DOL Fiduciary Rule Hurts Now, Annuity Community Says

  • Community
  • 20/04/2017
DOL Fiduciary Rule Hurts Now, Annuity Community Says
The American Council of Life Insurers, the National Association for Fixed Annuities, the Insured Retirement Institute, and the Indexed Annuity Leadership Council were some of the many insurance and annuity organizations that wrote to say the rule and the intermediariesdraft are already hurting the annuity industry.

President Donald Trump brought on the latest wave Feb. 3, when he sent the DOL a letter asking officials to get more information about the possibility that the fiduciary rule and related regulations could cause problems for retirement savers. The DOL then began the process of postponing implementation of the rule, to get more time to study the effects of the rule. The DOL also put out a request for comments about the actual and possible effects of the rule. Submissions for that round of comments were due Monday.

Dougherty's letter is part of the latest wave of comments on the fiduciary rule and a related proposal,the Best Interest Contract Exemption for Insurance Intermediaries draft.

"Avoid the de facto elimination of entire classes of products from the marketplace," Dougherty wrote.

NAIFA President Paul Dougherty wrote in the comment letter summarizing the survey results that DOL should recognize that industry professionals may disagree about what products to offer clients.

The National Association of Insurance and Financial Advisors told the U.S. Department of Labor earlier this week that the DOL fiduciary rule is already hurting NAIFA members, and the NAIFA members' clients.

Here's a look at what was in some of the annuity-related comments.

Many commenters blasted the math and data choices behind an annuity sales incentives white paper Sen. Elizabeth Warren, D-Mass., recently released.

David Stertzer, chief executive officer of the Association for Advanced Life Underwriting, said attacks on annuity sellers and advisors have excluded important benefits, such as the effects that a good advisor can have on a client's saving and investment behavior.

Blake Woodard, a life insurance agent in Fort Worth, Texas, said he believes annuity market analysts have erred by assuming that all recipients of conflicted advice came to bad ends.

"Some annuity purchases may turn out well for investors, even if the salesperson's advice was biased or malicious," Woodard wrote.

Even if conflicted advice causes some problems for retirement investors, "there are far larger and more insidious conflicts of interest threatening investors than an insurance company convention in Maui," Woodard wrote. "But such conflicts do not a colorful white paper make."

2. Uncertainty about the DOL fiduciary rule, and efforts to realign product offerings to comply with the rule, have pounded annuity sales.

Joseph McKeever III and Michael Hadley, lawyers for an industry group, the Committee of Annuity Insurers, said onlyunthinking supporters of the fiduciary rule can see the drop in annuity sales as good news.

"Anyone who actually helps Americans secure guaranteed income in retirement, or supports access to lifetime income, must conclude that these developments exactly the adverse effects contemplated by thepresident's memorandum," McKeever and Hadley said.

3. A class-action lawsuit provision in the insurance intermediaries draft is unwelcome.

Representatives for John Hancock, Transamerica, MassMutual and other insurers said they believe the drafters of the intermediaries proposal wrote it in such a way that lawsuits would be the primary enforcement mechanism.

John Deitelbaum and Kevin Finnegan, two senior vice presidents at MassMutual, wrote that encouraging class-action lawsuits is a bad enforcement mechanism.

"The exorbitant expenses associated with defending class actions and the resulting settlements, which disproportionately benefit the lawyers involved, will inevitably be borne by those the fiduciary rule is designed to protect," the MassMutual lawyers wrote.

4. Consumer groups strongly support the goals of the DOL fiduciary rule.

Industry groups say complying with the fiduciary rule would be too expensive for small accounts to support that expense.

Consumer said requiring retirement advisors to put clients' interests first is especially important for clients with small account balances.

David Certner, legislative counsel at AARP, wrote that lower- and middle-income retirement investors need every penny of their retirement savings. Without the DOL fiduciary rule, retirement investors are at risk of a 1% drop in annual returns on retirement savings, Certner said.
  
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