Now comes the scrutiny for the DOL Fiduciary final rule
The Rule is out. Now comes the dissection.
After the Department of Labor’s (DOL) final fiduciary rule published Wednesday, those impacted or potentially impacted are finally able to begin figuring out how to adapt to and deal with the new rule.
The DOL first proposed a new rule in 2010 but withdrew it in 2011 after widespread criticism from both the insurance and financial services industries and many members of Congress as well. A modified version was released in April 2015, leading to more criticism and another comment period before the further revised rule was released yesterday – in time to allow the final rule to begin to go into effect (in phases) by about the time rule proponent President Obama leaves office.
A White House Fact Sheet regarding the final rule said based on the extensive input (more than 3,000 comments in a 5-month comment period, four days of public hearings and more than 100 meetings), the DOL “streamlined and simplified the rule to minimize the compliance burden and ensure ongoing access to advice, while maintaining an enforceable best interest standard that protects savers.”
National Association of Insurance and Financial Advisors (NAIFA) President Jules Gaudreau said the organization appreciates that the DOL has accepted many of NAIFA’s suggestions and reworked some portions of the rule to address concerns raised during the review process.
“We remain cautious, and it remains to be seen how the practical application of the rule will affect middle-market consumers who need retirement planning advice and services,” Gaudreau said. “But we are pleased to see, for example, that DOL has incorporated our suggestions on the effective date of the rule, grandfathering of existing clients, and timing of when signatures are required on best interest contracts.”
NAIFA is now in the process of completing an in-depth analysis of the rule and says it will continue to provide training and education to help members deal with the rule’s new requirements and restrictions.
At the LIMRA Life Insurance Conference this week in Las Vegas, one of the breakout sessions – scheduled well before it became known that the final rule would be released to the public on April 6 – centered on what insurance companies are or at least should have been doing to prepare for the rule.
“We will all be waiting with baited breath,” speaker Mark Smith of Sutherland told the crowded room of insurance professionals, adding that he probably wouldn’t sleep much that night in anticipation of the release on Wednesday, knowing he would be closely reading every word of it to begin to interpret its true reach.
Truth is, a lot of companies probably didn’t do too much before the revised rule was released, even though Smith noted that a lot of progress had been made in the form of cooperation between product developers and distribution in just the past two months. Companies could only do so much in advance of the rule without knowing exactly what was in it.
Speaker Jill Peckingham of EY said some companies have made moves to divest themselves of some blocks of business they expected to be impacted by the rule, and Smith said he was cautiously optimistic that the rule would provide for traditional grandfathering relating to existing arrangements currently on the books.
Now that the rule is out and actively being scrutinized, companies are beginning to seek out opportunities and how they might capitalize. One such opportunity might be targeting smaller accounts that other firms may be dropping as a result of increased compliance requirements while others are starting to work with technology vendors to create solutions to meet new requirements. Understandably, vendors by and large didn’t put many resources into creating a DOL final rule client solution without knowing the exact language of the rule.
Smith also told Insurance Forums that while he expects the final rule may indeed spur legal challenges from the industry, he noted it wouldn’t be prudent for companies to sit back and rely on a challenge – which could be tied up in litigation for two or three years – to prevent them from preparing to become compliant by the time the rule takes effect in early 2017.
Thoughts about the new rule? Please share them on one of these two threads:
Next page: Key provisions; industry reaction
- Insurtech Updates: Launches, expansions, partnerships and more
- NAIFA launches LACP designation as new ‘gold standard’ for life and annuity professionals
- Partial Fiduciary Rule implementation starts Friday – with no enforcement
- How estate tax repeal could impact life insurance sales, retention
- More than 8 in 10 advisors now use social media for marketing, researching prospects and building relationships
- Resources being rolled out to help with partial Fiduciary Rule compliance
- Best-ever start to a year for indexed life sales, new report says
- Diversity, innovation top agenda at Women in Insurance Global Conference