As you likely know, the hot issue in the industry right now is the proposal by the Department of Labor (DOL) to change and revamp the definition of “fiduciary” with the intention of protecting investors from conflicting investment advice and imposing a uniform standard. The definition would make all advisors, including insurance agents, fiduciaries and would redefine the 1975 ERISA law currently in place to impart “fiduciary duty” on all those advisors involved with qualified money sales and recommendations, including IRAs.
In short, the DOL’s proposed rule will:
- Create new, unworkable exemptions for financial transactions
- Require advisors to offer clients a mix of financial products that would be in their “best interests,” without guidance on how the standard would be met
- Require no more than “reasonable compensation,” which could significantly reduce or even eliminate all commissions
- Allow the IRS to declare any violations of these new standards and subject you to new fines, penalties and damages
In its current state, we believe legislators, regulators and policymakers need to withdrawal or re-evaluate the proposal because of the devastating impact it will have on not only our industry, but the main-street consumers as well. Due to the new mechanisms created by the proposal, the risk of class-action lawsuits will make serving consumers with low-net assets too risky, and as a result, those consumers will go unserved. The current provisions will likely make E&O insurance costs increase greatly and will make it far too costly for many advisors to stay in practice.
With more than 65% of all annuity sales being qualified money, we understand this rule impacts a substantial segment of your sales and because of this, are adamantly opposed to the new rule. We are actively advocating against it for you in conjunction with the National Association for Fixed Annuities (NAFA), and will be updating our blog on an ongoing basis as developments occur and rulings are made.
We strongly encourage you to stay in the know and regularly check back here and with your CreativeOne sales team at 800.992.2642. Please listen to our internal webinar with NAFA’s executive director, Chip Anderson and our senior vice president of national accounts, Chris Conroy to learn how the proposal will affect you and what you can do to combat it.
We’re all “Financial Advisers” now. The President thinks we’re all untrustworthy and seek to steal from our clients. The DOL thinks retirement savers are confused and stupid. The DOL thinks it knows what’s best for these investors, including the type and amount of compensation financial professionals should earn. In over two hundred pages of proposed DOL fiduciary rules, the word “competition” is not mentioned once. Please comment (better late than never) and contact your Congressional representatives — most don’t seem to know or care. Insurance companies were also dilatory until they recently realized that 75% of their fixed index annuity rollover and IRA asset transfer business would disappear. Do a BICE contract with every existing and prospective client? You drastically lower the bar for client legal action against yourself as a “financial adviser.” And DOL may send you a letter if your fee-base or commission-based compensation strikes them as too high. Compared to a 1% annual 401(k) maintenance fee, what doesn’t seem out of line? It doesn’t matter to DOL that your retired client gets out of securities-based mutual funds and is now able to sleep at night, or that you may for the one-time commission work with that client for 15 or 20 years in the future. I am discouraged by how apathetic most financial professionals and life insurance companies have been since April. RIAs, Reg. Reps, and Insurance Salespersons will all be sorry they may have thought it would be good for all of us to be fiduciaries. Ask the SEC to step up and promulgage clear rules for transparency and disclosure, with help from FINRA, DOL, and state Insurance Commissions, for ALL secutities and life and annuity transactions. DOL, go back to Labor Relations.
Is this going to apply to individual sales or just the group market?
Keep me in the loop on this please
In its current state, it would apply to individual annuity sales. Please contact your CreativeOne sales team for more information. Thank you for your inquiry.
Ask the DOL folks if any of them lost money in the Stock Market downturn over the past week or so. Tell them our customers who purchased indexed annuities have not lost ANY MONEY; their principal amount is still protected from any loss.