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DOL Fiduciary News: July 12, 2017

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Rep. Wagner drafts bill to kill DOL fiduciary rule, replace it with best-interest standard

InvestmentNews; July 11, 2017 @ 1:32 pm

Legislation written by Rep. Ann Wagner, R-Mo., would eliminate the Labor Department's fiduciary rule and replace it with a best-interest standard for brokers giving retail investment advice.

In Ms. Wagner's bill, brokers would have to provide recommendations that "reflect reasonable diligence, care, skill and prudence," according to the legislative text.  They also would have to disclose at the point of sale the compensation they receive and "any material conflict of interest."

The bill goes on to require that a broker "avoid, disclose or otherwise reasonably manage any material conflict of interest with a retail customer."

The legislation would allow brokers to charge commissions and take third-party payments, engage in principal transactions, sell proprietary products and offer a limited menu of products. It would not require a broker to "recommend the least expensive security or investment strategy."

With fiduciary rule in place, two broker-dealers cut adviser compensation

InvestmentNews; July 11, 2017 @ 2:57 pm

Two prominent broker-dealers are cutting bonuses and payouts to advisers, in some cases because of the Department of Labor's new fiduciary rule.

LPL Financial is eliminating a "general securities bonus" applicable to the volume of equities and fixed income securities traded by an adviser, according to two sources who asked not to be named. Meanwhile, Raymond James's employee broker-dealer unit told its 2,500 reps and advisers that many of them would get a 1% cut in pay.

This LPL bonus that is being eliminated went to a small number of veteran advisers who built portfolios through buying and selling individual securities, according to an LPL branch manager. The majority of contemporary advisers at LPL buy and sell packaged products like mutual funds or variable annuities for clients.

It was not clear the exact amount of such bonuses or the amount of trading that would qualify an adviser for such a bonus.

Fiduciary rule advocates call Labor’s flip on class-action waivers unjustified; July 11, 2017

A consortium of consumer advocate groups says the Labor Department’s decision to drop its defense of the fiduciary rule’s restriction on class-action waivers is “without justification.”

In court documents filed with the 5th Circuit Court of Appeals last week, government attorneys said they would no longer defend one claim in the most wide-ranging of lawsuits seeking an injunction of the fiduciary rule. The claim? That the provision in the rule’s Best Interest Contract Exemption prohibiting class-action waivers violates the Federal Arbitration Act.

Days later, attorneys for the AARP, Better Markets, the Consumer Federation of America, Americans for Financial Reform, and the National Employment Law Practice filed an amici brief with the 5th Circuit, arguing the government’s change in its position is not based on an accurate read of the fiduciary rule or Supreme Court precedent on the FAA.

Nationwide Announces Its First Fee-based Fixed Indexed Annuity 

COLUMBUS, Ohio, July 11, 2017 /PRNewswire/ -- Nationwide, a leading insurance and financial services organization, announced today a new fee-based fixed indexed annuity (FIA) option. Nationwide Summit fixed indexed annuity is the first FIA in their lineup designed to better fit the needs of Registered Investment Advisors (RIAs) and fee-based advisors. Nationwide Summit offers capital preservation without sacrificing growth potential and features the exclusive J.P. Morgan MOZAIC Index (USD).

"Nationwide recognizes the growing market demand for alternatives to help hedge the risk of traditional portfolios managed by RIAs and fee-based advisors," said Mike Morrone, associate vice president of fixed annuity product strategy at Nationwide. "In today's low-interest rate environment, the fee-based Summit FIA with the J.P. Morgan MOZAIC Index (USD) offers a powerful accumulation opportunity with no downside market risk."

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