Carriers are starting to formulate business rules in order to accept ERISA and IRA funds under the DOL rule for solicitations June 9th until Jan 1, 2018.

We will keep a live document here to help navigate these waters click on this link to see what we are pulling from the different carrier communications

Read below for more insight

A week ago we all woke up to Acosta’s statement that he saw no legal reasons to further delay the DOL transition start date of June 9th 2017.  Since then phones have been ringing, emails have been coming in and conversations are being had as to what changes on June 9th and what do you have to do to get ready.  I sent an email on May 23rd that went through several items so some of this is reiteration and some is new material.

What you don’t have to do:

  • You don’t have to get your series 6,7,65,66 or any other securities registration to sell FIAs or IUL for that matter.  FIAs are not required to be a registered product, this DOL rule has nothing to do with registration that’s the SEC’s territory.
    • Remember the DOL ruling wasn’t written to go after just the FIA world, that world sort of got looped into it.  It was very much so written to go after the conflict of interest and excessive commissions that “wall street” has generated at the expense of consumers.  You hear people talking about the series 65 more because IAs and IARs are already required to act as a fiduciary and many are paid a fee for investment advice versus earning a commission.  You don’t have get your 65 to continue doing business as everyone is now required to act as a fiduciary (ERISA and IRA fund) and as of right now FIAs are exempt through the PTE 82-24 exemption.  Having your series 65 and becoming an IAR does broaden your scope and capabilities but it’s not required to advise on FIAs.
  • You don’t have move anything around or worse yet become captive to any of people out there using the chicken little approach to recruiting.  The sky isn’t falling, some groups just recruit better when people are worked up and they spin a good story.  To me this is nothing different than one of your clients that happened to run across another agent and that agent is trying to get your client to take surrender fees and move because that company you put them in is “in trouble” or “going under” etc. etc. Our firm and the 30 or so firms we talk to on a regular basis and consider peers all feel the same way…  even if things went into play today we have plans to comply-if things were to drastically change we have options to consider.  A peer of mine mentioned the great Gretzky quote: “Skate to where the puck is going, not where it has been.”  We are watching that puck and seeing where it’s going to be Jan 1, 2018.  I personally expect it to move a little bit but even if it doesn’t we have solid plans.  Here is what we are watching for:
    • BICE implementation isn’t until Jan 1, 2018
      • Acosta is still getting up to speed but he already cited that the rule “may not align with President Trump’s deregulatory goals.”- there is almost 6 months available to modify things to fit those goals.
      • The feasibility study is still underway which can change things
      • During the transition period FIAs are covered under PTE 84-24 which could remain the norm
      • Dodd-Frank repeal/replacement is still in the spotlight.  Follow this and you’ll see how broad Dodd-Frank is and there could be several outcomes as to the roles the DOL and SEC are allowed to play in consumer choices.
      • Trade groups are still lobbying and with the low complaint ratio FIAs have as well as the DOL actually learning how the FIA distribution works there is a lot of last minute education that the Acosta will have considered.

What you DO have to do:

  • Get up to speed with the new terms- READ THE DOL FAQ HERE and take Allianz’s training here   EVEN IF YOU AREN’T WITH ALLIANZ, DOING BUSINESS WITH THEM OR WHATEVER TAKE THE 15 MIN TRAINING- It’s a great summary of what is going on.  Below are some cliff’s notes
    •  Fiduciary
      • Act in best in interest of the client
      • Put the client interest first
      • Avoid conflicts of interest
    • Impartial Conduct Standard
      • Give advice that is in the “best interest” of the retirement investor. This best interest standard has two chief components: prudence and loyalty:
        • Under the prudence standard, the advice must meet a professional standard of care as specified in the text of the exemption;
        • Under the loyalty standard, the advice must be based on the interests of the customer, rather than the competing financial interest of the adviser or firm;
      • Charge no more than reasonable compensation
      • Make no misleading statements about investment transactions, compensation, and conflicts of interests.
    • PTE 84-24
      • Establishes an exemption through the transition period by:
        • Acting in according to fiduciary standard
        • Provide client with required disclosure and keeping record for 6 years
          • Disclose relationship with insurance company and product limitations
          • Commissions received expressed as a % of premium
          • Material Conflicts of interest- including trips bonuses
          • Product charges, fees, penalties and adjustments
        • Accept only reasonable compensation
  • Watch for carrier specific addendum’s and training.
    • There will not be uniformity in this but carriers are going to be proactive in their compliance to making sure producers are getting sufficient record keeping taking care of… it’s not their responsibility under 82-24 it’s the producer’s so think of this as a helping hand more than a mandate.  What we will continue to see is:
      • Training-  Example Allianz as before mentioned
      • Sample disclosure forms that the producer keeps in their file
      • Amended contracts with the carrier
      • Additional producer affidavits that proper records have been kept.

We will keep a live document here to help navigate these waters click on this link to see what we are pulling from the different carrier communications

  • It’s time to document- during the transition period you are responsible for documentation!
    • Conduct a through fact find and save it
    • Create your own or use one of the several industry templates to complete PTE 84-24 disclosure
    • Document client conversations in a database
  • Modify your practice to include commission conversations if you don’t already.
    • This must now be disclosed