Almost like the herald of a coming new age, the Department of Labor Fact Sheet issued on the finalization of its fiduciary duty rule announced it would “save middle-class families billions of dollars every year!” If, in fact, a billion is saved that would be about $1,000,000 for each of the 1,000+ pages of the final ruling. But despite the fact that the end product was more lenient than originally proposed, the enthusiasm of others is less ebullient. Chip Anderson, CEO of the National Association of Fixed Annuities (NAFA) responded on April 6:
“For the past year, NAFA has worked with fellow trade organizations to address deep concerns about the proposed Department of Labor fiduciary duty rule that stands to harm small businesses and hurt Americans’ access to the education and advice needed to prepare successfully for retirement . . . we led a grassroots effort in support of bipartisan legislation that underscores our commitment to protecting consumers while at the same time avoiding unnecessary disruption to consumer retirement planning and savings.
Upon initial review of the rule in its final form, it appears DOL has not addressed the very real concerns about the potential impact of this rule brought to light by thousands of individuals, from members of Congress and industry professionals to employers and American savers. We are disappointed that a political agenda seems to have taken precedence over guaranteeing low and middle-class income workers the ability to rely on the professionals and products, including fixed annuities, that can secure their future . . .”
Of primary concern are the effects of the rule on advisors who are paid commission for their recommendations on indexed and variable annuity products. They must pledge to all existing and new clients that they will act in their best interest, charge reasonable compensation, and will not mislead them about fees. These conditions are imposed by the new Best Interest Contract Exemption (BIC or BICE). Traditional and fixed-rate annuity sales are exempt.
The disclosure may become included as part of the paperwork used in the sale of the product, but also may be “as simple as a page or even a paragraph added to an existing document,” says Secretary of Labor Thomas Perez. The deadline to comply with the ruling is January 1, 2018.
A good place to start may be with Chip Anderson’s webinar, The Rule Is In: An Analysis of the DOL’s Final Fiduciary Rule, scheduled for Thursday, April 28, 2016 (8:30 a.m. PT, 9:30 a.m. MT, 10:30 a.m. CT, 11:30 a.m. ET). Advisors can register for the meeting by clicking here.
A symposium, How Annuity Distribution Will Survive the DOL Rule, will also be available, presented by Insurance News Net on April 21, at 1:00 ET. Register by clicking here.
As our primary carriers also prepare materials to inform and assist our advisors on these matters, we will make available to you these planning aids as they are released. Please contact us with any questions.