Insurers are "a little behind the curve" on preparations for the forthcoming Department of Labor fiduciary rules, a leading analyst said Thursday.
Fred Reish, a partner at Drinker Biddle & Reath in Los Angeles, spokes during a webinar on the fiduciary regulations. The firms dealing with qualified retirement funds -- broker-dealers, insurers, RIAs and others – need to get moving if they plan to meet the initial April 2017 deadline, he said.
“I don’t think (insurers) quite realize the impact this is going to have,” Reish said. “So for insurance products, they might be a little bit later. They’re waiting for feedback from the broker-dealers on what the broker-dealers want.”
Many larger broker-dealers will have a plan in place by June or July at the latest, Reish said. Decisions include whether to continue selling commission-based products through one of the exemptions in the DOL rule, what products to sell, or whether to move to fee-only products.
Developing that strategy now is key, Reish said, so firms can move on to other tasks. Such as fiduciary training for advisors, developing policies and supervisory procedures, and possibly developing new products.
Fixed Indexed Annuity Surprise
Insurers are behind because “the industry didn't expect fixed indexed annuities to be moved” into the Best Interest Contract Exemption, Reish said in a follow-up email.
The DOL proposed new fiduciary rules in April 2015, which cover advice provided regarding qualified retirement employer-sponsored plans and individual retirement accounts.
DOL officials and public interest groups say the rules are necessary to protect retirement investors from high commissions.
Critics say the DOL is trying to force the industry to move from a commission- to a fee-based model. The rule allows for commissions via a prohibited transaction exemption, but industry officials said it isn’t realistic due to the burdensome regulations.
Litigation to revise or stop the rule remains in play, said Bradford Campbell, former assistant secretary of the DOL now with Drinker Biddle. But the industry needs to move full-speed ahead as if the rule is the law, he added.
Most of the rule will go into effect in April 2017, with some provisions being delayed until Jan. 1, 2018.
“I think a year is too little time, but unfortunately, it’s the time we have, so it’s the time we’re going to have to figure out how to make work,” Campbell told the webinar audience. “If there are any of you out there who think that this just isn’t going to affect you in some way, I think you’re probably wrong.”
InsuranceNewsNet Senior Editor John Hilton has covered business and other beats in more than 20 years of daily journalism. John may be reached at firstname.lastname@example.org.
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