Industry Groups Struggle to Provide Data for Fiduciary Standard
February 22, 2012 by Arthur D. Postal
From the Washington Bureau
February 17, 2012 • Reprints
Insurance industry trade groups are having difficulty providing the basic data the Department of Labor says it needs to prepare an economic impact study that must be included in its new proposal for a revised definition of fiduciary in sale of retirement products.
In a letter dated today, the National Association of Insurance and Financial Advisors is telling DOL officials “it is not feasible for us to obtain any of the data” enumerated in the Dec. 15 letter DOL officials sent to all trade groups involved.
The letter was signed by Dr. Susan Waters, NAIFA CEO.
“The relationship of our members to their clients and affiliated companies is such that they likely would not have the right to share the client’s or company’s data even if they have some access to it,” Waters said.
DOL’s Employee Benefits Security Administration has given industry trade groups until Feb. 24 to fulfill the department’s request regarding what impact the conflicts of interest faced by brokers who advise IRAs have on IRA investors.
EBSA originally wanted the data by Jan. 15. At the request of various trade groups, it originally delayed the response date to today, and then to Feb. 24.
These groups include the Financial Services Institute, NAIFA, the Financial Services Roundtable, the Securities Industry and Financial Markets Association, the American Council of Life Insurers, the Insured Retirement Institute and the American Bankers Association.
EBSA originally proposed the rule last year, but withdrew the proposal in September under intense pressure from Congress and industry, saying it would be re-proposed early this year.
One of the most controversial aspects of the rule is that it would apply a fiduciary standard on sale of IRAs. Industry, now backed by a bipartisan group of members of Congress, argue that that would substantively reduce the types of sales agents who would want to sell IRAs under such a standard.
One of the reasons EBSA withdrew the rule is that the industry would like to challenge it in court based on the need through the Securities and Exchange Law to include a regulatory impact analysis that provided detail data on how the rule would not impact competition and capital formation.
In its letter, NAIFA said that it represents approximately 200,000 individuals who provide a variety of financial services, not businesses, “and the nature of our membership significantly impacts the type of information we can provide.”
It says that virtually all NAIFA members sell life insurance, and that according to a recent survey nearly two-thirds of NAIFA members also are licensed as registered representatives of broker-dealers and sell securities to their clients.
Of its members who deal in securities, 41 percent are dual-registered as both registered representatives of broker-dealers and as investment advisors under the Investment Advisors Act of 1940.
The survey also found that on average, 77 percent of a NAIFA member’s income comes from commissions, 8 percent from salary, 11 percent from assets under management and/or planning fees, and only 4 percent from bonuses and reimbursements, according to the letter signed by Waters.
