Last week’s annual convention of the Insured Retirement Institute in Palm Beach, Fla., yielded three takeaways.
Takeaway No. 1: As of December 2018, the IRI will be under the leadership of a new CEO to succeed Cathy Weatherford.
Weatherford, a former regulator, has been IRI's president and CEO since 2008.
She led the organization through its critical transition from a group narrowly focused on representing the interests of the variable annuity industry to one representing the entire supply chain for insured retirement income.
Insured retirement income includes all annuities, not just the variable annuity bucket, as well as the distribution chain.
Whoever the board selects to succeed Weatherford, IRI members can bet that that the insured retirement market in 2018 and 2019 will be a far cry from what the insured retirement market looked like back in 2008.
That was a time when the first of the baby boomers, born in 1946, had yet to turn 65. It also was a time when the variable annuity market dwarfed fixed annuity sales, and when economists and policymakers had yet to uncover the depth of the financial crisis then unfolding.
By 2019, when the IRI’s new leader takes the reins in earnest, the masses of the baby boomer demographic will begin to draw on their government entitlements and the personal resources they’ve accumulated.
For their part, advisors will have more and simpler annuity products to choose from, including a host of fee-based options.
Beware of Complacency
Takeaway No. 2: It would be dangerous, derelict even, for financial advisors to assume that in a decade only life insurance companies will be selling life insurance and retirement products.
That would be as short-sighted as consumers thinking that Apple would only be selling computers, or that Amazon would only be selling books, or that auto manufacturers like GM made cars and trucks that only came with gasoline engines.
Yes, advisors have heard this refrain before. Nontraditional life insurers have no clue about the mass of regulation that life and annuity companies face. Can any other industry match our databases and claims experience to price risk?
This is true. But it is also true that other industries are just as good – even better, perhaps – at mining and acting on their data to be able to assess risk as well as weigh the consequences and financial returns of moving into a new market.
If there’s one underserved market in the U.S., it’s the market for life insurance coverage and retirement preparedness.
Advisors and insurers don’t need to be reminded of how underinsured and underprepared tens of millions of their fellow Americans find themselves.
But perhaps advisors and insurers do need to be reminded that underserved populations mean an opportunity for competitors to step in where traditional life and annuity companies and their go-to distribution models seem to be coming up short.
Get Used to a Best-Interest Standard
Takeaway No. 3: The best-interest standard is here to stay.
The question for advisors going forward is who will enforce such a standard. The Department of Labor? The Securities and Exchange Commission? State regulators or industry-based self-regulatory bodies like the Financial Industry Regulatory Authority?
Also to be announced is what kind of conduct will be deemed in or out of compliance with such a best interest standard.
Perhaps by the time IRI’s new leader steps in by the end of next year, regulators will have moved closer to answering what conduct they expect for advisors to be held in compliance.
But from now until July 1, 2019, when the remainder of the fiduciary rule goes into effect, there’s a big window of opportunity for the annuity industry and the IRI to step in and shape its own destiny as much as possible .
For too long, the industry has let others dictate the agenda without pushing back and making a case for itself allowing critics, even from within the industry, to look down on guaranteed income products.
The Trump administration’s victory at the polls last fall has created an opening for the IRI to work with other industry groups to corral regulators for yet another push for a workable best-interest standard acceptable across multiple regulatory layers.
IRI calls that a harmonized regulatory standard, and it may just be something the IRI will be able to sing about by the time a new leader takes the helm.
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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