Final DOL Fiduciary Regulations

[DHK]

Mortgage companies loan out money and receive payments, generally based on the credit, character, and income of those who borrowed.

Annuity insurance companies receive money and pay out payments, based on the general account performance (or sub-accounts for variable contracts).

Apples and oranges my friend.

 

[Gulfman]

Mortgage companies loan out money and receive payments, generally based on the credit, character, and income of those who borrowed.

Annuity insurance companies receive money and pay out payments, based on the general account performance (or sub-accounts for variable contracts).

Apples and oranges my friend.

DK,...i brought up mtgs, not as a dynamic comparison, but a model to Illustrate 1. That Sales ppl, expect should be paid when a sale is completed AND 2. PROVE to you that the LARGEST co's, in the WORLD have been shut down. (i personally known Lenders who lost their entire pipeline (they owned servicing rights) because of this debacle. (Remember, were too big to fail).

Seems like Agents are just willing to throw in the towel and just do what co's. want. They are like Sheep---baaah, baaah...LOL.

We have no Lobby and no voice....take what you get.

 

[scagnt83]

Seems like Agents are just willing to throw in the towel and just do what co's. want. They are like Sheep---baaah, baaah...LOL.

We have no Lobby and no voice....take what you get.

I agree that agents have no real lobby or political voice. But that is our own fault. Very few in this industry have the money and time to dedicate to the cause.


But agents have been asking for Trail commission options on fixed annuities for years now. Part of the reason we have seen more trail options is likely due to pending regulations. BUT, a larger reason is that agents have been screaming for them for the past decade. You might not like that business model, but LOTS of agents do.

Personally, I like the combo of a smaller FYC (like 3%) and a 50bps or so trail. You get paid for the time spent, and then you get paid for the ongoing service work.

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DK,...i brought up mtgs, not as a dynamic comparison, but a model to Illustrate 1. That Sales ppl, expect should be paid when a sale is completed AND 2. PROVE to you that the LARGEST co's, in the WORLD have been shut down. (i personally known Lenders who lost their entire pipeline (they owned servicing rights) because of this debacle. (Remember, were too big to fail).

I have to agree with DHK on this one, you are comparing apples to oranges. I do get what you are trying to say. It just does not hold true in insurance because of regulations and the structure of the industry.


Also, the annuity business is more than just sales. It is advising people on their retirement. You are not an annuity salesman... you are an annuity advisor. Perhaps not on paper, but in spirit that is what you are. Im not trying to argue semantics with you, it is more about the mindset an agent needs to have if they are in the annuity business... especially the index annuity business and selling GLWB Riders. When you are planning out a persons retirement income using their life savings, you are an advisor, not a salesman.


Back to industry structure.
Lenders take on a large amount of risk. Sure they insure and re-insure their contracts. But they are relying on individuals and the economy.

Annuity Carriers invest the majority of their assets in US Treasuries. Which is a zero risk investment. The rest is in AAAs and a very small portion is in various equities and real estate.

More importantly, the SGA protection that annuities have pretty much ensures that product will be around 10/20/30 years from now. If the original carrier becomes insolvent, the annuity book will be sold off to another carrier.

As someone who has studied various insolvencies in the past. I have never once found an instance of a fixed annuity BoB not being immediately bought up by another carrier.

I have also never found any instance of SGA funds having to be used to reimburse policy holders of annuities. I could be wrong and would love to hear about it if it happened. But I cant find it happening anytime in the past 30 years.

Im no expert on how the loan industry pays comp at all. But in insurance, ive always been told that when a carrier buys a book from another carrier, the agents comp stays the same. And I know for a fact that if a carrier goes into receivership, the SGA facilitates the sell of their various BoBs to a carrier that is stable.


There are insurance carriers that have been in existence for over 150 years. I dont think any mortgage lender can say that.


And agents do expect to be compensated. Many agents want to be compensated for their work year after year after year. Which is why agents picking trail commission options has boomed over the past few years as they have become available on more and more products. If agents didnt want trails, they wouldnt be choosing Options B/C/D comp over Option A comp. Its not just about regulations. Agents see the value in a forever increasing recurring income stream. I think that if you really ran the numbers on all the various comp options you would warm up to the combo fyc/trail options that are out there. Great American has a great comparison tool for their 4 different comp options. It shows the year by year plus the cumulative for each one, all side by side.

 

[Justin Bilyj]

Really great thread! The pros vs cons of taking commissions vs trails reminds me of an agent deciding between final expense and medicare supplement due to commission sizes.
My question is, if there will be:
-shorter surrender periods
-lower to no commissions or just trails
-higher suitability guidelines
How will those factors affect annuity profitability from a consumer standpoint? You would figure an insurance company not having to pay a lump sum up front commission means a better performing contract (I know not always but indulge me), while having to shorten surrender periods would make the profitability for the company smaller imo.
Just wondering if anyone gave any thought to the effects this will have on the annuities themselves...

 

[pfg1]

Personally, I like the combo of a smaller FYC (like 3%) and a 50bps or so trail. You get paid for the time spent, and then you get paid for the ongoing service work.

I like that idea too.

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Really great thread! The pros vs cons of taking commissions vs trails reminds me of an agent deciding between final expense and medicare supplement due to commission sizes.
My question is, if there will be:
-shorter surrender periods
-lower to no commissions or just trails
-higher suitability guidelines
How will those factors affect annuity profitability from a consumer standpoint? You would figure an insurance company not having to pay a lump sum up front commission means a better performing contract (I know not always but indulge me), while having to shorten surrender periods would make the profitability for the company smaller imo.
Just wondering if anyone gave any thought to the effects this will have on the annuities themselves...

That is a good question....

 

[DHK]

Last year, ANICO announced a trail option available for their Strategic Indexed Annuity FIAs.

Attached is their illustration of showing 7% up front 0% trails vs 5% up front and .5% trails.

Granted, it isn't showing what the income would be if taking withdrawals early on from the annuity as the trails are based on the cash account values. If income is taken in the early years, it would affect your trail commissions - and long-term, since annuities are meant to be liquidated over an extended period of time, you won't have LEVEL trail commissions.

Annuities sold and structured for capital appreciation with no risk to principal, would have nice trail commissions.

 

[DHK]

Jim Silbernagle interviews Paul Dougherty (incoming NAIFA president) regarding the DOL rule:

https://realwealthmarketing.com/04-08-2016-dol-update-naifas-paul-dougherty/

 

[Rivers1]

So which type of licenses will I need to represent indexed annuities moving forward?

 

[scagnt83]

So which type of licenses will I need to represent indexed annuities moving forward?

None of this was about licensing. The licensing requirements are the same.

 

[Rivers1]

None of this was about licensing. The licensing requirements are the same.

Maybe I've misunderstood after reading different takes on this decision but it seems indexed are now lumped with variable annuities? Doesn't this require a securities license?