NAIFA Gov Alert - Fiduciary Rule

DHK

RFC®, ChFC®, CLU®
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Advocacy

Action Is Urgently Needed: The Department of Labor (DOL) needs to hear from you TODAY about your clients’ right to continue to work with you.

The DOL recently proposed a controversial regulation that would dramatically expand who is considered a fiduciary when advising retirement savers. The rule is complicated, confusing and will be costly to implement. Most importantly, the rule, if enacted as written, will dramatically reduce access to education and professional advice, and will both increase costs to retirement savers and limit the choices in how they choose to pay for much needed retirement planning services.

The regulation needs significant revisions. The DOL needs to know why.

If you currently help employers set up 401(k) kinds of plans, you will be prohibited from receiving any third party compensation if the new rule is enacted as written.

If you currently identify the investment option that meets a common portfolio model, you will be deemed an investment advice fiduciary, not just an advisor offering investment education, and will be subject to strict fiduciary obligations.

If you sell proprietary products to IRA account owners, you may fail to satisfy the “best interest” rules under the proposed regulation.

It is vitally important that the DOL hear from you NOW. Our ability to successfully fix the rule depends on the volume of the “noise” your letters generate.

Please personalize the letter provided. Add a paragraph that describes how you serve a specific client now and what the consequence would be to your client if this unworkable rule stands.

EXAMPLE: Recently, I helped Jane decide what to do with her 401(k) account when she terminated employment. The decision was made that rolling the assets into an Individual Retirement Account (IRA) was the best choice for Jane. I helped Jane decide how to invest the IRA account to best meet Jane’s risk tolerance, financial situation, tax status, investment objectives, liquidity needs, and risk tolerance. I received commissions from the purchase of mutual funds and an annuity. Under the current rule, I would be prohibited from providing any of those services. The likely result would be that Jane would instead just cash out her 401(k) and would suffer the tax and the early withdrawal penalty, a wrong decision but one likely if she hadn’t had access to my services.

Write to the DOL TODAY! Tell them why those results are wrong for your clients.

Advocacy
 
Can someone please post the Cliff notes version how this will impact NON VARIABLE licensed agents...????
 
I *think* this won't have any impact on people who aren't securities licensed.

I also think that a lot of people who are securities licensed need stricter rules as I see people get ripped off all the time.

I also don't want to have any stricter regulations on myself as I know I operate honestly and the rules are a huge pain already and my compliance department is much more thorough than they need to be or are at other firms.

I'm not sure how to balance those.
 
I *think* this won't have any impact on people who aren't securities licensed.

I also think that a lot of people who are securities licensed need stricter rules as I see people get ripped off all the time.

I also don't want to have any stricter regulations on myself as I know I operate honestly and the rules are a huge pain already and my compliance department is much more thorough than they need to be or are at other firms.

I'm not sure how to balance those.

People are constantly ripped off in the securities world. And that has nothing to do with brokers.
 
The problem isn't so much the brokers (though there are a few), its the way the rules are in-equally applied.

With a securities license, there is a lot you can't tell your client, mostly a good thing. You can't imply or promise future returns, etc, etc.

Then the 'gold' commercials come on the radio and promise (just imply, but sounds like a promise) of these HUGE returns.

Then some real estate investment thing comes on the radio and tells me how I can get rich flipping houses.

Then I need to invest in coins.

Investments as a whole need more uniform rules. I know they are not all covered by the same regulatory agency, so its hard, but the strangeness in the rules is very bad for the average person.

Dan
 
You WILL be impacted regardless of being securities licensed or not.

I was with NAIFA in DC in May to lobby for changes. This will greatly impact us due to true fiduciary standard. We would be required to show every available plan that may be suitable for the client. For us brokers, no biggie, for captives- ie: New York Life, BIG problems.

Also, there will be additional paperwork involved PIOR to PRESENTATION. We will not be able to educate our clients on any products/plans, if they are rolling qualified funds. We would be required to have them read/understand/sign a complicated suitability document, send it to the carrier/s for approval and then we can start the education process. Which could take days, based on the number of carriers we represent/that are suitable.

The main issue is with qualified funds. It doesn't matter if we are writing fixed or variable- it's where the money is coming from.

This will greatly impact middle America- Average Joe. Fee based agents won't touch a $15,000 rollover- it's not worth it and/or the person rolling over can't/won't pay a fee. Average Joe comes to us because we are inexpensive, and we will show them how things really work. If we are prevented from doing that, by POLITICAL red tape, Average Joe has a high chance of losing his retirement savings because he wasn't able to see a person that could help him.

Please write your congressperson. This is a political maneuver, it's not fixing a broken system. We are regulated enough by many organizations and carriers. This was set up as a diversion, by the administration, for a few congresspeople to get out of Obama's way, while he pushed the trade bill though. It worked, and we are paying the price. We have support in Congress to have this ruling amended, but we need more.

Tell your congressperson a story about how you helped Average Joe. We do it every day. They need to know how this ruling will HURT them. Because, right now, they think it's only going to help.
 
The federal gov has been going after the tax favored status of life insurance for using withdrawals & policy loans to generate tax free income in retirement for decades and has lost most of the battles. They want that tax revenue so badly they can taste it. They have been shut down with a few exceptions. This proposal is a back-door scheme to accomplish their real end result.
 
The example given here is for the guy who has a 15000 rollover. I am RIA and I would charge him probably one time 200 fee to do a rollover and basic asset allocation using vanguard funds. His ongoing fees would be around 30 basis points going forward. Or I would also give him a choice to use wealthfront which would charge him even less than I do. But wealthfront would not do the rollover so for a person needing hand holding my fee is better. Now when I was at NY Life, I could sell him a variable annuity for 15,000, it is true the client would not have to pay me directly any fee, but I would make about 5% and the client would pay somewhere between 200 to 300 basis points a year. Because the payment is coming from the IRA account, and not from the client's own checking account, NY Life and all other B/D's are arguing that they can't service the middle class anymore. By the way,as a RIA if I just did a 15000 rollover every half hour at 200, 48 weeks a year and 40 hours a week I would make 768,000 a year and all my clients would be better off then anything NY Life can offer.
 

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