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DOL Fiduciary News: July 5, 2016

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A Strategic Shift [fiduciary rule and product development]

Best's Review (July 1st, 2016 Issue)

By Achim Schwetlick and Lucy Pilko, Boston Consulting Group

The final version of the U.S. Department of Labor's new fiduciary rule aims to raise investment-advice standards for retirement accounts. After months of speculation, this streamlined version of the regulation addresses a number of the concerns raised by earlier drafts.

For insurance companies, this softer ruling will no doubt feel like a reprieve; however, they should not be lulled into a sense of security. True, the final rule offers relief, and on two fronts. First, the deadline for implementation now allows insurers 12 to 20 months for implementation rather than eight. Second, the fiduciary standards for the sale of variable annuities have been lowered.

Jefferson National CEO: Expect fee-based variable annuities to surge; July 03, 2016

With the dust still settling on the now finalized Department of Labor fiduciary rule, insurance and financial service professionals active in the retirement plan arena are scrambling to make sense of the 1,000-plus regulations being phased in through year-end 2017.

Many among them are coming to a stark conclusion: To avoid the conflict-of-interest rule’s more draconian requirements, the best option will be to jettison commissions and shift to a fee-based compensation model.

A Glimpse of the Future of Annuities

From the July 2016 issue of Research Magazine

By Scott Stolz, Senior Vice President, Raymond James

The annuity industry is at a crossroads. LIMRA recently reported that first-quarter 2016 variable annuity sales were $26.6 billion, down 18% from the previous year. Early indications suggest that variable annuity sales have dropped at least another 10% or so in the second quarter. In fact, LIMRA is estimating that variable annuity sales will be off 15–20% in 2016 compared with 2015 and then another 25–30% in 2017.

In contrast, LIMRA reported that first-quarter sales of indexed annuities were up 35% to $15.7 billion, making them the growth engine for the industry. LIMRA reported that all of the top 10 indexed annuity carriers saw sales increases during the first quarter.

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