Whenever anyone in our industry is asked what the DOL fiduciary rule will require of us, there should only be one answer: “WE DON’T KNOW, YET!”
While I strongly believe in the famous quote by Benjamin Disraeli “I am prepared for the worst, but hope for the best”, I am amazed at the select few FMO/IMOs who are professing such a scorched earth future for qualified Index Annuity sales.
Some groups are using scare tactics to drive producers to those who claim to have answers and platforms that will be provided in a “post DOL Fiduciary” marketplace. We have heard from agents and other IMOs in a number of instances where agents are told that if they don’t come on board with a particular group “now”, they will not be able to add them later on, painting a dark picture of the future for agents and advisors. As of this writing, the DOL has not issued any guidance for how FMOs can comply with the requirements to be an FI (Financial Institution).
“I’m really surprised that some advisors are falling victim to the scare tactics I am seeing from a few FMOs. How can any FMO tell an advisor what a post-DOL world is going to look like, when even the insurance companies don’t know what their strategy is today?!?” said industry expert, Sheryl Moore, of Wink and Moore Market Intelligence.
As a smaller IMO, Alternative Brokerage will not be a Financial Institution (FI), and we have had groups offer us the opportunity to come under their umbrella. This is a welcome invitation and may indeed make sense in the coming year… But right now should we commit to one particular group without knowing requirements, direction, or circumstances? NOT YET.
No one should switch IMOs just because they are being told that the group soliciting them is better-prepared for a post-DOL world than their current IMO. They are guessing.
If you are happy with your current IMO, why move and change contracts?
Many of us have expected increased regulations and are still fighting this battle, and I believe that in the next 3 to 5 years that there will probably be consolidation creating a small number of “Super IMOs” that many of us will be under. One carrier with nearly 100 top IMO contracts expects to have only 12-15 top contracts in the future.
So let’s put it into perspective here is what you need to know:
After a 5-month comment period, 4 days of public hearings, over 3000 comment letters and more than 100 meetings the DOL released 1023 pages on the new Fiduciary left us with more questions than answers. Index annuities were lumped into the same category as Variable Annuities, Mutual Funds and investments; even though the Harkin Amendment of the Dodd Frank Act made Index Annuities, Fixed Insurance products.
On August 25th, The National Association for Fixed Annuities (NAFA) was in Federal court in DC fighting the DOL and seeking an injunction on behalf of the agents, advisors, FMOs and Index Annuity carriers. Outcome: Unknown. The case is pending, so WE DON’T KNOW, YET.
On September 22nd, Market Synergy Group was in Federal court in Kansas City seeking an injunction on the DOL Fiduciary law, again on behalf of the producers, FMOs and carriers on the Index side. Outcome: Unknown. The case is still pending, so WE DON’T KNOW, YET.
On October 10th, Thrivent filed a suit for relief from the fiduciary rule’s Best Interest Contract Exemption that prohibits class-action waivers in contracts against the DOL in Federal Court in Minneapolis. Outcome: Unknown. The case is pending, so WE DON’T KNOW, YET.
On October 27th, the DOL released it’s first of three FAQs to the public. For those of us who read the full 31 pages, we were amazed at how little direction was given. One of the best descriptions of it from an online blogger was that “…it is as useful as 31 pages of strategy and tactics for the game of Red Rover, Red Rover…”
On November 17th, this month, the 3 federal cases in lawsuits filed in Texas and consolidated under Chamber of Commerce of the US, et al., v. Perez, et al, argue that the rule unlawfully creates a private right of action, violates the First Amendment as applied to truthful commercial speech, and that they (DOL) exceeded their authority and acted arbitrarily and capriciously in imposing fiduciary obligations on non-fiduciary speech and disfavoring annuities. They also argue that the rule-making process was inadequate. Outcome: To Be Determined
This week, we learned from Sheryl Moore’s discussion with a DOL Lawyer:
“…there is no need for any marketing group or agency to submit an application for FI status. Although the DOL has received 18 applications thus far, it is unnecessary to apply. Ultimately, the DOL will issue an exemption, and if an FMO or BGA complies with the exemption, they will have relief. All one needs to do is notify the agency that they intend to comply with the class exemption.” ***
So what are the possibilities? Suspension of the law? Injunctive relief? Extension of deadlines? The law goes into effect “as is” in January of 2018?
WE DON’T KNOW, YET!
BUT there will be changes, adaptations, direction and more information to help you make an educated, informed decision. Don’t let anyone scare you into a move that does not need to happen now.
For up-to-date info on the DOL Fiduciary rule, lawsuits and how this related to the annuity market, follow us on Twitter: @QLACS
***For the Full article: http://www.looktowink.com/2016/10/interesting-news-from-the-dol/