Don’t Be Fooled: Only an Insurance License Needed to Sell Qualified Annuities

Commentary

Since the DOL’s transitional implementation of the Fiduciary Rule began June 9, Americans for Annuity Protection continues to receive dozens of phone calls or solicitation emails from marketing organizations and RIAs telling agents they must have a Series 65 to continue to sell qualified IRAs.

Let’s be clear: THE ONLY LICENSE THAT IS REQUIRED TO ROLLOVER QUALIFIED MONEY INTO AN ANNUITY OR LIFE INSURANCE PRODUCT IS AN INSURANCE LICENSE AUTHORIZED BY YOUR STATE INSURANCE DEPARTMENT!

The DOL Fiduciary Rule DID NOT CHANGE that! Why are we so sure? Because the DOL stated it clearly in the Rule, the BIC Exemption and the 84-24 Exemption. The DOL’s own language in creating the Impartial Conduct Standards for individuals receiving compensation other than level-fee compensation:

The Department published proposed new and amended exemptions from ERISA’s and the Code’s prohibited transaction rules designed to allow certain broker-dealers, insurance agents and others that act as investment advice fiduciaries to nevertheless continue to receive common forms of compensation that would otherwise be prohibited, subject to appropriate safeguards.

The Series 65 license is required by anyone intending to provide any kind of financial advice or service on a non-commission basis. Financial planners and advisors that provide investment advice for an hourly fee fall into this category, as do stockbrokers or other registered representatives that deal with managed-money accounts.

You don’t even need a Series 65 to be an investment advisor representative (IAR).

There is no doubt the advisors who wish to add investment advice to their business practice and manage both investments and insurance in their client’s portfolio, should consider a Series 65 to provide them more fee-based options for their clients.

But it is NOT A REQUIREMENT under the Rule or even to provide investment advice. It is only a requirement if you want to charge fees – in addition to commission – for that advice.

FINRA – Financial Services Regulatory Authority

FINRA offers several different types of licenses needed by both representatives and supervisors. Each license corresponds to a specific type of business or investment. While there are several licenses geared toward specific types of securities, there are three general licenses that the majority of representatives and advisors usually obtain:

Series 6

The Series 6 license is known as the limited-investment securities license. It allows its holders to sell "packaged" investment products such as mutual funds, variable annuities and unit investment trusts (UITs). This license is also required for insurance agents that sell variable products of any kind, because securities constitute the underlying investments within those products.

Principals who supervise representatives holding a Series 6 license must obtain the Series 26 license in addition to having already obtained the Series 6.

Series 7

The Series 7 license is known as the general securities representative (GS) license. It authorizes licensees to sell virtually any type of individual security. The only major types of securities or investments that Series 7 licensees are not authorized to sell are commodities futures, real estate and life insurance.

Those who carry this license are officially listed as "registered representatives" by FINRA, but they are generally referred to as stockbrokers. Many insurance agents and other types of financial planners and advisors also carry the Series 7 license to facilitate certain types of transactions inherent in their businesses.

Series 3

The Series 3 license authorizes representatives to sell commodity futures contracts, which are generally considered the riskiest publicly traded investments available. Representatives that carry the Series 3 license tend to specialize in commodities and often do little or no other business of any type.

Other Licenses

Not all securities licenses are administered by FINRA. The North American Securities Administrators Association (NASAA) oversees the licensing requirements of three key licenses. For more specifics about these licenses, read our article at www.InsuranceNewsNet.com from last fall.

The Bottom Line

The majority of financial and investment firms that hire or train new advisors will have a mandatory licensing program included in the training package. The firm will, in most cases, mandate which licenses must be obtained to sell the company's products and services.

Those that decide to go into business for themselves still need to meet the licensing requirements of their chosen services: the only real independence comes in which profession is chosen and not mandated.

So what license MUST YOU HAVE to sell and comply with the DOL’s Fiduciary Rule? That depends on the products and services you offer. If you offer financial planning and charge a flat fee for the planning services, you will need a 65.

If you want to give specific, individualized and tailored advice regarding the securities, mutual funds or variable annuities (or you supervise those that do), you will need the appropriate license to do that.

If you simply want to offer annuities and life insurance products for guaranteed income or asset protection needs, you will only need a life insurance license in the states you intend to do business.

Don’t be sucked in by misleading marketing suggesting you need an additional license. Get the license or licenses that you choose which allow you to provide your products and services.

As an insurance-only agent you may be leaving assets on the table because of net worth guidelines. But, if you want to remain an insurance specialist that assesses the insurance needs in a client’s financial plan and provides knowledge and competent analysis on how to fill those needs with annuities and/or life insurance, that is a service and skill that is sorely needed in the ego-driven, hyperbolic investment idolatry.

Kim O’Brien is a 35-year veteran of the insurance industry specializing in guaranteed annuities and life insurance. She is the current CEO of Americans for Annuity Protection and Founder of AssessBEST, Inc., a sales and compliance software system. Visit www.AAPnow.com or www.AssessBEST.com for more information.

This article is provided for educational and informative purposes only and not for the purpose of providing legal advice. Readers should consult with their own legal and compliance counsels to obtain guidance and direction with respect to any issue or question.
Contact Kim at [email protected].

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