NAFA Responds To INN Article On Fiduciary Standard Debate
July 22, 2013 by Jeff Mose
NAFA, the National Association for Fixed Annuities, has responded to a recent InsuranceNewsNet article, “War of the Advisor Groups Heats Up,” written by Cyril Tuohy and published July 12. Read Cyril’s article here.
Cyril,
You’ve articulated the fiduciary agenda very well. And you presented an interesting editorial comment in your column when you write “…or whether investors are better off with advice that is good enough…” as it suggests that the decision is ultimately between fiduciary or, well, cross your fingers and hope, as you hint at the fact there is no other means of looking out for the well-being of the consumer. But fortunately, there is.
The fixed annuity industry is already subject to comprehensive and effective state regulation, which ensures that each customer is sold an annuity product that is, in fact, suitable for his or her personal financial needs. NAFA submits that the Suitability Standard of Care that applies to the sale of annuities and other insurance products is the proper and “most suitable” standard of care for all annuity sales. It is unnecessary and would be both disruptive and unworkable to attempt to replace or overlay this proven Suitability Standard of Care with the fiduciary rules that apply to securities sales.
States apply the suitability standard of care to sales of fixed annuities and the product “suitability” test clearly provides consumers with comprehensive, proven protection that is the most appropriate way to regulate such insurance transactions. State product suitability requirements that apply to fixed annuities generally are based on the uniform suitability standards contained in the National Association of Insurance Commissioners (NAIC) Suitability in Annuity Transactions Model Regulation. A majority of the states have adopted this standard while those remaining states are in the process of adoption.
While neither the SEC nor the DOL has adopted an over-reaching application of the fiduciary standard as of yet, NAFA believes strongly that federal efforts to update or harmonize fiduciary standards for investment advice and asset management transactions in the securities arena must not be expanded to needs-based transactions in the insurance marketplace, which has a strong, proven history of robust and effective state regulation.
Regards,
Jeff Mose
Vice President, Development and Education
National Association for Fixed Annuities
