Federal Roundup: The Summer of the DOL Fiduciary Rule (AGAIN!)
Summertime has once again proved to be a heated time for the Fiduciary Rule. Last year NAFA sued the DOL, and this year has been a rollercoaster, culminating in the June 9th implementation of the onerous Impartial Conduct Standards (ICS). Unfortunately, despite a February 3rd Presidential Memorandum ordering a review of the rule and tremendous pressure from the Hill, NAFA, and other trade groups, the DOL allowed the ICS to go into effect. Secretary Acosta concluded he had “no basis” for further delay, and now all insurance producers are fiduciaries largely operating under the temporary provisions of PTE 84-24. Unless changes are made, the real hammer drops on January 1, 2018 when the fixed annuity marketplace will be split in two, with FIAs being covered by the unworkable Best Interest Contract Exemption and declared rate fixed annuities operating under PTE 84-24.
In particular, the Fiduciary Rule disproportionally harms the fixed annuity marketplace due to the impartial conduct standards now being stacked on top of the present strictly-supervised annuity suitability standard. Many of the insurance agents who sell principal-protected annuities have little or no investment industry experience and licensing. Also, insurance producers are denied the option to protect themselves from frivolous litigation because they are prohibited from using pre-dispute, mandatory arbitration. The Fiduciary Rule is not needed for the fixed annuities, which are insurance contracts, and it is ultimately unworkable for the independent agent distribution system.
NAFA carried these concerns to Washington D.C. this past June at its annual Annuity Leadership Forum, where NAFA leadership met with the Administration and conference attendees swarmed the Hill, conducting more than 150 meetings with House and Senate offices. As part of this conference, NAFA was pleased to have distinguished guests of honor, including Representatives Roe (R-TN), Roskam (R-IL), and Hill (R-AR) who spoke to attendees about the DOL rule and the D.C. landscape.
Additionally, the conference included a DOL panel discussion, breakout sessions for carriers and IMOs, and a particularly enjoyable highlight from keynote speaker U.S. Marine Corporal Josh Bleill. His personal story and message about overcoming adversity profoundly impacted all attendees.
Shortly after the NAFA D.C. conference, the DOL published a request for information on July 6th, which will be used to inform future changes to the DOL Fiduciary Rule. There was a 15-day comment period on delaying the January 1, 2018 effective date and a 30-day comment period on other possible changes to the rule. NAFA submitted comment letters urging that the Rule be rescinded or substantially modified, delay the January 1, 2018 effective date, include FIA’s in PTE 84-24 and clarify the “reasonable compensation” definition.
NAFA supports protecting consumers and providing access to financial professionals and affordable product choices. However, the Fiduciary Rule will adversely affect the ability of Americans to access retirement products and information, cause dislocations in the financial services industry, and cause increased litigation that will drive up the prices of retirement products and services. NAFA will continue to work with the Department of Labor, Congress, and other industry stakeholders to review and significantly modify or rescind the rule.