UNITED STATES OF ANNUITIES | ANNUITY
Licensing issues. Agents who want to talk with customers about rolling money out of 401(k)s and into rollover IRA annuities or partial IRA annuities or any insurance product will need to do so within the boundaries of the licenses they hold, cautions Pinkans. That has always been the case. Agents, however, who are not securities licensed but want to take advantage of some of the new opportunities should partner with someone who does have a securities license, he says. “Either that, or just don’t have the conversation.” The only other option for these agents would be to become dual licensed as both an insurance agent and a securities rep. But that will take time and money— and some agents won’t want to expend either—a decision that Pinkans says could limit their options in this market. Know the available income solutions. Advisors who are already dual licensed can discuss a variety of income strategies and solutions with workers. But that means the advisor needs to keep abreast of the options as they come out. In today’s market, for instance, it may look as if rolling some of the 401(k) money into a fixed indexed annuity in a rollover IRA would be the best bet for clients with a long term horizon, Pinkans says. “In fact, for some clients, that may be the best thing to do right now, and well before the client retires.” And a dual-licensed advisor could do that for the client. The advisor should, however, keep an open mind, Pinkans stresses. “It could be that a traditional fixed annuity, a variable annuity or some other option would be better. And if the person already has an in-plan annuity, the advisor should check the payout and compare it to the other options.” In addition, advisors will need to be ready to address criticism over using annuities in qualified plans. The complaint continues to be that this strategy puts a tax-deferred product into a tax-deferred wrapper and there are costs associated with that, says Friedman, the attorney. His suggestion is that agents prepare themselves to offer the counter-argument, that “annuities have features such as
lifetime income provisions that can- to take effect, cautions Marrion. For not be duplicated anywhere.” instance, managed money advisors who Competency issues. There is no way advise on clients’ plan assets as well as around it. Agents, advisors and planners individual holdings could decide it’s time will need to develop greater competencies to strengthen their position with clients in order to provide advice to consumers who have 401(k) plans. who will be affected by the Treasury and Instead of watching their assets being Labor initiatives, says Newcomb. sold by dual-licensed annuity agents and For example, the availability of more then turned into IRA annuities, “the choices along with more cost and fee managed money mavens may decide to information means that advisors who wrap lifetime payout annuities around work with plan participants may need to “Advisors will have develop greater quanincreased opportunities— titative competencies than they now have. but they may also come to Annuity companies view their annuity bedfellow that develop products to compete against the with a guarded eye.” in-plan annuity options will probably develop calculators and their client’s funds,” he says. “That way, applications to help the agents compete both they and the consumer can receive in this manner, he allows. But the agents lifetime income—and the agent will be will still need to know how to apply those left out in the cold.” applications to the client’s situation. Fiduciary issues. The Department of Putting It Together Labor’s rulemaking efforts to expand the Putting the pros and cons together, it scope of fiduciary responsibilities to more looks as if the Treasury and Labor initiaadvisors who give advice will give shape tives could be a mixed bag for indepento the competency issue, Newcomb pre- dent agents and brokers in the individdicts. The rulemaking activities are not ual market. Advisors will have increased part of the new Treasury and Labor ini- opportunities—but they may also come tiatives, he allows, but he predicts that the to view their annuity bedfellow with a fiduciary issues will impact independent guarded eye. agents and advisors who provide advice As Pinkans puts it, “some government related to in-plan annuities, rollover IRA body might decide to launch new efforts annuities and related matters. to regulate indexed annuities. Or efforts Efforts exist to keep fiduciary issues out could be made to put certain annuities of the world of IRAs, Newcomb allows. under the Employee Retirement Income But the issue could still trickle over to Security Act (ERISA), and say ‘now you agents in the IRA rollover market, espe- are regulated under ERISA’.” cially if the goal is to offer a level comThen again, he says, “those things petitive playing field between providing might never happen, because annuities advice on in-plan annuities and rollover today are more heavily regulated than annuities, he says. It may be that the inde- even two years ago, for suitability, dispendent agents who want to compete in closure, product training and more.” this market will need to accept the same Since the jury is still out, his suggestion fiduciary responsibility to IRA owners as for now is to think of the annuity initiaregistered investment advisers have. tives as measures that will open up new “Advisors who don’t want to accept that market opportunities for those producers responsibility will find their world getting who choose to take advantage of them. smaller and smaller,” Newcomb predicts. Brace for greater competition. Linda Koco, MBA, is a contributing editor to InsuranceNewsNet, specializing in life insurance, anAgents may face greater competition as nuities and income planning. Linda can be reached at the Treasury and Labor initiatives begin Linda.Koco@innfeedback.com. April 2012
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