As a consumer you need to be aware of the realities of the most recent regulatory over reach in the insurance industry. The debate was about the benchmark of fiduciary or suitability standards. In the annuity and life insurance industry agents have long been held to a suitability standard which suggested that any product solution provided for a consumer should be suitable for their financial needs. Agents have long served the public through this standard and have done no harm. Of course there is always a few agents who use predatory sales tactics and abuse consumers, these agents are always weeded out and they represent a very small sampling.
Now the Dept of Labor (DOL) comes along and decides they should jump in and protect consumers by changing the standard to a Fiduciary benchmark which basically says that a client’s best interest is always the standard. Well that is not the issue here at all. The real issue is the new levels of regulatory administration and burdensome costs that go with these new levels of pseudo taxes. Insurance agents have long been regulated at the state level and consumers have strong protections from the state insurance depts. Now, the federal government wants to add an additional layer of burden and thus create new pools of revenues (this is truly what regulatory statutes are. In essence they represent a new level of taxation).
Consumers have been used by the DOL as the excuse to create more costs and administrative burden for agents and insurers. Just as Obama care has slowly destroyed the insurance market and increase costs to the consumer, this new over reach is going to result in a huge reduction of agents and insurers which is the exact opposite of what the so called objective is. This will increase the costs to consumers and will greatly reduce the market of agents and advisors for the middle the market which presently is incredibly under served.
So, when the middle market has no ability to get financial advice where do they turn? Of course the government will step in and educate consumers just as they have with Obama Care. How has that worked out?
The vast majority of Life and Annuity agents are professionals who are fully transparent and provide extremely important service for the middle market who need retirement incomes they can’t outlive. These agents cannot be compared to financial advisors who are serving ultra wealthy and the affluent markets. These markets begin with people who have minimum $250k in assets. Whether that advisor has to be held to a fiduciary standard should not trickle down to the insurance agent who is serving those with $100K and less for their retirement needs. The reality is the middle market is quite attractive to the government and the financial advisory industry and like a shiny new toy they are focused on ensuring that this market place has no option but to be dependent upon the government for their financial decisions.
Don’t buy into the story that I’m from the government and here to help you, this DOL grab has nothing to do with helping you the consumer in the middle market. This will provide you with less options, and the products and solutions available for you will cost more and deliver less which in the end will push you to the upcoming government solutions.