FIAs and Groundhog Day: The Movie!

Commentary

“Groundhog Day,” the now iconic 1993 comedy starring Bill Murray, tells the story of Phil Connors, an arrogant Pittsburgh TV weatherman who, during an assignment covering the annual Groundhog Day event in Punxsutawney, Pa., finds himself caught in a time loop, repeating the same day again and again.

Like the movie, the fixed indexed annuity industry is caught in a seemingly endless loop to keep the product with its rightful and appropriate regulator, the state insurance department. Even though the securities industry lost its power play to regulate FIAs under the SEC 151a Rule, that doesn’t mean the fight is over.

The DOL is the latest regulator to treat FIAs like securities and put them under the Best Interest Contract Exemption.

Even though all 401(k) and IRA recommendations must follow the impartial conduct standards of prudence, care, loyalty and diligence as of June 9, 2017, FIA agents and advisors may use the 84-24 Exemption during the partial delay.

However, whether the delay is over on Jan. 1, or the DOL finally announces the partial delay will continue until July 2019, one thing remains certain:

When the Rule goes into full effect, all fixed indexed annuity recommendations will be subject to the Best Interest Contract (BIC) Exemption (BICE) to be compliant.

The BICE requires a supervising Financial Institution to execute a contract with the annuity owner and has onerous and confusing disclosure requirements that were designed for the securities industry’s framework and not insurance distribution.

That is why the Board of Directors for Americans for Annuity Protection (AAP) has authorized resources to work with the Fixed Annuity Consumer Choice (FACC) Campaign to help ensure FIAs are permanently moved from the Best Interest Contract Exemption to the current 84-24 or a similar exemption.

The FACC Campaign’s mission, which aligns perfectly with AAP, is critical to ensure that FIAs are not treated like securities.

Over the past few months, annuity advisors and industry personnel have pledged their commitment to the FACC’s pro-FIA campaign (and to clients who rely on these valuable products) by racking up some impressive numbers. Together, thousands of letters and other communications have been sent to members of Congress and the Department of Labor.

Engaged insurance professionals from all areas of the industry have:

• Collected almost 3,000 signatures on a petition to DOL Secretary Acosta;
• Sent members of Congress and the Administration hundreds of personal letters; and,
• Inundated targeted Congressional offices with requests to sign a letter to Secretary Acosta.

All these efforts have had an impact. But the job is far from done. Our own Groundhog Day movie keeps running and our fight continues. Even though the Harkin Amendment clearly defines FIAs as insurance products and NOT securities, unconvinced regulators keep looking for ways to regulate them like securities.

“Placing FIAs in BICE would have severe adverse repercussions for consumers by limiting choice in the IRA marketplace and violates the spirit of the Harkin Amendment, which was adopted by Congress to distinguish regulatory treatment of FIAs from securities products,” states FACC Campaign Steering Committee Chair Dwight Carter, president of Financial Security Associates.

Fair Treatment Sought

Fixed annuities – including fixed indexed annuities - offer unparalleled guaranteed protections and benefits to consumers that are not fully understood or appreciated by the DOL and other regulators. The FACC Campaign, with AAP’s full support, seeks to ensure FIAs are treated appropriately and fairly.

The administrative and regulatory obstacles to comply with BICE threaten to put FIAs out of business in the qualified marketplace and thereby deprive consumers of innovative products and access to annuity expertise.

While other organizations bring challenges in court or seek Congressional action, the FACC Campaign and AAP is singularly focused on getting the DOL to fix the exemptions. It is even more critical we succeed now, ahead of any SEC fiduciary action.

To those of you already involved, thank you for your support. To the rest of you, now is the time to get engaged. AAP encourages you to join the FACC Campaign effort. You can help by sending this link to at least three industry colleagues or clients and ask them to get engaged, make the pledge, and help save the future of our industry.

Also, keep abreast of the latest campaign information, as well as accurate and timely information on DOL activities, at the FACC blog located here. Consider subscribing to AAP’s newsletters, educational programs and regulatory alerts at www.aapnow.com.

We need more engagement and help to ensure the future of FIA distribution and consumer freedom of choice. Unless we succeed, like Phil Conner, we are destined to keep repeating this Groundhog Day again and again. We must UNITE AND FIGHT to protect the future of FIAs.

About the FACC Campaign

The Fixed Annuity Consumer Choice Campaign (FACC Campaign) is organized to protect fixed annuities in connection with the Department of Labor (DOL) fiduciary rule deliberations and any other deliberations by other government agencies and organizations.

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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