NAIFA Member Comments on DOL Fiduciary Proposal Include Personal Appeals

The Department of Labor asked the public to comment on its retirement advice fiduciary proposal, and insurance and financial advisors responded. A NAIFA GovAlert on the issue resulted in advisors sending 18,421 letters to DOL Secretary Thomas Perez and members of Congress.  More than 95 percent of Congress, 508 out of 535, received letters because of the GovAlert.
Many advisors included personal stories to illustrate the impact the DOL proposal would have on their businesses and their clients. Below are a few excerpts:

Today I helped a client decide what to do with his 401(k) account when he terminated employment. The decision was made that rolling the assets into an Individual Retirement Account (IRA) was the best choice for him. I helped him decide how to invest the IRA account to best meet his risk tolerance, financial situation, tax status, investment objectives, liquidity needs, and risk tolerance. I was able to combine these monies with existing account for his family resulting in no sales charge for him. Under the current rule, I would be prohibited from providing any of those services. The likely result would be that my client would instead have kept his money in the 401(k) and received no advice and paid higher annual management fees than having his money invested in A shares which are usually lower management fees. If I rolled all of my clients into managed accounts, they would pay 1% a year or more in annual fees which would not be good for them in the long term.

-John Hevron

I meet with individuals who are able to save only a small amount per month to meet their retirement needs.  I do advise them on the options available to them to accomplish this, including continuing to contribute to their employer plans and traditional and Roth IRA's through the use of mutual funds and annuities.  I find that in most cases, these individuals are looking for someone to guide them in making good decisions given their time horizons, risk tolerance, financial stability and goals and objectives.  If this fiduciary rule should be implemented as written, I will no longer be able to receive third party compensation for any products used to accomplish my client's goals and needs, and since I strive always to do what is in my client's best interest and work continually to provide the best service, I would be forced to give my advice for free.  That is not reasonable, so I would have to stop providing this service.  My clients then would be forced to pay fees for advice and this would either be too cost prohibitive and the client might stop saving for retirement altogether.  At any rate, that is no in their best interest.  

 -Sharon Herrick

Recently, I helped a client, friend, and fellow church member Jeff, age 55 1/2, create an income strategy to keep his family in the house, his son in college, and slow the depletion of his other assets after nearly 2 1/2 years of involuntary unemployment (laid off).   The decision was made that rolling his 401K assets into an Individual Retirement Account (IRA) and receiving Substantially Equal Periodic Payments (SEPPs) was the best choice for Jeff. I  helped Jeff decide how to invest the IRA account to best meet Jeff's risk tolerance, financial situation, tax status, investment objectives, liquidity needs, and risk tolerance.  I received commissions from the purchase of a fixed indexed annuity - parenthetically the lowest commissions of the three suitable solutions presented and my only compensation for untold hours of analysis.  Under the current rule, I would be prohibited from providing any of those services.  The likely result would be that Jeff would instead just cash out his 401(k) and would suffer the tax and the early withdrawal penalty, a wrong decision but one likely if he hadn’t had access to my services.

-Mark Knauff

Recently I helped a "middle America" client roll over an IRA from a retirement account at work.  We made a good recommendation based on her risk tolerance and time horizon and sold a quality mutual fund at a reasonable commission to assist her.  Under the proposed legislation, I could not have done this.  Not only would I be disadvantaged, so would be the client.  I have worked for the same "household name" company for 34 years and we treat customers honorably ad helpfully.  I hope I can continue to do so.
                                                                                                                        -Rob Rice
Finally, NAIFA member Andrea Thalheimer sent us videos explaining the consequences she and her clients could face if the DOL proposal goes into effect.

  • Posted July 22, 2015 IN
  • Comments (4)

James Toler
Any DOL Fiduciary Standard, or Dodd-Frank related fiduciary standard ideas are deeply flawed to level of being unconstitutional.

Here's why: The Constitution provides for equal protection under the law.

By creating a "fiduciary standard" (FS) based on the altruistic concept of putting the client's best interests first, that means all licensed agents and reg. reps must have the ability to contract with ALL carriers to sell ALL products, and be able to get selling agreements with ALL mutual fund companies. That would assure all reps and agents have access to the same products but unfortunately the fund companies and insurance carriers limit who they give selling contracts to. Ask Prudential to sell their variable annuity products if you do not believe me.

If a (FS) were coupled with a new regulation that opens ALL products to ALL properly licensed sales people then that would be a different story.That way the playing field is level for everyone, not just a few who have access to those products already.

Otherwise without such access to ALL products, it is impossible to compete with those agents and reps that do have those contracts for selling different products.

That means if the non-contracted agent/rep sells a product HE CAN sell that is inferior in someone's opinion to the product he cannot sell because he cannot get a contract to sell it, he is in violation of the (FS).

He is not being treated equally under law because he cannot get access to ALLl the same products.

There is also a principle in the law that says you cannot make someone break the law to comply with another law.

Stop making new laws to drive people out of the industry and enforce the ones we have. HIRE MORE COPS!
7/31/2015 4:11:52 PM
Byron Haney
I'm clearly in the minority among NAIFA members. I must admit that I see this proposed rule change as an opportunity to increase our individual standing in our communities and to provide deeper and more complete service. Given the proliferation of predatory "Financial Service" institutions, I can't imagine that we as service providers are balking at the chance to set ourselves apart. Sure, there are some challenges that will need to be met; however, we are the National Association of Insurance and Financial ADVISERS...not insurance and product pushers. If you have entered this industry for the purpose of pocketing huge commissions and churning activity and chasing the corporate vacations and then I submit that you are among the predatory providers that the Heart of NAIFA is dead-set against and seeks to eliminate.
7/28/2015 1:33:58 PM
Doug Johnson
I became a registered representative in 1995 and in that time period have helped many people get sound advice on what to do with their 401 K accounts when they retire. Since participants in 401K's are self directed after the initial interview for the most part they have no clue of what to do. When we take the time to spend several hours with them and explain to them that once we roll over to an IRA we can run some intergrated projections for them with various conservative earnings rates and various interest rates to create a report that will help them for the first time get a view of their reality in retirement years. Most of the time it is the first time that they have been exposed to this. Every single one of them is very thankful for the time spent and the work product. We then move the discussion to the wisdom of creating a will or updating their existing one and also a frank discussion about the wisdom of Long Term Care Insurance.
Perhaps the DOL and congress need to understand the true value that we bring to the table. If the DOL wants to make a worthy rule change, perhaps they should require the broker/registered representative to meet every 24 months with 401 K participants so that they get the guidance that they need while growing their 401K rather than the self directed approach currently being taken.
Fodder for thought.
Doug Johnson
7/27/2015 5:57:40 PM
Raymond Kojetin
Andrea, Great points, I agree whole heartedly
7/23/2015 11:57:44 AM