Seven years after the Obama Administration first proposed (and ultimately withdrew before re-proposing in Feb. 2015) a fiduciary rule to “protect retirement savers from conflicted advice,” the Department of Labor’s controversial Fiduciary Rule goes into partial effect on Friday, June 9.
Full implementation remains scheduled for Jan. 1, 2018, and during the transition period between now and then, the rule effectively has no bite because the DOL says it will not enforce any parts of the rule until the start of next year.
Two major provisions of the Fiduciary Rule go into effect June 9 – one that expands the definition of who is a fiduciary and another establishing impartial conduct standards. Insurance agents will still be able to sell fixed indexed annuities and receive commissions so long as it is documented as to why it is in the client’s best interest.
The DOL also recently announced that it intends to issue a Request for Information for additional public input, including comments on a potential delay to the Jan. 1 effective date. If there is a new extension or modification, it would likely be announced in early fall to allow time for yet another notice/comment period to be completed by the end of the year.
The Securities and Exchange Commission (SEC) recently announced it will consider modifying its own fiduciary standards for brokers providing investment advice to retail investors. The potential of future SEC action could be interpreted as a reason to delay full implementation, as it would seem to necessitate coordination between the DOL and SEC in order to avoid unnecessary costs from conflicting standards of care.
• For more on this argument, see: Trump’s Labor chief has a chance to set the fiduciary rule straight
While the rule will take partial effect on Friday, its future remains very uncertain with strong opposition from industry groups including the National Association for Fixed Annuities and the Insured Retirement Institute, and plenty of opposition being voiced from Republicans in Congress.
House Financial Services Committee Chairman Jeb Hensarling (R-TX) issued the following statement after DOL Secretary Alexander Acosta’s May 22 announcement saying he would not delay the June 9 partial implementation:
“I was there in the Oval Office when President Trump signed his Presidential Memorandum on the Obama administration’s fiduciary rule. I don’t see how the Department of Labor’s decision is commensurate with the President’s Memorandum, so I am disappointed. It regrettably appears Obama era bureaucrats in the Department of Labor may have been allowed to overrule President Trump’s wishes. I am especially disappointed for those low and moderate income Americans who rely upon investment advice to plan their retirements. This flawed fiduciary rule means their costs will likely go up and their choices will likely go down – just like with Obamacare. Republicans believe we must preserve access, choice and affordability so Americans who like their retirement planner can keep their retirement planner, which is exactly what the Financial CHOICE Act will accomplish. That’s why I urge the administration to repropose the rule as soon as possible.”
Rep. Phil Roe, M.D. (R-TN) also released a statement in response to Acosta’s decision:
“The misguided, Obama-era fiduciary rule drives up the cost of investment advice for low- and middle-income investors and makes it harder, not easier, for workers to save for retirement. From the day it was first announced, this rule was a solution in search of a problem. If this is the direction the secretary believes is necessary, I will strongly urge him to expedite additional relief from the rule, and in the long-term, will continue advocating the reversal of this flawed rule. More must be done to ensure Americans can more easily receive the advice they need to adequately save for retirement.”
Dr. Roe recently led a letter of 124 members in writing to the Secretary urging him to permanently delay the rule.
- FINRA Chair: Even if Trump repeals Fiduciary Rule, it has already reshaped industry
- DOL Fiduciary Rule will go into effect June 9
- Thread: DOL Fiduciary Update – 60-day delay proposed by DOL
- Thread: DOL Unintended Consequences?
Professional Insurance Agents oppose insurance provision in Financial CHOICE Act
The National Association of Professional Insurance Agents (PIA) this week reaffirmed its opposition to a provision in the Financial Creating Hope and Opportunity for Investors, Consumers, and Entrepreneurs (CHOICE) Act that would create an Office of the Independent Insurance Advocate. A vote on the CHOICE Act is expected in the House on June 8.
“The CHOICE Act is designed to roll back the regulatory overreach of the Dodd-Frank Act,” said PIA National Executive Vice President & CEO Mike Becker. “Unfortunately, it also contains a provision that would create a new, expansive and unnecessary federal insurance bureaucracy. The Independent Insurance Advocate could quickly become a federal insurance czar with no supervision, positioned to usurp our strong and effective system of state insurance regulation. It runs counter to the purpose of shrinking the federal footprint.”
PIA opposes the creation of the Office of the Independent Insurance Advocate and will continue to advocate in the future to see that it is not signed into law.
“If one were to draft a proposal to extend the reach of the federal government over the insurance industry, this provision of the CHOICE Act would fit the bill,” said PIA National Vice President of Government Relations Jon Gentile. “It’s disappointing and frankly inexplicable for the CHOICE Act, which removes power from Washington in so many ways, to be used to increase the federal role over insurance.”
Founded in 1931, PIA is a national trade association that represents member insurance agents and their employees who sell and service all kinds of insurance, but specialize in coverage of automobiles, homes and businesses.
For more information visit www.pianet.com.