A more streamlined future is in store for financial advisors selling into retirement accounts, regardless of the fate of the Department of Labor’s fiduciary rule, a top insurance executive said Tuesday.
Even if the rule isn’t implemented as envisioned by DOL regulators, “I think that the intermediaries have gotten more comfortable with taking a slightly different approach by having more control lie within the companies, one, and that two, that they are going to reduce the number of options for (financial advisors),” said Dan Houston, chairman, president and CEO of Principal Financial Group.
“Some of it has to do with complexity, a lot of that has to do with ensuring that I’s are getting dotted and T’s are getting crossed,” Houston said during Principal's annual outlook conference call.
Under the DOL fiduciary rule, which raises investment advice standards, financial advisors will be held to a fiduciary standard involving retirement money. That means more disclosures and liability, and even a contract to sell some products.
Product lines and commission structures are expected to undergo a degree of standardization, and the array of independent marketing organizations independent agents and advisors could potentially sell through are likely to shrink.
The fiduciary rule is slated to take effect April 10, but some on Trump’s transition team have called for the rule to be abolished and many Republican lawmakers in Congress also favor repeal.
Plaintiffs have also challenged the rule in several ongoing court cases.
Houston Warns Against Speculation
As a result, implementation of the fiduciary rule appears to be in doubt with industry watchers on all sides speculating as to the rule’s future.
Houston, however, said trying to divine how the rule will turn out and whether a delay – rumored by some industry sources to be for as long as two years – might be in the works would amount to “pure speculation.”
One of the lessons learned from the Affordable Care Act is that once a law becomes codified repealing it is a lengthy and arduous process.
“It isn’t waving a magic wand and having it go away,” he said.
A final version of the fiduciary rule was published eight months ago.
Houston said his company was planning to proceed with the expectation that the fiduciary rule would go into effect on schedule and as planned.
Principal Financial executives earlier this year said complying with the DOL rule would cost the company an estimated $1 million a month for the next 18 months to 24 months and between $5 million to $10 million a year annually after that.
InsuranceNewsNet Senior Writer Cyril Tuohy has covered the financial services industry for more than 15 years. Cyril may be reached at firstname.lastname@example.org.
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