We’ve Gone Full Bipolar

This moment between the two political conventions finds most of us in a full-bore bipolar state.

Many people find themselves somewhere near the extremes of riding a fist-pumping, red-faced adrenaline rush or waiting out a wave of depression by going into a fetal position, perhaps for the next four months.

Politics occupy only one spectrum with dramatic extremes these days. Religion, race, guns and the environment would be just the beginning of a long list of topics that could trigger a bloody argument. Some might say that all those issues are elements of a larger continuum, but the splintering of both parties shows that not everybody is lockstep with their stereotype.

The insurance and financial industries have their own divisive issues and certainly the fiduciary standard is at the top of that list these days with the Department of Labor’s rule. But that regulation is just the latest in a longer fight over commissions vs. fees.

The reaction to the DOL rule resembles the brawling going on just about everywhere else. People seem to be reaching for the usual bludgeons in response.

Some say the rule is an overdue crackdown on commission-craving charlatans, others say it’s a power-grasping overreach. The truth might be in the middle.

Is there a problem with some agents and advisors who only target the money? Indeed, just as there is under the existing fiduciary system. Just look at the jaw-dropping, billion-dollar cons that flourished within the purview of the Securities and Exchange Commission.

The insurance industry has responded to problems regarding agents who jammed elderly clients into annuities with long-term surrender charges. The companies had to dial back some of the features they built into byzantine annuities and roll back some of the sales incentives along with improving oversight.

That was the system actually working.

Then you have the fee-only, fiduciary side claiming furious righteousness in this debate. But a fiduciary-only world does not solve the problems of rogue advisors and the retirement crisis.
What about the consumers who can’t pay a fee? The common answer has been that the roboworld will develop sufficiently to serve lower- and middle-class Americans.

How are people doing under the current system of financial advice? Not great. And the reason is not due to a fee or a commission. Will a system that helps people find the lowest-fee fund or mix of investments make a difference? It’s difficult to see how it would.

Let’s not forget that when the economy was in near China Syndrome in 2008, it was people with fixed annuities who didn’t have to worry about their principal melting down. Someone made a commission on selling them, but their clients reaped the benefit of security.

Again, that doesn’t mean that problems do not exist within the insurance industry. But problems exist in each of the sectors of finance.

We can all understand this when we look and listen.

All of these issues dividing us are not black and white. They are not either and or. They are each a spectrum with a blend in the middle.

The middle range is cooler, healthier and saner. How about we meet there?

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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