professional Responsibility does
not prohibit an attorney from providing financial planning services through the law firm
to business and estate planning clients of the law firm when the law-related services are
provided in connection with and are related to the provision of legal services.” Ohio
SupCt, Bd Comm’rs on Grievances and Discipline, Op. 2000-4 (2000). It is of no
surprise that the Board is now asked to advise upon the ethical propriety of a lawyer
selling annuities to estate planning clients.
The Ohio Code of Professional Responsibility through its disciplinary rules and ethical
considerations warns lawyers to limit business relations with clients. DR 5-104(A) is the
rule that regulates business transactions wherein the lawyer and client have differing
interests.
DR 5-104(A) A lawyer shall not enter into a business transaction with a
client if they have differing interests therein and if the client expects the
lawyer to exercise his [her] professional judgment therein for the
protection of the client, unless the client has consented after full
disclosure.
Op. 2001-4 2
“Differing interests” is defined in the Ohio Code of Professional Responsibility as
follows:
“Differing interests” include every interest that will adversely affect either
the judgment or the loyalty of a lawyer to a client, whether it be a
conflicting, inconsistent, diverse, or other interest.
Ethical Consideration 5-3 states that “[a] lawyer should not . . . make improper use of his
[her] professional relationship to influence his [her] client to invest in an enterprise in
which the lawyer is interested.”
A client in need of estate planning reasonably expects his or her lawyer to use
independent professional judgment in all matters related to the client’s estate plan. The
value of professional independent judgment is not to be underestimated, for it very well
may be one of the primary reasons a client seeks legal advice in estate planning matters.
A lawyer who sells annuities has a significant interest in each sale. The lawyer receives
commissions from each sale. The more sales the more commissions. The sale of products
creates a “differing interest” between an estate planning client and his or her lawyer.
When a lawyer is responsible for both the estate plan and the sale of annuities or other
products to fund the estate, the lawyer’s financial interest may adversely affect the
independent professional judgment and loyalty of the lawyer to the client. The lawyer’s
financial interest in the sale of annuities competes with the client’s interest in receiving
independent judgment regarding his or her estate plan.
The Board acknowledges that DR 5-104(A) provides that a lawyer may enter a business
transaction in which there are “differing interests” when the client consents after full
disclosure. However, when the lawyer is legal counsel, estate planner, and seller of
insurance products to fund the estate, the Board questions whether full disclosure and
meaningful consent ever could be achieved.
The Board is not alone in expressing concern regarding consent as a cure to the conflict.
Both New York and Rhode Island advise that an attorney may not sell insurance to estate
planning law clients. See New York State Bar Ass’n, Op. 619 (1991); Rhode Island
SupCt, Op. 96-26 (1996).
The Committee on Professional Ethics of the New York State Bar Association expressed
its concern in the following manner.
We recognize that both DR 5-101(A) and DR 5-104(A) permit a client to
remit such disqualification of the lawyer if the client consents to the
conflict after full disclosure of the circumstances. Given the wide array of
life insurance products sold by various companies at differing prices, not
to mention the threshold question of whether life insurance products are
the most appropriate or economical way to best satisfy the client’s needs,
however, we do not believe that there could be meaningful consent by the
client to the lawyer having a separate business interest of this kind. Since
Op. 2001-4 3
the client is entitled to rely upon the lawyer’s independent professional
judgment, the opportunity for overreaching by the lawyer is too great to be
tolerated. We do not believe that a lawyer can, consistent with the duty of
competent representation under Canon 6, solicit or accept a client’s
consent to a direct and substantial conflict between the client's and the
lawyer’s interests.
New York State Bar Ass’n, Op. 619 (1991).
Citing New York State Bar Ass’n Op. 619 (1991), the Ethics Advisory Panel of the
Rhode Island Supreme Court stated: “As a practical matter, consultation and disclosure
which are properly and fully carried out would not in most cases result in the client’s
consent. Aside from the practical considerations, however, the Panel does not believe
that there could be meaningful consent by the law client where the estate planning lawyer
has a separate interest in selling insurance.” Rhode Island SupCt, Op. 96-26 (1996)
A number of ethics committees do permit attorneys to sell insurance to legal clients, but
with various conditions as to disclosure, consent, confidentiality, and other ethical
concerns, such as whether the transaction is fair and reasonable. State Bar of Arizona,
Op. 99-09 (1999); Illinois State Bar Ass’n, Op. 90-32 (1991); Kansas Bar Ass’n, Op. 95-
17(a) (1997); Michigan RI 135 (1992); New Hampshire State Bar, Op. 1998-99/14
(2000), North Carolina State Bar Ass’n, Op. RPC 238 (1996); State Bar Ass’n of North
Dakota, Op. 98-07 (1998); Utah Sate Bar, Op. 146A1, (1995). Each opinion sets forth
caveats that a lawyer must comply with. For example, North Carolina permits an
attorney to sell financial products such as annuities but adds the condition that no
commission or fee may be earned by the law firm or any lawyers with the firm on any
financial product purchased by a client upon the recommendation by the lawyer. See
North Carolina State Bar Ass’n, Op. RPC 238 (1996). New Hampshire concludes its
advisory opinion by listing conditions that a lawyer must meet to sell life insurance to
estate planning clients.
The transaction and terms must be fair and reasonable to the client.
The lawyer must believe the representation will not be adversely
affected.
Such belief must be reasonable.
The lawyer must consult with the client before entering into the
transaction.
The client must be given an opportunity to consult another attorney.
The client must understand the consequences of the transaction.
The client must consent in writing to the terms of the transaction, and to the
conflict of interest.
New Hampshire State Bar, Op. 1998-99/14 (2000)
Satisfying such conditions may be difficult if not impossible, because many of the
conditions are subjective, not objective. In addition, the conditions are burdensome, not
only to the lawyer, but also to the client. For example, seeking consultation from another
attorney will take more of the client’s time and more of the client’s money.
Op. 2001-4 4
In this Board’s view, a lawyer who sells annuities to his or her estate planning clients is
setting his or her foot into a certain ethical trap. The lawyer’s independence of
professional judgment will always be questioned when a problem arises with regard to
the representation. The lawyer’s motives will be scrutinized. Was the purchase of the
annuity really in the best interest of the client or was it in the best interest of the lawyer?
Even if full disclosure and meaningful consent were obtainable, an appearance of
impropriety would still exist. By providing estate planning and selling products to fund
the plan, the lawyer creates an appearance of impropriety, for such conduct casts doubt
upon the independence of the lawyer’s professional legal judgment in the estate planning
matter. Further, a lawyer selling annuities to his or her estate planning clients may
jeopardize the duty to preserve confidences and secrets under DR 4-101, for the records
of a licensed insurance agent are subject to inspection by the state superintendent of
insurance under Section 3905.19 of the Ohio Revised Code.
In conclusion, this Board advises that it is improper for a lawyer, who is also a licensed
insurance agent, to sell annuities through the law firm to estate planning clients of the
lawyer. A lawyer’s interest in selling an annuity differs from a client’s interest in
receiving independent professional legal counsel free of compromise. Even if full
disclosure and meaningful consent may be obtained, there exists an appearance of
impropriety. Also, a lawyer’s sale of annuities through a law firm may jeopardize the
preservation of client confidences or secrets, for the records of a licensed insurance agent
are subject to inspection by the state superintendent of insurance under Section 3905.19
of the Ohio Revised Code.
Advisory Opinions of the Board of Commissioners on Grievances and Discipline are
informal, nonbinding opinions in response to prospective or hypothetical questions
regarding the application of the Supreme Court Rules for the Government of the
Bar of Ohio, the Supreme Court Rules for the Government of the Judiciary, the
Code of Professional Responsibility, the Code of Judicial Conduct, and the
Attorney’s Oath of Office.
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