IMO President: Here’s How We’ll Sell Under DOL

Brokers International is all-in on a Department of Labor waiver to allow the marketer to continue selling popular fixed indexed annuities.

The Iowa-based marketing organization has requested the DOL grant it financial institution, or FI, status. The company partners with more than 20 insurance companies to distribute retirement and life insurance products through about 35 independent marketing organizations and 2,500 broker-dealers, registered investment advisors and insurance agents.

Under the new DOL fiduciary rule, only financial institutions can sign a best interest contract to allow a fixed indexed or variable annuity sale affecting retirement money. The rule grants FI status to four entities: banks, broker-dealers, registered investment advisors and insurance companies. IMOs and FMOs need to apply for a waiver, and at least seven companies have done so.

In this edited conversation, Brokers International president and CEO Mark Williams reveals how his company might develop if the DOL grants its request.

Q:  What are you proposing to supervise the independent agents contracted with Brokers International?

A: We are proposing a supervisory structure that is similar to an RIA/B-D structure but for insurance-only agents managed through our insurance compliance group.

Q: You have an affiliated RIA. Why not use the RIA structure as the supervisory framework for your independent agents to sell fixed indexed annuities under the DOL’s Best Interest Contract Exemption, or BICE?

A: Only producers licensed and registered with an RIA fall under the fiduciary oversight of the RIA. We are taking steps to help insurance-only agents who desire to become licensed take the class and become Series 65 licensed, but this will not apply to all agents as some have no desire to become Series 65 licensed.

Q: How does receiving financial institution, or FI, status put Brokers International in a stronger position with regard to recruiting A) independent agents and B) sub-IMOs/FMOs?

A: FI status would allow us to offer additional support and benefits to our producers that other FMOs without FI status could not. Agents associated with organizations who do not have FI status could be limited to doing business with only the carriers who are willing to sign the BICE agreement, limiting the number of products available to meet their clients’ options for qualified funds.

FI status ensures each insurance agent is given the resources needed to grow their business while successfully meeting all DOL requirements. We offer an agency building platform that focuses on insurance, annuities and wealth management. Once FI status is obtained, fiduciary endorsement will be added to our innovative business model.

Our compliance program focuses on educating, collaborating and coaching our producers. This approach builds rapport between compliance and the producer which leads to a win-win for all. We feel this partnership-based oversight concept is a great recruiting tool for us.

Q: Do you estimate an increase in the size of your compliance department?

A: We have an experienced compliance team in place with extensive knowledge of FINRA and insurance regulations. Our program encompasses a robust supervisory and oversight structure that we execute and enforce every day. The road ahead is still unknown and all compliance regulations have not been fully disclosed.

As we learn more we will assess our needs for growing the team. We are committed to building the department as needed to ensure we’re able to provide the resources required to foster a compliance culture and respond to all agent requests in a very timely manner.

We offer our producers the tools required to run a compliant and successful practice. To continue to fulfill this commitment to them, we will hire additional staff as the DOL releases more information.

Q: Will the compliance department be responsible for overseeing the formal FINRA-like registered B-D supervisory structure?

A: Our RIA/B-D will be responsible for handling the oversight of securities-licensed individuals and our insurance compliance team will be responsible for insurance-only licensed oversight. All regulatory requirements under the DOL have not been published yet but we will work hand in hand to ensure both programs encompass risk mitigation, oversight, auditing and education.

Q: Will your supervisory framework have to report to the DOL or state insurance regulators? Is there a superseding authority that oversees Brokers International’s supervisory framework?

A: Our BD/RIA will be responsible for handling the oversight of securities-licensed individuals and our insurance compliance team will be responsible for insurance-only licensed oversight. At this time, we have received no formal communication from the state insurance regulators nor the DOL regarding a reporting structure, but assume we will continue to be regulated by state insurance departments as we are now.

Q: You list errors and omissions (E&O) coverage limits of $2 million per occurrence and $4 million in the aggregate. How much of an increase is this over what you are paying now?

A: We will continue to carry appropriate E&O coverage insurance.

Q: Has the DOL given you any hint of when they expect to approve your application, if indeed that is the case?

A: No.

Q: Assuming the DOL grants you FI status, your status would be an “individual” status to your organization and the independent agents who contract with you. In other words, this is not a class exemption, or is it?

A: We don’t know. The DOL has not given us an indication as yet.

Q: Is there anything else you’d like to add about the details of the supervisory structure?

A: Brokers Intl. is very well positioned with regard to compliance and oversight on behalf of our agents and representatives through both our insurance compliance and RIA/B-D compliance departments. Our business platform is built upon ethical, compliant and customer focused sales practices with information delivered to producers in a very timely manner which encourages them to use our services.

InsuranceNewsNet Senior Writer Cyril Tuohy has covered the financial services industry for more than 15 years. Cyril may be reached at [email protected].

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