DOL Executive Order Moves Forward - Affect on Annuity Sales

[Freddie]

It seems like this awful DOL order continues to get closer. I have heard it would hurt annuities used for qualified accounts. The DOL rule would affect both fixed indexed annuities and variable annuities.

The sales person becomes a fiduciary. Also commissions for FIA's will likely drop dramatically. Anyone have any additional ideas?

 

[HealthGuy]

Freddie is the sky falling, who really knows...who else can really chime in and give an update on this?

 

[DHK]

There isn't much in the way of anything recent (within the last couple of months).

This is Kim O'Brien's recent LinkedIn post:
https://www.linkedin.com/pulse/whos-driving-dol-fiduciary-rule-kim-o-brien?trk=prof-post

And nothing new from John Olsen (author of Taxation and Suitability of Annuities).

And nothing recent on ProducersWeb.com either. I'm sure that if there was a recent development, there would be something new - especially on ProducersWeb.com.

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However, of what I have previously read, it attacks the PERKS of annuity sales... not necessarily the commissions themselves.

Oh, and I don't know what the new "standard" would be, but I haven't operated under just a suitability standard in a long time. Once you hold designations, you are automatically assumed to be holding yourself out at a higher standard. Now, whether it's considered a 'fiduciary standard' or not, remains to be seen.

But the sole reason for selling an annuity should not be for the commissions or that it isn't unsuitable. The product should be a fit for their plans and demonstrate materially how it is suitable and good for them - regardless of any additional sales incentives.

In my opinion, that's the definition of professional salesmanship.

 

[MW Agent]

It seems like this awful DOL order continues to get closer. I have heard it would hurt annuities used for qualified accounts. The DOL rule would affect both fixed indexed annuities and variable annuities.

The sales person becomes a fiduciary. Also commissions for FIA's will likely drop dramatically. Anyone have any additional ideas?

My understanding, and I reserve the right to be wrong, is that no commissions will be allowed in qualified plans. You would need to legally be operating as a fiduciary (fee based). However, I believe there is a planned exception as stated for fixed annuitites/CD's. That being said, I'm not sure anyone knows exactly where this will go yet.

 

[Tahoe Ray]

This could be pretty serious or a minor nuisance for fixed indexed annuity sellers.

It has already been sent to the OMB for review. They can take up to 90 days but are expecting an answer by late March.

Come back in a few months when the final reg hits the federal register...then we'll have a good idea of the impact.

There is a ton of info online about this. FIA business has been excluded, then included (violating already longstanding federal guidelines) and now it seems up in the air.

I try not to worry about these things. I wrote my congressman, sent letters, did what I thought was necessary.

If this ruling precludes me from doing business in the qualified market, it will hurt but there are still billions sitting in the banks the could be potentially suitable for our products.

I can't worry about what I don't control.

 

[HealthGuy]

These are very helpful replies...thanks guys.

 

[MW Agent]

This could be pretty serious or a minor nuisance for fixed indexed annuity sellers.

It has already been sent to the OMB for review. They can take up to 90 days but are expecting an answer by late March.

Come back in a few months when the final reg hits the federal register...then we'll have a good idea of the impact.

There is a ton of info online about this. FIA business has been excluded, then included (violating already longstanding federal guidelines) and now it seems up in the air.

I try not to worry about these things. I wrote my congressman, sent letters, did what I thought was necessary.

If this ruling precludes me from doing business in the qualified market, it will hurt but there are still billions sitting in the banks the could be potentially suitable for our products.

I can't worry about what I don't control.

As you said, we don't know. I could also see it being just another form the client has to sign saying you are not acting as a fiduciary. If so, who cares, business as usual.

 

[Tahoe Ray]

As you said, we don't know. I could also see it being just another form the client has to sign saying you are not acting as a fiduciary. If so, who cares, business as usual.

That has been my position from day 1 but the carriers seem nervous which makes me nervous.

Most of the better products already have level loads so I would guess that the pricing would transition well.

We will see. Bottom line is make this a banner year if FIA is your market.

 

[HealthGuy]

The sad thing is the FIA is often a great income planning product for both those with a lot of assets as well as those with less....So now the government may tell us that only a "fiduciary" may be able to sell FIAs? Ridiculous ! So those with lesser assets are now going to have to possibly pay a "fiduciary" wrap fee in order to purchase a FIA vs. just paying a commission to the broker selling it? True insanity. Only the government can possibly screw something like this up.

 

[scagnt83]

The DOL has included a best interest exemption for commissioned products last I heard. The Agent would have to sign a statement saying that they believe the commissioned product to be in the clients best interest (and the client has to sign as well). But it would hold the agent legally liable to prove that position if asked to do so.

If anything we will see more short term products, less long term products, and less "incentives" such as trips or extra comp during certain times of the year. And we will be held liable for recommendations on qualified accounts.

I dont blame the carriers for fighting it. They have worked hard to create a successful business model. But I dont think this is the end of annuity funded IRAs by any means. And more skin in the game when it comes to a persons life savings is not necessarily a bad thing... of course when it comes via gooberment regs, you never can tell.