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After the Ghost Goes

I don’t know whether it’s a little late or absurdly early to speak of A Christmas Carol, but I’m reminded about the story’s lesson throughout the year.

The tale is often called a redemption story, but it’s more visceral than simply seeing the error of your ways. It’s the snapping awake from the nightmare to see that we’ve been spared a disastrous fate and given a chance to change our story. It’s the liberating relief of the phrase, “It’s not too late.”

Of course, we don’t need a ghost to lead us through the steps down to a miserable end in the future. We can time travel by looking back. We can look at what we have done with our previous chances.

We’ve all been there, promising to live the straight and narrow if we can just get out of this one. But once we’re saved, we go on our merry way.

The promise could be to stay in better contact with a parent who survived a health scare. Perhaps it’s the close call at work where everything was on the line. What have we done with those second chances in the past?

Many agents and marketing organizations felt that release recently when the Department of Labor filed an order to delay its fiduciary rule application. Now April 10 will be just another day rather than the date when insurance-only annuity agents were exiled from the retirement market.

Was it as dramatic as that? Absolutely. The DOL targeted annuity sellers in its rule and deliberately banished the insurance sales channel. Under the rules, only financial institutions could sign off on annuity sales with retirement funds, and the DOL did not list independent marketing organizations (IMOs) or insurance agents as financial institutions.

Then the DOL entertained applications for individual IMOs to become financial institutions under the rule, while hinting that the department might issue an exemption for all IMOs. After 21 IMOs applied for the status and months of deliberation, the department did issue a class exemption, but the IMO had to show it had $1.5 billion in fixed annuity premium annually for each of the preceding three years. It also had to put up 1 percent in annual sales as its reserve.

So, out of about 350 IMOs nationally, only a handful would qualify. After months of the industry expecting the class status, the DOL issued a nearly meaningless standard only a few months before the rule went into effect.

Three court cases to stay or kill the rule also came to dead ends. The Trump administration signaled a desire to kill the rule, but had to start with a delay. Instead of an order to postpone, the president signed a memo instructing the DOL to look into the rule.

Finally, the department submitted a delay rule to the Office of Management and Budget for review before its issue.

Agents and their IMOs have been through a long, fitful night wondering whether they would lose most or all of their business at the end of it.

Add to that the steady stream of insults they’ve received from the fee-only industry and in the financial press. Some even call it the “anti-cheating” rule. Certainly Sen. Elizabeth Warren, D-Mass., has made IMOs her punching bag on this issue. She produced a report called “Villas, Castles, and Vacations: Protections From Financial Adviser Kickbacks, High Fees & Commissions Are at Risk.” In it, she describes the “lavish” trips that agents and advisors can win from IMOs. She doesn’t mention that many financial firms also offer trips. In fact, Transamerica, one of the companies she cited in a press release as a company that wants to keep the fiduciary rule, also offers trips to some of the same locales.

That is not to say that the DOL rule doesn’t have some good intent, but it’s been wielded like a blunt instrument against an entire industry. A majority of agents care about their clients and want to do the right thing by them. Castigating all of them as cheaters doesn’t help sell this program. People do not oppose this rule because they want to cheat clients.

All of this has been a roar of noise for agents and advisors needing clarity. So, news of the delay will at least dial it back from 11.

This is the moment in the middle of the night when the ghost of fiduciary future has brought agents back safely to the present. The fiduciary push has eased for the moment. Many advisors and IMOs who thought they would go out of business have a new lease.

But the trend toward holistic advising is unmistakable. More consumers will be turning to advisors for help with their retirement dollars. Annuities are the only products that can ensure retirees will have a revenue stream for the rest of their lives. But advisors can’t be looking at their clients purely as revenue streams for their business.

The night terrors have cleared, and it is the bright light of morning. What will we do with this new day?

Steven A. Morelli is editor-in-chief for InsuranceNewsNet. He has more than 25 years of experience as a reporter and editor for newspapers, magazines and insurance periodicals. Steve may be reached at [email protected] Follow him on Twitter @INNSteveM. [email protected].

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