Fiduciary commitment should be table stakes

According to some, it was akin to an undercover night raid, the speed of which left the insurance industry dizzy and defenseless. One minute the fiduciary rule was fair, the next it had been changed forever. They stole our commissions, said one. The rulemaking process is flawed, cried another. The movement to redefine what constitutes fiduciary advice only took … wait for it … 15 years.

Forgive the hyperbole, but the insurance industry’s opposition to the speed with which the newly published Retirement Security Rule was released is, frankly, ridiculous. While this latest incarnation was first proposed only last year, the rule, which will almost certainly face litigation, is simply the culmination of work to redefine who qualifies as a fiduciary that began during former president Barack Obama’s administration. Different iterations have been presented, as Emile Hallez details in his news analysis on page 6, but this latest overhaul loops a lot of brokers under the Employee Retirement Income Security Act in the same way the final version of the Obama-era Conflict of Interest Rule did in 2016, before it was overturned by the Fifth Circuit Court of Appeals in 2018.

Gnashing teeth over the speed of this latest version, which will for the first time subject many agents selling annuities to a fiduciary standard and make it harder for them to earn commissions, risks losing sight of its overall aim – to give Americans better access to quality, conflict-free advice.

The argument that this will have the opposite effect, and price out ordinary people, is more worthy of debate than seething rhetoric about the process being “un-American,” as Finseca CEO Marc Cadin did in a statement. But even that has more than a whiff of self-interest.

The heart of the matter can be located by following the dollars. Morningstar believes this rule will have significant benefits for ordinary investors and save retirement plan participants an estimated $55 billion over the next 10 years in fees. It added that investors rolling over into annuity products could save another $32.5 billion over the same period. This is money that will no longer be flowing into agents’ coffers. It’s no wonder this section of the industry has come out fighting.

The big picture is that if people think they are being ripped off for receiving advice that is not in their own interests, distrust of the entire financial advice industry will fester. The world is more complicated than ever, job security is tenuous for many, and we’re all being told to prepare as if we’re going to live beyond 100. A fiduciary commitment to people’s future should be table stakes.