By Cyril Tuohy
Legislative experts said the recent attention lawmakers have been lavishing on annuities should be seen as a good sign for the financial services industry as a whole, not simply a win at the expense of the mutual fund industry.
In a polarized environment that defines so much of the political process, some people have come to think that the renewed attention on annuities is hogging the spotlight from mutual funds. But that thinking would be wrong, said Sean Cassidy, vice president of federal government affairs for Voya Financial.
“A rising tide lifts all boats,” he said, speaking at the annual marketing summit of the Insured Retirement Institute (IRI).
In the past, insurers have feuded with mutual fund companies over the use of annuity-based retirement calculations to generate monthly retirement income disclosures.
Many early baby boomers, those who began retiring in 2011 when they turned 65, still benefit from defined benefit pensions. But as that generation’s leading edge cedes to the trailing edge, more boomers will be reliant on defined contribution plans to fund retirement.
That demographic shift has shone a brighter spotlight on annuities as lawmakers discuss the need for guaranteed income among baby boomers. The summary prospectus rule is an example of regulators paying attention to annuity-related issues.
The rule would make prospectus documents pertaining to variable annuities easier to understand. The Securities and Exchange Commission (SEC) may issue long-awaited rules on variable annuity summary prospectuses this year.
Variable annuity prospectuses run for dozens of pages. Much of the language is incomprehensible - even to lawyers, let alone investors.
Lee Covington, IRI senior vice president and general counsel, said the delays with regard to the summary prospectus rule may have to do with management turnover within the SEC’s Investment Management division.
Covington said the SEC’s commissioners have expressed support for a summary prospectus rule and that they “just need a runway to land it.”
Legislative experts also said the SEC is a “complicated beast,” and that the agency has often found its resources tied up with requirements by the Dodd-Frank Act.
James Shorris, executive vice president and general counsel of LPL Financial, said “competing priorities” often dictate which rules get more attention.
“The (the SEC) are conservative when it comes to rulemaking,” he said.
Momentum around annuities doesn’t mean they are not without challenges, not the first of which is that many people perceive annuities as expensive, complicated and of interest primarily to “old, rich people,” Cassidy said.
InsuranceNewsNet Senior Writer Cyril Tuohy has covered the financial services industry for more than 15 years. Cyril may be reached at [email protected].
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