DOL Fiduciary News: May 26, 2017
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Fiduciary Rule Hurts First Quarter Annuity Sales
Retirement Income Journal; Thu, May 25, 2017
Year-over-year U.S. annuity sales were depressed in the first quarter of 2017 by uncertainty over the Obama Department of Labor’s fiduciary rule, which President Trump’s Secretary of Labor, Alexander Acosta, said will be allowed to take effect on June 9 despite the objections of annuity industry trade groups and lobbyists.
Overall U.S. annuity sales were $52.0 billion in the first quarter. That was a slight rise from the fourth quarter of 2016 but a 12% percent decline from the first quarter of 2016, according to LIMRA Secure Retirement Institute’s First Quarter 2017 U.S. Retail Annuity Sales Survey. 1Q2107 witnessed the fourth consecutive quarter of declines in overall annuity sales.
“Despite an improvement in the equities market and interest rate environment, uncertainty around the DOL rule overwhelmed any impact it may have had on annuity sales,” said Todd Giesing, assistant research director, LIMRA Secure Retirement Institute, in a release.
DOL fiduciary rule pushes indexed annuity carriers to develop new products
InvestmentNews; May 25, 2017 @ 1:59 pm
Insurance companies, especially those that are indexed-annuity-centric, have been launching annuity products within the past several months in anticipation of the Department of Labor's fiduciary rule, which is expected to cause a big disruption to distribution of their traditional products.
Half a dozen companies, such as American Equity Investment Life Insurance Co. and Midland National Life Insurance Co., have debuted fixed-rate deferred annuities available with income riders since the start of the year.
That's new to the industry — insurers have traditionally only offered these income riders, which provide a lifetime income stream, for variable and indexed annuities.
Winners and Losers in a Post-Fiduciary World
The Wall Street Journal; May 24, 2017 11:11 a.m. ET
The Labor Department’s decision to let the fiduciary rule take effect in 2½ weeks will be a bane or a boon to a host of players from robo advisers and providers of index funds to brokerages and annuity providers.
Registered investment advisers and providers of index and exchange-traded funds are among the parties that stand to benefit from the rule. But the rule, which requires that stewards of retirement savings act in clients’ best interest, may pinch some full-service wealth-management firms, alternative asset managers and annuity providers.
Investors, depending on whom is asked, could benefit or suffer under the rule. Advocates say the rule will protect them from receiving conflicted advice that can weigh on returns and not be the best or most cost-effective solution. Opponents say small investors may be cut off from some forms of advice as firms look to comply with the rule.
Fiduciary rule deadline raises clarity concerns
Financial Planning; May 24 2017, 4:08pm EDT
By letting the fiduciary rule’s June 9 deadline stand, Secretary of Labor Alexander Acosta may be placing the proverbial cart before the horse for financial advisers and industry suppliers.
Tim Rouse, executive director of the SPARK Institute, whose research and educational efforts are used to help shape national retirement policy, was “moderately disappointed” that the fiduciary rule wasn’t delayed beyond the president’s order calling for a 60-day extension.
While his organization never opposed the regulations, it did lobby the Office of Management and Budget and others for a longer implementation period as far back as early 2016.
Plan Sponsors, Advisers Must Move Forward on Fiduciary Rule Compliance
PLANSPONSOR.COM | May 24, 2017
The U.S. Department of Labor (DOL) has confirmed that it will not seek to further delay the June 9, 2017, applicability date of the new fiduciary rule defining investment advice and establishing the best interest contract exemption (BICE) and other related exemptions under the Employee Retirement Income Security Act (ERISA).
The effect is that the policing power of the DOL will be greatly expanded, reaching over individual retirement accounts (IRA) and the vast majority of investment and advice providers to defined contribution (DC) retirement plans. Suffice it to say, this is a surprising outcome given that the new fiduciary rule and its accompanying exemptions are signature Obama-era regulatory actions that have been flatly criticized by the new president and many members of the Republican Congressional majority.
Wells Fargo Advisors restricting investments for retirement accounts
InvestmentNews; May 24, 2017 @ 2:22 pm
With the Department of Labor's fiduciary rule to take effect on June 9, Wells Fargo Advisors is putting new limits on mutual fund share classes and types of securities advisers can sell or recommend in a client's retirement account.
Starting next month, Wells Fargo Advisors "will require all new [mutual fund] purchases in brokerage retirement accounts to be executed in Class T shares," according to a memo sent to Wells Fargo advisers on Friday.
Non-retirement accounts will continue to use current share classes, such as A and C shares. T shares, which will have a 2.5% commission or front-end load and a 25 basis point trail, will not be available in non-retirement accounts, according to the memo.
DOL fiduciary rule pushing broker-dealer assets to fee-based accounts, away from commissions
InvestmentNews; May 24, 2017 @ 2:43 pm
There's been a marked shift in the allocation of broker-dealer client assets in the year since the Department of Labor issued its fiduciary rule.
Largely, the shift has seen assets flow into advisory accounts, which assess a level fee based on client assets, and away from commission accounts. That, in turn, has generally pushed up broker-dealer revenues derived from fee-based accounts and depressed those from commissions.
While this is a continuation of a trend that's been occurring in the brokerage industry for the past several years, the fiduciary rule, which raises investment-advice standards in retirement accounts, has "been kind of a knock-on effect," said Bill Butterfield, a senior wealth management analyst at Aite Group.
Fiduciary Rule: What’s Next for Investors, Brokers
The Wall Street Journal; May 24, 2017 11:12 a.m. ET
The Labor Department’s new retirement-savings rule is set to take effect June 9. What happens after that is the subject of myriad questions from both consumers and wealth-management firms.
While the decision to move ahead with the fiduciary rule’s rollout gives some clarity around immediate compliance questions, the Labor Department is continuing with an economic-impact review that could still result in the rule’s revision or repeal.
The rule, intended to protect retirement savers from conflicted investment advice, takes only partial effect next month. Brokers and insurance agents don’t need to comply with certain parts of the regulation until Jan. 1, 2018.
Fiduciary rule's best interest stays, but plaintiffs’ bar checkmated until first of next year
BenefitsPro.com; May 24, 2017
In opting to not attempt another delay of the fiduciary rule’s impartial conduct standards, Labor Secretary Alexander Acosta showed deference to the rule of law.
That has frustrated the many opponents of the rule who had called on Acosta to delay the June 9 implementation date of the impartial conduct standards until Labor can complete the updated review of the regulation ordered by President Trump.
“I am deeply disappointed that the fiduciary rule is not being delayed further, which I believe fails to follow the clear directive of the President of the United States,” said Rep. Ann Wagner, R-MO, in a statement. For several years, Wagner has spearheaded the effort to block the rule from taking affect by sponsoring legislation that would require the Securities and Exchange Commission to be the lead regulator in promulgating a uniform fiduciary standard.
Here’s Your Guide to ‘Reasonable’ Comp Under DOL Rule
InsuranceNewsNet; May 24, 2017
With the Department of Labor fiduciary rule taking effect June 9, agents face a lawsuit threat, analysts say.
When the deadline hits, agents need to be ready to act as fiduciaries when dealing with retirement funds.
“Any lawyer can sue on recommendations made June 9 and after,” said Kim O’Brien, CEO of Americans for Annuity Protection.