Life Insurance Selling

The Fight For Independents, Part II

tions could adversely impact investors.” They urged the staff to go back and perform a detailed cost/benefit analysis on the proposed rule change.

The Association for Advanced Life Underwriting (AALU), the National Association of Insurance and Financial Advisors (NAIFA) and the National Association of Independent Life Brokerage Agencies (NAILBA) were among the industry organizations that criticized the study as inadequate.

A LIMRA study released by NAIFA in December 2011 claimed a fiduciary standard would increase compliance costs by at least 15% for its 50,000 members, and as a result, 65% of its members would reduce their services to less-wealthy customers.

Valmark Securities President and CEO Lawrence Rybka, who is also chair of the AALU’s Regulatory Reform Committee, told National Underwriter in June that a “vague” fiduciary standard would be subject to second-guessing. And anything with a higher commission could create the presumption that the advisor made the wrong recommendation, he said.

“One outcome that I fear: if we, as a
broker-dealer, have to say that a certain
product is in the client’s best interests,
then the data we collected previously is
no longer adequate to determining what is
best,” Rybka said. “Now we have to ex-
plore more alternatives based on the cli-
ent’s financial objectives and risk profile.
This can be very intrusive into the recom-
mendations that producers make.”
Meanwhile, seven consumer and fi-
nancial planning industry organizations
supporting a uniform fiduciary duty —
Consumer Federation of America, Fund
Democracy, AARP, Certified Financial
Planner Board of Standards Inc., Financial
Planning Association, Investment Adviser
Association, and National Association of
Personal Financial Advisors — submitted
a “roadmap” in March to SEC Chairman
Mary Schapiro for resolving the debate
about how to create a rule outlined in the
study. The compromise framework uses
a July 2011 letter from the Securities In-
dustry and Financial Markets Association
(SIFMA) as a starting point. Here is an ex-
cerpt from the 14-page letter detailing the
consortium’s position:

SEC has next move

The SEC has been mum on the subject of late, which current NAIFA President Robert Miller says is a good thing.

“We think that the SEC is working hard on bringing all their data together,” Miller told Life Insurance Selling recently. “I really thought by now we’d have something down, but I don’t see it as a negative that

EDITOR’S NOTE:

This is the second part of a six-part series on threats to the independent life insurance distribution channel, running in each issue of Life Insurance Selling through the remainder of 2012.

Part I: Facing up to a graying producer workforce (July)

Part II: The impact of a universal fiduciary standard

Part III: Competing against alternative distribution channels Part IV: The danger of the affluent/ middle market disparity Part V: The obstacle of consumer unawareness and apathy Part VI: Emerging technology and the future of distribution LifeHealthPro.com / LIS / August 2012 25