DOL hearing parses intersection of ‘best interest’ and annuity sales

investmentnews.com:

Insurance industry advocates and Department of Labor officials wrestled Wednesday over how annuity sales can be conducted in a customer’s best interests without the insurance agent being held to a fiduciary standard.

The discussion was a highlight of the second day of hearings on the agency’s proposal to raise investment-advice standards for retirement savers. Under the retirement security rule proposal the DOL released in October, almost all retirement investing advice would be held to the fiduciary standard in federal retirement law, regardless of whether it is being given by an investment advisor, a broker or an insurance agent.

The agency has said it is trying to establish a consistent regulatory framework to protect investors from conflicted advice when they’re working with an advisor in a relationship of “trust and confidence.”

The DOL has cited sales of fixed indexed annuities as an example of a situation where sales incentives can amount to “junk fees” that line an advisor’s pockets while diminishing a customer’s nest egg.

The insurance industry is strongly resisting the proposal, asserting that it will unfairly make annuity transactions a fiduciary act and curb customer access to the products.

Insurance advocates also say annuity sales are governed by a best-interests standard thanks to the National Association of Insurance Commissioners’ revised annuity suitability rule that has been adopted by 41 states.

Witnesses at Wednesday’s hearing said NAIC’s goal was to establish a standard that was stronger than suitability but less than a fiduciary requirement.

“It is not a fiduciary standard but it is a best interest sales standard,” said Tom Roberts, a principal at Groom Law Group who testified on behalf of the