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DOL Fiduciary News: November 7, 2016

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Amid DOL fiduciary rule doom and gloom, some take opportunistic tack

InvestmentNews; Nov 4, 2016 @ 1:13 pm

Amid the outpouring of dour forecasts, grim analysis and outright confusion about the impact of the Labor Department's fiduciary rule among stakeholders in the financial services industry, some product providers see a silver lining.

Executives at insurers such as Lincoln National Corp. and Principal Financial Group Inc. have pointed to business opportunities posed by broker-dealers trimming their product offerings to comply with the federal regulation, which raises investment advice standards in retirement accounts.

Court denies NAFA in DOL fiduciary rule case; NOV 04, 2016

The National Association for Fixed Annuities has lost its challenge to the Department of Labor’s fiduciary rule.

In a decision issued today in the United States District Court for the District of Columbia, Judge Randolph Moss denied NAFA’s motions for a preliminary injunction and summary judgment.

Among other things, NAFA claimed DOL violated the Administrative Procedure Act when it shifted the regulation of fixed indexed annuities to the rule’s Best Interest Contract Exemption. In the proposed version of the rule, FIAs were scheduled for regulation under the less restrictive Prohibited Transaction Exemption 84-24.

CNO Financial: DOL Rule to Cost $8-$10M in 2017

InsuranceNewsNet; November 4, 2016

CNO Financial Group plans to spend between $8 million and $10 million in 2017 to comply with the Department of Labor fiduciary rule.

In addition to initial implementation costs, the company will spend between $2 million and $3 million a year to comply with the rule, said Gary Bhojwani, president of CNO Financial Group, a Carmel, Ind.-based holding company for middle market life insurers.

Commonwealth offers brokers bridge financing as DOL takes toll in shift to fee-based IRAs

InvestmentNews; Nov 4, 2016 @ 12:56 pm

Commonwealth Financial Network, one of the biggest independent broker-dealers in the U.S., will offer its advisers financing to bridge a shortfall in cash flow that results from its recent decision to stop charging commissions in retirement accounts.

Commonwealth will provide short-term loans to help advisers cover a potential drop in earnings as it shifts to charging fees to comply with the Labor Department's new fiduciary rule, Rich Hunter, president of the brokerage firm, said Friday during the firm's national conference in Austin, Texas. The brokers may obtain loans amounting to 10% of their trailing 12-month revenue, according to a slide shown during the presentation.

DOL rule for dummies: An 8-step compliance guide [infographic]; NOV 05, 2016

With just 5 months to go before the fiduciary rule kicks in, advisors will need to familiarize themselves with steps of the process needed to be DOL-compliant. These include requirements pertaining to client education, fact-finding, documentation, production recommendations and post-sale plan reviews.

The requirements will vary, depending on whether you’re a level-fee fiduciary or derive variable commissions from product sales. The latter will be beholden to the more stringent provisions of the rule’s best interest contract exemption or BICE.

Can Funds with 12b-1 Fees Still Work in Retirement Plans?

PLANSPONSOR.COM | November 04, 2016

Some experts believe retirement plan sponsors shouldn’t offer any mutual funds with 12b-1 revenue-sharing fees in their investment lineups; on the other hand, other experts maintain that by crediting revenue back to the plan, funds with 12b-1 fees can actually cost less than those without such fees.

In either case, given their strict fiduciary responsibility, defined contribution (DC) plan sponsors have a duty to compare funds with these fees to those without—and to decide which fits best for their participants’ individual circumstances.

New Rule Helps No-Load Funds—But Investors Still Need to Watch for Other Fees

The Wall Street Journal; Nov. 7, 2016 12:30 a.m. ET

Mutual-fund investors may soon see changes on the shelves of fund supermarkets: No-load share classes are likely to dominate the offerings because of a new government conflict-of-interest rule aimed at financial advisers.

The rule, which takes effect in April and requires advisers offering retirement-investment advice to put clients’ needs ahead of their own, is expected to reshape the distribution of mutual funds and accelerate the demise of loads, or the fees fund firms charge investors to compensate brokers for selling the funds.

On its face, it is a positive development for investors, who likely will be able to buy funds more cheaply and better understand what they are paying for.

Could Fee-Based Annuities Entice More Advisors to Sell Them? 

InsuranceNewsNet; November 4, 2016 

Financial advisors who avoid commission-based annuities could be drawn to selling more annuities as insurers repackage them into fee-based products to comply with fiduciary regulations. That's the word from the chief executive of Lincoln Financial Group, a major seller of variable annuities.

“With fee-based annuities currently representing a small portion of industry sales, we see this as a big distribution growth opportunity,” Dennis R. Glass, president and CEO of Lincoln Financial Group, said in a conference call with analysts.

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