NAIFA sends members to Hill to fight DOL fiduciary rule

Members lobby to block funding for measure

Sep 14, 2011 @ 3:20 pm

By Mark Schoeff Jr.

A major insurance industry organization charged up Capitol Hill today in part to try to kill a Labor Department rule that would expand the definition of a fiduciary for those providing advice about retirement plans.

On the final day of the National Association of Insurance and Financial Advisors' annual conference in Washington, more than 1,000 NAIFA members were set to conduct about 364 meetings with members of Congress and their staffs.

One of the major items on the NAIFA agenda was Labor's proposed fiduciary duty regulation. NAIFA is hoping that legislation emerges that would deny funding to implement the rule.

“There may be such a bill any day now, but it doesn't exist yet,” Lillian Vogl, NAIFA director of federal government relations, told NAIFA conference participants in a session prior to their Capitol Hill meetings.

The measure would likely come in the form of a rider to an appropriations bill that funds the Labor Department. As was the case last year, Congress is way behind in its annual effort to fund the government. The rider could be placed on an omnibus bill, even if there is no separate legislation for the Labor Department budget.

Ms. Vogl said that the rule would prevent the use of commissions, bonuses and other compensation on retirement products. She also warned that it would, for the first time, subject advisers for IRAs to a fiduciary duty, “which means a lot more regulation and a lot more liability.”

The Labor Department argues that the retirement law, enacted in 1974, needs to be updated to better protect investors who now must secure their own retirement finances through IRAs and 401(k) plans.

In congressional testimony over the summer, Assistant Labor Secretary Phyllis C. Borzi said that the rule would not curtail commissions and that she intends to propose a final version by the end of the year.

More than 100 bipartisan members of Congress have written to the agency to urge it to scrap the rule and start over.

“Thus far, the Department of Labor doesn't seem to care,” Ms. Vogl said. “This is the perfect issue for Congress to show that it can work across the aisle.”

The Labor fiduciary proposal has brought interest groups together. The Consumer Federation of America also opposes the rule.

In a House Financial Services subcommittee hearing Tuesday, Barbara Roper, CFA director of investor protection, said that the Labor fiduciary rule could drive broker-dealers out of the IRA business.

Small investors, who might have $2,000 annually to put into a retirement account, “are not that enticing a market and there are not a lot of fee-only financial planners or fee-only advisers who are going to step in and provide those services,” Ms. Roper said.

The two groups stake out opposing positions on a potential Securities and Exchange Commission fiduciary duty regulation for retail investment advice. NAIFA opposes a universal fiduciary standard; the CFA has been fighting for one.

On the SEC rule, NAIFA told its members not to ask for anything specific from Congress but rather to urge vigilant oversight. Under the Dodd-Frank financial reform law, the SEC has the authority to promulgate a fiduciary duty rule.

One of the reasons that fiduciary proponents want to see a universal standard is to protect investors from unscrupulous sales of annuities, which they say can be complex, confusing and unfit for many investors.

In its Capitol Hill meetings, however, NAIFA promoted those products — as well as life insurance — as answers to retirement security. They were set to urge lawmakers not to curtail insurance tax deferrals in tax reform and deficit reduction efforts.

“I hope that notion of a ‘cold call' is far off your radar screens,” Dirk Kempthorne, president and chief executive of the American Council of Life Insurers, told NAIFA members. “Your calls are not intrusions but messages of hope. You represent certainty in an uncertain world.”

Mr. Kempthorne, a former Idaho governor and senator, urged NAIFA members to focus their Capitol Hill meetings on stories of how they've helped clients build a solid retirement foundation.


What do you think?

View comments

Recommended for you

Upcoming Event

Apr 30


Retirement Income Summit

Join InvestmentNews at the 12th annual Retirement Income Summit - the industry's premier retirement planning conference.Much has changed - and much remains to be learned. Attend and discuss how the future is full of opportunity for ... Learn more

Featured video


Martin Dempsey: Geopolitical hotspots (and how they could impact investing)

What are the big international hotspots and how could it affect advisers and investors. Gen. Martin Dempsey, the former chairman of the joinst chiefs of staff, offers his unique perspective.

Video Spotlight

Help Clients Be Prepared, Not Surprised

Sponsored by Prudential

Recommended Video

Path to growth

Latest news & opinion

RIAs struggle to keep clients grounded amid stock market euphoria

With equities at record levels, financial advisers are confronted with realities of greed and fear.

Tax update: Brady says sales tax deduction in final bill

Taxpayers will be able to deduct state income taxes or state sales taxes in addition to property levies — up to a $10,000 cap.

Complexity of new indexed annuities causing concern

Insurers are using 'hybrid' indices as a way to differentiate themselves, but critics contend the products are less transparent, more confusing and don't add financial benefit.

Critics say regulation hasn't curbed overly rosy projections for indexed universal life insurance

They say rule didn't go far enough and more stringent measures may be necessary.

Broker, retirement groups make last-minute pleas to change tax legislation

Pass-through provisions are target of groups representing employee-model brokerage firms, as well as retirement plan advisers.


Subscribe and Save 60%

Premium Access
Print + Digital

Learn more
Subscribe to Print