Voya: Independent Agents To Suffer Under DOL Rule

Independent insurance agents and advisors not affiliated with a financial institution can expect to be “disenfranchised,” by the Department of Labor’s new fiduciary rule, a top executive with Voya Financial said Wednesday.

Agents, however, could find some relief if regulators amend the rule, which was issued in its final form last month.

One of the challenges of the Best Interest Contract Exemption is defining what qualifies as a financial institution. This is because selling agents need to be affiliated with a bank, a broker/dealer, an insurance company or a registered advisor in order to take advantage of the exemption, Alain Karaoglan, Voya Financial’s chief operating officer and CEO of the Retirement and Investment Solutions unit, said in a first-quarter earnings call with analysts.

A significant population of insurance agents are not affiliated with a financial institution “and these independent agencies are seemingly disenfranchised by the rule, absent some future relief from the DOL,” Karaoglan said.

He also said that 60 percent of Voya’s sales are conducted through financial institutions and 85 percent of sales are conducted through registered representatives. Those distributors, if they need to affiliate with a financial institution, “will be able to do so.”

Under the new rule, the insurance company or the broker/dealer, not the individual agent, bears the responsibility for assuring fiduciary conduct.

Consolidation Seen as Inevitable

Voya Financial's chairman and CEO Rod Martin said that, for some of Voya’s distribution partners, the DOL rule might nudge advisors into partnerships with larger companies or force them to stop selling some products, which he did not name.

In the retail wealth management business, smaller advisory practices of five or 10 advisors also will find life difficult because of new compliance and supervisory costs, documentation and website presentation and compliance, said Charlie Nelson, CEO of Voya’s Retirement division.

Voya, which offers retirement plans to large corporate markets, won't be affected much by the DOL rule because of the tax-exempt nature of those retirement accounts.

With retirement plans for small and midsize companies, Voya uses a Morningstar service for retirement plan sponsors.

Voya on Wednesday reported first-quarter profit of $191.6 million and net income was 92 cents per share.

Earnings, adjusted for nonrecurring gains, were 55 cents per share, missing the average estimate of 13 analysts surveyed by Zacks Investment Research by 16 cents.

The company also posted first quarter revenue of $239 million, short from the $297.3 million that 14 analysts surveyed by Zacks  expected the company to deliver.

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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Cyril Tuohy is a writer based in Pennsylvania. He has covered the financial services industry for more than 15 years. He can be reached at [email protected].