Final DOL Fiduciary Regulations

[DHK]

Based on that, the BICE is just confirming that you have had the client's best interest in mind... versus having a "client engagement agreement" that some may use from the very beginning of the client engagement.

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Here's the full rule:

https://s3.amazonaws.com/public-inspection.federalregister.gov/2016-07924.pdf

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I haven't found anything regarding a commission disclosure to the client. Is there anything that anyone else has found regarding disclosing the commissions earned on these sales?

 

[scagnt83]

Here's the full rule:

https://s3.amazonaws.com/public-inspection.federalregister.gov/2016-07924.pdf

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I haven't found anything regarding a commission disclosure to the client. Is there anything that anyone else has found regarding disclosing the commissions earned on these sales?

208 pages... not as bad as I expected it to be.... LOL.


I havent seen anything yet, but I havent fully investigated either.

 

[Gulfman]

That means that you can't be two-faced in your conduct and recommendations before and after signing the BICE. You need to always have the client's best interest in mind before giving any kind of advice, regardless of when the contract is signed.

The BICE agreement will just be part of the contract the client signs (application). What he was saying is that your comments to the client before the sale, cant contradict what you tell them at the point of sale or what you say on the suitability section of the contract.

This is what the labor secretary said about it:

Regulators....and Lawyers.
Each looking to hang someone so they can
have a job!​

I would make PROSPECTS sign something that says "Any discussion and opinions expressed with said agent were given with notice to me (said customer) with full knowledge that no "fiduciary relationship" exist between either party!"

(before i even opened my mouth).

NOTE: ME THINKS there is a shortage of agents that know and sell these products. The companies that underwrite these plans are CHICKEN **** scared of lawsuits. They want someone ELSE'S neck to be on the line, but when it comes time to defend a LAWSUIT, they run like Chicken S*** BAST***DS and will roll over on their agents (like cheap hookers).

NO ONE (clients) wants to take responsibility for their actions knowing WELL in advance what they are doing. Everyone wants an IRON CLAD guarantee, but guess what...there is no guarantee in life (read the fine print).

The law used to be "what a reasonable person would do." NOW it reads (between the lines), "whatever we can sue for and collect vs. how much do we spend to get this suit into action?"


~

 

[DHK]

Regulators....and Lawyers.
Each looking to hang someone so they can have a job!​

I would make PROSPECTS sign something that says "Any discussion and opions expressed with said agent where given with notice to me (said customer) with full knowledge that no "fiduciary relationship" exist between either party" (before i even opened my mouth).

The BICE would override this by stating that all advice given prior to the signing of the BICE would be covered and provided under a fiduciary standard. You can't ask someone to sign a waiver against a federal protection law.

NOTE: ME THINKS there is a shortage of agents that know and sell these products. The companies that underwrite these plans are CHICKEN **** scared of lawsuits. They want someone ELSE'S neck to be on the line, but when it comes time to defend a LAWSUIT, they run like Chicken S*** BAST***DS.

I would agree with that assessment.

https://www.ethics.net/a/misrepresentation-and-ignorance-a-dangerous-blend-for-ethics

NO ONE (clients) wants to take responsibility for their actions knowing WELL in advance what they are doing. Everyone wants an IRON CLAD guarantee, but guess what...there is no guarantee in life (read the fine print).

Insurance contracts are complex. Clients are RELYING on agents to give them all material information needed to help them to make an informed decision.

There are VERY FEW clients that understand these products. And the ones that do... are often the "engineering types" that also have a hard time trusting people. Therefore, you are selling upon the basis of TRUST.

The law used to be "what a reasonable person would do." NOW it reads (between the lines), "whatever we can sue for and collect vs. how much do we spend to get this suit into action?"


~

There's a certain amount of that in there. We're now all fiduciaries. What does that really mean?
- It means that you can be held liable for your recommendations.
- It means that you must hold your client's best interests first.
- It means that you must actually know what you're doing or be threatened with a lawsuit for reckless recommendations.
- It means that you had better keep good notes and documentation on every client interaction and recommendation you make.
- It means that you had better know your products inside and out. No lazy or ignorant selling allowed anymore.

What it also means to me:
- The best way to maintain expertise, is to keep your business to 1-3 companies. It's awfully hard (and time consuming) to maintain educational requirements and to stay on top of product changes for 5-10 companies. Streamline your business and become "subject matter experts" on 1-3 companies.

My biggest issue right now is what constitutes "reasonable" compensation? Reasonable compared to what? Who determines it?

Hopefully additional clarification on that will come down the pike soon.

 

[yorkriver1]

The BICE would override this by stating that all advice given prior to the signing of the BICE would be covered and provided under a fiduciary standard. You can't ask someone to sign a waiver against a federal protection law.



I would agree with that assessment.

https://www.ethics.net/a/misrepresentation-and-ignorance-a-dangerous-blend-for-ethics



Insurance contracts are complex. Clients are RELYING on agents to give them all material information needed to help them to make an informed decision.

There are VERY FEW clients that understand these products. And the ones that do... are often the "engineering types" that also have a hard time trusting people. Therefore, you are selling upon the basis of TRUST.



There's a certain amount of that in there. We're now all fiduciaries. What does that really mean?
- It means that you can be held liable for your recommendations.
- It means that you must hold your client's best interests first.
- It means that you must actually know what you're doing or be threatened with a lawsuit for reckless recommendations.
- It means that you had better keep good notes and documentation on every client interaction and recommendation you make.
- It means that you had better know your products inside and out. No lazy or ignorant selling allowed anymore.

What it also means to me:
- The best way to maintain expertise, is to keep your business to 1-3 companies. It's awfully hard (and time consuming) to maintain educational requirements and to stay on top of product changes for 5-10 companies. Streamline your business and become "subject matter experts" on 1-3 companies.

My biggest issue right now is what constitutes "reasonable" compensation? Reasonable compared to what? Who determines it?

Hopefully additional clarification on that will come down the pike soon.

If I work for an organization that has several products, but all are with one insurance carrier, that is simple in one sense, and would be easier to be expert on those. In another sense, by having one carrier's products, how would I be able to say I did enough homework to know my recommendations are enough to meet DOL's fiduciary standard?

 

[DHK]

If compensation is going to be more focused on "trails", then here's a bit of good news: You'll be able to ask for a higher amount if you decide to sell your book of business to another agent!

If you have a book of business that doesn't generate revenue, aside from referrals or cross-selling, you generally can't ask for much. But with a book of business with trail income coming in, you can sell it for more.

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If I work for an organization that has several products, but all are with one insurance carrier, that is simple in one sense, and would be easier to be expert on those. In another sense, by having one carrier's products, how would I be able to say I did enough homework to know my recommendations are enough to meet DOL's fiduciary standard?

Of everything I've read on the DOL, it's not about recommending "the best of what's under the sun." It's recommend the best OF WHAT YOU WORK WITH. That's why even with captive companies with proprietary products, they can still sell them, as long as they uphold their fiduciary duty.

Even then, studying and being appointed are two different things.

Let me compare two annuities with two companies for example:

Company 1's issue age: 0-65
Company 2's issue age: 0-80 (larger market share here)

Company 1's surrender charge schedule: 14 years
Company 2's surrender charge schedule: 10 years

Company 1's compensation: 7%
Company 2's compensation: 7% with .5% trail

Company 1's LIBR cost: .85%
Company 2's LIBR cost: .3% or .6%

Which company makes the most sense and, compared with the two, fulfills the fiduciary duty? Company 2.

Once you have a good standard, you use that as the standard to compare everything else. Either it's good, but has a different application to it... or it isn't and you don't sell it.

 

[yorkriver1]

If compensation is going to be more focused on "trails", then here's a bit of good news: You'll be able to ask for a higher amount if you decide to sell your book of business to another agent!

If you have a book of business that doesn't generate revenue, aside from referrals or cross-selling, you generally can't ask for much. But with a book of business with trail income coming in, you can sell it for more.

----------



Of everything I've read on the DOL, it's not about recommending "the best of what's under the sun." It's recommend the best OF WHAT YOU WORK WITH. That's why even with captive companies with proprietary products, they can still sell them, as long as they uphold their fiduciary duty.

Even then, studying and being appointed are two different things.

Let me compare two annuities with two companies for example:

Company 1's issue age: 0-65
Company 2's issue age: 0-80 (larger market share here)

Company 1's surrender charge schedule: 14 years
Company 2's surrender charge schedule: 10 years

Company 1's compensation: 7%
Company 2's compensation: 7% with .5% trail

Company 1's LIBR cost: .85%
Company 2's LIBR cost: .3% or .6%

Which company makes the most sense and, compared with the two, fulfills the fiduciary duty? Company 2.

Once you have a good standard, you use that as the standard to compare everything else. Either it's good, but has a different application to it... or it isn't and you don't sell it.

Two concerns in the captive situation:

1. how to make a reasonable recommendation, knowing that other carriers may have more favorable features.

2. by the example of criteria/standards, unless I could go independent, I would essentially be walking away from some potential business, more than I might like

 

[DHK]

Two concerns in the captive situation:

1. how to make a reasonable recommendation, knowing that other carriers may have more favorable features.

From my understanding, unless you're appointed to sell those other carriers, it doesn't apply. It only applies to your current product line.

2. by the example of criteria/standards, unless I could go independent, I would essentially be walking away from some potential business, more than I might like

From my understanding, the fiduciary standard applies to what you are able to offer - to make the best recommendation YOU can... not "the best that's out there in all of existence".

 

[Gulfman]

The BICE would override this by stating that all advice given prior to the signing of the BICE would be covered and provided under a fiduciary standard. You can't ask someone to sign a waiver against a federal protection law.



I would agree with that assessment.

https://www.ethics.net/a/misrepresentation-and-ignorance-a-dangerous-blend-for-ethics



Insurance contracts are complex. Clients are RELYING on agents to give them all material information needed to help them to make an informed decision.

There are VERY FEW clients that understand these products. And the ones that do... are often the "engineering types" that also have a hard time trusting people. Therefore, you are selling upon the basis of TRUST.



There's a certain amount of that in there. We're now all fiduciaries. What does that really mean?
- It means that you can be held liable for your recommendations.
- It means that you must hold your client's best interests first.
- It means that you must actually know what you're doing or be threatened with a lawsuit for reckless recommendations.
- It means that you had better keep good notes and documentation on every client interaction and recommendation you make.
- It means that you had better know your products inside and out. No lazy or ignorant selling allowed anymore.

What it also means to me:
- The best way to maintain expertise, is to keep your business to 1-3 companies. It's awfully hard (and time consuming) to maintain educational requirements and to stay on top of product changes for 5-10 companies. Streamline your business and become "subject matter experts" on 1-3 companies.

My biggest issue right now is what constitutes "reasonable" compensation? Reasonable compared to what? Who determines it?

Hopefully additional clarification on that will come down the pike soon.

Appreciate your comments DK,

Hold my Clients best interest first?

• -What does that mean?
• -Do i have a crystal ball?
• -What if i miss the next Bull Market...did i hold my clients interests FIRST (if he could have purchased the next apple stock?)
• -I don't agree with the "fiduciary responsibility" of an agent. An agent is a "Sales-Person"---Period. They are NOT being PAID by the client (up front cash) in 99% of the cases. THEREFORE, how am i a Fiduciary?
• -Agents represent Insurance Companies---they are appointed by INS.COMPANIES. How can they represent BOTH PARTIES and be a Fiduciary?
• -If i was selling Roofs, would i be a Fiduciary?

NOTE: Most decent human beings want to do what's right, but at the same time, NEEDS to make a living. Holding an Insurance Agent up as a Fiduciary is like holding a Car Sales Guy in a Fiduciary,---a contradiction of values and terms. Sure there is common sense responsibility, BUT don't put that into "LAW."

-RE Agents went through the same BS. Finally, the "Lobbying Arm for the Realtors" spoke up and distroyed any Fiduciary responsibilities through legislation. NOW, a simple paper that says "no fiduciary" relationship protects the RE agent from frivilous lawsuits (which is what is going to happen here with Ins. Agents----

SAD that insurance companies don't have a STRONG enough lobby to battle this BS.




.

 

[DHK]

Appreciate your comments DK,

Hold my Clients best interest first?

• -What does that mean?
  It means that you would do for your clients the same as you would do for yourself with their financial situation and attitudes.
  
• -Do i have a crystal ball?
  A crystal ball, or rather trying to predict the future outcomes of decisions have nothing to do with it.
  
• -What if i miss the next Bull Market...did i hold my clients interests FIRST (if he could have purchased the next apple stock?)
  Are you a Series 7 advisor and have a research department conclude that you can and should be recommending that people buy AAPL?
  
• -I don't agree with the "fiduciary responsibility" of an agent. An agent is a "Sales-Person"---Period. They are NOT being PAID by the client (up front cash) in 99% of the cases. THEREFORE, how am i a Fiduciary?
  Our job is to help our clients to be materially better off than before they met us.
  
• -Agents represent Insurance Companies---they are appointed by INS.COMPANIES. How can they represent BOTH PARTIES and be a Fiduciary?
  You work for the client UNTIL you are taking an application, and then you work for the insurance or investment company to provide accurate information. It's called field underwriting.
  
• -If i was selling Roofs, would i be a Fiduciary?
  You would be selling for a licensed contractor, responsible to ensure that those who are buying roofs can make a fully informed decision and that the contractor would actually fulfill on what was ordered and represented.
  

NOTE: Most decent human beings want to do what's right, but at the same time, NEEDS to make a living. Holding an Insurance Agent up as a Fiduciary is like holding a Car Sales Guy in a Fiduciary,---a contradiction of values and terms. Sure there is common sense responsibility, BUT don't put that into "LAW."

-RE Agents went through the same BS. Finally, the "Lobbying Arm for the Realtors" spoke up and distroyed any Fiduciary responsibilities through legislation. NOW, a simple paper that says "no fiduciary" relationship protects the RE agent from frivilous lawsuits (which is what is going to happen here with Ins. Agents----

SAD that insurance companies don't have a STRONG enough lobby to battle this BS.

I think we all have products in our lineup that we like and products that we don't. The products that we don't like, we either don't understand them, or we simply don't like some of the terms and conditions. Under the fiduciary rule, you will never sell a product that you don't like and don't fully understand.

Take ANICO's ASIA annuity vs their Value-Lock annuity. Under the suitability rules, I could still sell the Value-Lock annuity and earn the same compensation as I would earn if I sold the ASIA annuity (they pay identical commissions). But I don't fully understand the Value-Lock annuity yet. (I'm trying not to publicly state that I don't like it. I just don't see it's appeal yet.) Until I know where it best fits, I'm not going to sell it... period. There are other products that I'm perfectly comfortable with that are just fine for most people.

There are "bad" products out there that pays HUGE commissions... and there are good products out there that pay out decent commissions. Under the fiduciary rules, you need to sell the good stuff and treat your clients right.

I don't think it's really that hard.