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DOL Fiduciary News: March 1, 2018

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The Big D (Disruption) Is Coming [conference coverage]

InsuranceNewsNet; February 28, 2018

PONTE VEDRA, Fla. -- The “disruption” that is surely coming to the financial services industry really hasn’t started yet, a LIMRA researcher said.

The only real example is regulation, in the form of the Department of Labor fiduciary rule, said Eric T. Sondergeld, vice president of strategic and technology research for LIMRA.

During today's LIMRA 2018 Distribution Conference for Financial Services, Sondergeld will be joined by colleague Scott Kallenbach, director of strategic research for LIMRA, for a session on the “D word,” disruption.

“I would say largely (financial services) has not yet been disrupted,” Sondergeld said. “The Department of Labor fiduciary rule was disruptive even before it was in effect. The mere threat of a regulation put annuity sales in a very bad place. There was so much uncertainty about what was going to happen.”

Fixed annuity sales fell by 8 percent to $108 billion in 2017 over 2016, noted the forecast by insurance ratings house A.M. Best Co. Variable annuity sales dropped 9 percent, LIMRA reported. Many manufacturers and distributors are trying to transition to fee-based annuities, but with mixed results.

In addition to regulation, disruption is expected from two additional factors, he added, technology/changing consumer and new market entrants.

“Part of understanding disruption is it’s in the eye of the beholder,” Sondergeld said.

What one segment of the industry considers a disruption, another might not. One thing is virtually certain: “disruption” is going to be bad news for someone. 

Some speculating DOL will write new exemption based on SEC rule | February 28, 2018 at 03:27 PM

As the Securities and Exchange Commission continues to field comments on a uniform fiduciary standard, some stakeholders are speculating that the Labor Department could draft a new exemption to its fiduciary rule based on a best interest standard produced by the SEC.

“One potential outcome of DOL’s rule is that if you satisfy SEC requirements, you then satisfy the DOL rule,” said Cliff Kirsch, a securities attorney with Eversheds Sutherland.

Full implementation of Labor’s fiduciary rule has been delayed until July of 2019, as that agency considers revisions to the regulation promulgated under the Obama Administration.

In effect, the Labor Department could craft a new sellers’ exemption that says an advisor or broker is in compliance with the fiduciary rule, so long as they are in compliance with the standards ultimately produced by the SEC, according to Mr. Kirsch’s analysis.

That approach would go a long way to satisfying industry critics of Labor’s fiduciary rule, who have argued for years that the SEC is the more appropriate agency to establish and enforce regulations for the securities industry.

It would also likely be met with fierce criticism from consumer advocates that back full implementation of Labor’s fiduciary rule, who fear the SEC will undercut investor protections by drafting a disclosure-based fiduciary standard.

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