Navigating 2024’s policy challenges that impact financial professionals

Now that we are in the first few months of 2024, financial security professionals are navigating myriad federal policy issues that carry far-reaching implications for our industry and the diverse needs of the individual, family and business clients we serve. These policies will significantly shape our strategies and decision-making in our industry, which includes life insurance, retirement planning and investments. 

Challenges spilling over into 2024 include high borrowing costs, persistent inflation worries and multiple armed conflicts worldwide. Adding to the complexities are the issue of federal legislative inactivity and the absence of decisive policy actions on important matters such as taxation. However, the 2024 concerns can be simplified into three main items: the Department of Labor fiduciary rule proposal, upcoming elections and tax-related issues.

The DOL’s recently proposed fiduciary rule, released on Halloween 2023, expands the definition of investment fiduciary advice while simultaneously restricting the business practices of financial security professionals. The proposed rule will drastically impact the profession’s ability to provide holistic retirement planning to clients who depend on retirement advice. 

Contrary to the DOL’s intended goal, the proposal could hinder or even deny needed retirement advice, particularly for individuals with low-to-moderate income. Additionally, the proposed rule will make it more challenging to enter or start a career as a financial security professional. 

The DOL proposal is offensively framed, misleading and substantively very bad. The proposal overlooks the existing robust investor protections provided by the Securities and Exchange Commission’s Regulation Best Interest and the adoption of the National Association of Insurance Commissioners’ model regulation by 40 states. And if you think about it, it seems that over the past 13 years the DOL has been on an ideological crusade to effectively ban commissions. That’s why they continue to come back with regulations that are so punitive that they will make it impossible for financial security professionals to do their jobs.

Looking at Congress in 2024

The 118th Congress has faced criticism as the least effective in history, marked by limited legislative rulemaking. While it seems numerous dramas and subplots unfolded on Capitol Hill in 2023, the focus is shifting toward the upcoming 2024 election. The election results can reshape the political landscape, impacting the presidency and control of the Senate and House of Representatives. This underscores the significance of taxes as a key issue in the pivotal political landscape.

Several key provisions of the Tax Cuts and Jobs Act are slated to sunset after 2025, including the estate tax exemption, child tax credit, SALT deduction cap, individual income tax rates, standard deductions and 199A deductions for pass-through businesses. The fate of these provisions beyond 2025 will be influenced by the outcomes of elections, determining the president and party control of the Senate and the House. 

In addition, the upcoming transfer of an estimated $100 trillion from baby boomers to the next generation over the next few decades is expected to prompt legislative proposals aimed at capturing additional revenue. These tax proposals will be targeted to address the burgeoning government debt and Medicare and Social Security shortfalls and offset other federal initiatives. In fact, there are already several tax proposals targeting Americans based on specific income and wealth thresholds.

Finseca was created to reunify the financial security profession. With greater scale and a stronger voice, we have the potential to tackle the significant challenges emerging in 2024. Although the obstacles ahead pose significant challenges, they are not insurmountable.

Alex Kim is vice president, public policy, with Finseca. He may be contacted at [email protected].