Where IMOs Boldly Go

If the Department of Labor thought that marketing organizations were just going to wither and die after the organizations were left out of a key component of the fiduciary rule, the DOL was a tad mistaken.

As Senior Editor Cyril Tuohy has been reporting, several marketing organizations have submitted long applications to become financial institutions. They are stepping forward to define a new way of doing business. And along the way, they may be shaping a new industry.

Despite the DOL's best efforts, the IMO channel may thrive. They were left out of the definition of financial institution, which is required to complete a sale of most annuities and financial products that involve qualified retirement money.

The financial institution would be the entity guaranteeing that the sale was made in the best interest of the client. Otherwise, no sale. Insurance companies can be considered a financial institution, but many of them are saying that they can’t be responsible for independent agents because they don’t control them.

Insurance agents, also left out of the financial institution designation, seem to be out of luck if they want to sell in the IRA market, which accounts for more than 60 percent of the dollars going into fixed indexed annuities.

But the DOL did leave open the door for marketing organizations to apply for financial institution status. They will have to show how they will do all the compliance and record-keeping generally required by financial regulators.

Seven organizations have applied individually with different visions of how that will be carried out, because the DOL didn’t express what the agency would be looking for.

Some observers say the marketers are wasting their time because the DOL has little love for the sales channel. So, it is courageous of those organizations to step forward to create a new kind of agency, sort of an insurance broker/dealer.

The effort is testament to not only the ingenuity and drive of the channel but also to the integrity they believe they possess now and what they promise to deliver.
That dedication is rewarded no matter what the outcome, but we’re hoping we get to see this new entity develop – DOL willing.

Steven A. Morelli is editor-in-chief for InsuranceNewsNet. He has more than 25 years of experience as a reporter and editor for newspapers, magazines and insurance periodicals. He was also vice president of communications for an insurance agents’ association. Steve can be reached at [email protected].

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