COVER STORY
Between The End And The Beginning This year was either post-one thing or pre-another. It was post-vacated Department of Labor fiduciary rule but pre-National Association of Insurance Commissioners new sales standard. It was post“repeal and replace” and pre-“Medicare for All.” And post-Securities and Exchange Commission Regulation Best Interest approval and pre-Reg BI compliance. The worlds of life insurance, annuities,
health insurance and finance all seem midturn from one reality into another. We are starting to see the dim outlines of what that new world looks like in 2020. In the following three articles, we’ll see: » New York has forged ahead with its tough Regulation 187, which not only tightens the standard for annuity selling, it also brings life insurance under the same standard. Will that new standard guide the direction for the NAIC’s new model rules?
» Medicare for All is the rallying cry of some of the leading Democratic hopefuls on the presidential campaign trail. But what does it really mean? And are all the candidates singing the same tune? » Reg BI has been an enigma stuffed into a euphemism sandwich since it was prepared by the SEC. Is it really a best interest standard? Does it really change anything? If you were thinking it won’t, think again.
New York Epicenter In Fiduciary/Suitability Clash
Annuity sellers face increased scrutiny with new best-interest regulations — starting in New York, where Regulation 187 took effect Aug. 1. Is it the standard for things to come?
By John Hilton It’s not unusual for Larry Holzberg to be called on to handle an annuity sale for an already completed financial plan. He refers to Wealth Advisory Group’s role in those transactions as being “a glorified order taker.” But now that Regulation 187 is the law in New York, Holzberg must think twice about these sales. The new rules raised the liability standard and went into effect Aug. 1 for annuity sales and will take effect Feb. 1, 2020, for life insurance sales. “I’m not necessarily going to be made available for all the investment planning decisions that were done by the accountant or the advisor or the estate planning attorney,” Holzberg explained. “I have to 18
ask them for information to make sure that what they recommended, essentially, is suitable if I’m going to be the one who is making the product sale.” Based in Manhattan with offices in the shadow of the Empire State Building, Wealth Advisory Group might even have to change its name once Reg 187 is fully in place. The rule bans use of the terms “financial advisor” or “financial planner,” including in the firm name, without clear licensing. Wealth Advisory Group includes insurance agents as well as a broker-dealer. Firm executives have asked state officials if they can keep their name and are awaiting an answer. New York is the central battle location for the fiduciary forces and the suitability
InsuranceNewsNet Magazine » December 2019
corps. Debate between the two sides has coalesced around a best-interest standard as regulators continue to seek compromise rules. Still, both sides are continually pushing to pull best-interest language in their favor. New York put a stake in the ground for fiduciary with its tough rules. Although the word “fiduciary” is not mentioned, the state Department of Financial Services toughened its standard through several features. Here are three important ones: 1. The Language. “Only the interests of the consumer shall be considered in making the recommendation.” Thirteen words that are unambiguous on what the producer must do in any transaction.