Advisors Cornered By Zombie DOL Rule

CHICAGO  -- The Department of Labor fiduciary rule was the obvious big topic in the room at the Insured Retirement Institute kicked off its 2017 marketing conference.

Don Moore, a broker-dealer in Greenbelt, Md., is scrambling hard to make the April 10 applicability date set by the DOL. Of course, that could change if the DOL follows through with a 60-day delay as the agency plans. That would move the applicability date to June 9.

Speculation is rampant that the DOL, as directed by President Donald J. Trump, will use the delay to strip the rule of its more onerous requirements. But in the meantime, folks like Moore need to have compliance systems ready to go.

"We're wasting a lot of time trying to adapt," said Moore, who offers a wide range of planning services at Lincoln Investments. "One of my frustrations is the government had to come up with costs for this whole thing and what they didn't account for was the costs of a lawsuit."

The fiduciary rule establishes a best-interest standard for anyone working with retirement dollars. It requires more disclosures, a contract in some cases, and establishes a class-action lawsuit process.

"Even if we're not guilty of anything, we still have to spend money to defend it," Moore said.

Staff training and trying to reconfigure clients' accounts so they comply with the new rules is taking up the most time, he said. With 45 years in the business, Moore said he won't walk away now.

Lincoln sells both fee- and commission-based products. If the rule goes into effect, Moore said he will sell variable annuities under the rule's best interest contract exemption. The BICE requires a signed contract in order to sell VAs with a commission.

Others in attendance at the IRI opening reception Sunday night said the industry is moving toward fee-based advisory services. The problem with fee-based VAs is getting the fee out of the account annually, said Marc Vosen, president of the broker-dealer division of Key Investment Services.

Unless the Internal Revenue Service changes the rules, the annual fee counts as a taxable distribution. That's a negative against the fee-based route, Vosen said.

"Especially in the bank channel,” he said. “It's a problem."

InsuranceNewsNet Senior Editor John Hilton has covered business and other beats in more than 20 years of daily journalism. John may be reached at john.hilton@innfeedback.com.

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