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DOL Fiduciary News: March 27, 2018

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NAIC Punts Fiduciary Standard, Invites More Comments

InsuranceNewsNet; March 26, 2018

A National Association of Insurance Commissioners working group voted Saturday to open up another 30-day comment period on its controversial annuity sales standard. The new comment period will end Friday, April 27.                                                    

…The NAIC is attempting to adopt a model law that states can then put in place, creating a uniform standard. Some industry critics say it too closely mimics the Department of Labor fiduciary rule that was struck down by the courts last week, while others say it doesn't go far enough.

Many of those critics from both sides are state representatives sitting on the NAIC Annuity Suitability Working Group.

The group finalized its "Annuity Transactions Model" last year and its comment period closed Jan. 20. But a March 14 conference call to begin finalizing rule language quickly bogged down, with only minor agreements reached.

Group Chairman Dean L. Cameron, Idaho insurance commissioner, expressed hope that a final model law would be finished and voted on at the NAIC spring meeting Saturday in Milwaukee.

DOL fiduciary rule lawsuit withdrawn by fixed annuities group in DC federal court

InvestmentNews; Mar 26, 2018 @ 1:51 pm

The National Association of Fixed Annuities withdrew its lawsuit late last Friday against the Labor Department's fiduciary rule that was pending in the D.C. Circuit Court of Appeals.

NAFA said the recent decision by the 5th Circuit Court of Appeals striking down the fiduciary rule in a lawsuit brought by several financial industry trade associations obviated the need for its suit.

"We are very pleased the 5th Circuit understood the harms the fiduciary rule created for middle American retirement savers," NAFA executive director Chip Anderson said in a statement ( "This ruling vindicates both NAFA's and the 5th Circuit plaintiffs' chief concerns, and, as a result, we see no reason to continue to pursue our litigation in another federal circuit court."

The DOL agreed to the voluntary dismissal.

In its suit, NAFA claimed the DOL exceeded its authority in promulgating the rule, which requires brokers to act in the best interests of their clients in retirement accounts, and treated fixed annuities unfairly.

Consumer Group Says Industry Wants 'Watered-Down' Advisor Rule

Financial Advisor; March 26, 2018

As the SEC readies a “best-interest” advisor rule proposal for summer release, the Consumer Federation of America is asking the agency to go beyond the “watered-down" standard being advocated by the financial industry.

“Notably absent from the industry’s proposed regulatory framework is any obligation to act in the customer’s best interests,” Barbara Roper, the CFA’s director of investor protection, said in a letter to SEC Chairman Jay Clayton in reference to proposals contained in the more than 30 industry comment letters that have poured into the SEC in anticipation of the rulemaking.

For instance, Roper said, while both LPL Financial and the Investment Company Institute have asked for an explicit duty of care and loyalty, a careful review of their comments makes clear that they intend for those duties to be satisfied almost exclusively through compliance and existing broker-dealer regulations. LPL had been one of the few B-Ds to explicitly support the fiduciary rule.

“Specifically, their duty of care would be satisfied through compliance with Finra’s [existing] know-your-customer and suitability obligations, and their duty of loyalty would be satisfied not by minimizing or avoiding conflicts, but by disclosing them,” Roper said. “If the [SEC] were to adopt their suggested regulatory framework, it would offer the appearance, but not the reality, of enhanced protection for non-retirement accounts while badly undermining existing protections for retirement accounts.”

Ruling might give DOL, others time to focus on retirement income, experts say

Pensions & Investments; March 23, 2018 10:19 AM

The DOL and other groups might have the time and capacity to pick up work on retirement income strategies, now that a U.S. appellate court decision has vacated the fiduciary rule, industry experts said at Pensions & Investments' East Coast Defined Contribution Conference in Miami March 18-20.

In a keynote address on retirement legislation and policies, Michael P. Kreps, a principal at Groom Law Group, said he was doubtful that the Department of Labor would appeal a March 15 federal appeals court decision that vacated the fiduciary rule.

"It seems unlikely" that a department that has officials who have been skeptical of the rule since the beginning, and received a 2017 memorandum from President Donald Trump to analyze the rule's impact, would defend the rule "when they have a clear decision that undoes it all," Mr. Kreps said.

Potentially free from having to focus their time on the fiduciary rule, Department of Labor regulars might turn their attention to other issues, like lifetime income, instead, Mr. Kreps said.

Retirement income solutions already are receiving some attention from Congress, Mr. Kreps noted. Legislators have been working on a bipartisan retirement savings package that would facilitate the use of lifetime income strategies in DC plans, among other provisions.

Regardless of what happens to the fiduciary rule, it has "forced" a lot of plan executives and asset managers to think about strategies to help participants draw down their assets in retirement, said Nick Nefouse, managing director, head of DC investment and product strategy at BlackRock Inc., and co-head of the firm's Lifepath target-date series. There is recognition that if people do stay in plans, "the fiduciary responsibility of the plan sponsor would increase," Mr. Nefouse said, speaking on a panel on retirement readiness.

CFA Institute Calls for Universal Disclosure of Fees and Performance Across Investment Industry; Investor Trust Will Follow, Study Finds

March 26, 2018 05:00 AM EDT

NEW YORK -- (BUSINESS WIRE) -- In a new global survey on the importance of trust in the investment management industry, CFA Institute provides a roadmap for how the investment industry can increase its credibility and allay investor concerns. By adhering to the core tenets of professionalism – putting clients first, being transparent about fees and performance, demonstrating expertise – advisers will earn the trust of their clients.

CFA Institute, the global association of investment professionals, commissioned the survey to help advisers understand the pivotal role that professionalism plays in building trust in client relationships and in the industry overall. As investor expectations continue to rise, the survey finds that the trust equation of credibility and professionalism will acquire even more importance.

The 12-market survey (, The Next Generation of Trust: A Global Survey on the State of Investor Trust, reveals a significant gap between what more than 3,000 retail investors expect from their financial advisers and how satisfied they are with the relationship. Retail investors believe that financial advisers fall short of meeting expectations the most in the areas of transparency and performance. Investors surveyed say that their trust in advisers is driven by priorities of full disclosure of fees (84% importance), disclosure and management of conflicts of interest (80%), and generating returns better than a benchmark (78%), yet respectively, only 48%, 43%, and 44% of participants say that advisers deliver satisfactorily on these. 

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