Fiduciary Rule Is Here To Stay, Industry Veteran Says

Agents and advisors are 90 percent down the road to compliance with the controversial Department of Labor (DOL) fiduciary rules, one expert said.

The last 10 percent requires some serious due diligence, said Kim O’Brien, CEO of Americans for Annuity Protection.

“They’re 90 percent there with the suitability standard that they’ve been under since the early 2000s,” she said. “With just a few more tweaks and modifications to their business models, they can be in full compliance.”

O’Brien will host a lunch and learn session on the DOL rule today at the 2017 Advisor Super Conference in Dallas.

The fiduciary rule partially took effect June 9. Phase one requires advisors and agents to act as fiduciaries, make no misleading statements and accept only “reasonable” compensation.

Opponents are concerned with phase two rules that establish a class-action right to sue and could make it difficult for independent agents to sell through independent marketing organizations. Those requirements are expected to be delayed until July 1, 2019.

'Rule is Not Delayed'

Still, O’Brien cautioned agents and advisors not to relax because of news of the delay, which could become official any day.

“The rule is not delayed. The rule was effective June 9,” she emphasized. “Sell, sell, sell away, but the new normal is you’ve got to sell using impartial conduct standards, and you’ve got to prove that you’ve got procedures in place to mitigate conflicts of interest.”

That means a change in business practices, O’Brien said, and that cannot be underestimated. There is a middle ground between being paralyzed by fear, and treating the DOL rule as much ado about nothing, she said.

“There is a change. They do really have to have in place a system of processes and procedures that can demonstrate they’re serving their clients’ best interest,” said O’Brien, founder of AssessBEST, a sales and compliance software system. “But that’s just a business model. That’s an easy change.”

Determining “reasonable compensation” might prove to be the toughest hurdle to quick and easy compliance, experts say. Failure to find this answer will leave agents and advisors vulnerable to lawsuits, O’Brien said.

“That’s the new world. The big change is the analysis you’re required to do,” she added. “I think it’s easy to comply once you understand it, but it’s the most misunderstood.”

As the DOL works to finalize its rules, some states are passing their own best interest standards. Nevada passed a law earlier this summer and five other states - including bellwether California -  are looking into the higher standard, O’Brien said.

“It’s good to do this now because this train is not coming back to the station,” she added.

InsuranceNewsNet Senior Editor John Hilton has covered business and other beats in more than 20 years of daily journalism. John may be reached at [email protected].

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