June 15, 2017
The Department of
Labor Fiduciary Rule (the Rule) went into effect on June 9, 2017. The Rule, by law, requires a higher standard of care for advice given on qualified retirement assets.
The full requirements will go into effect on January 1, 2018, barring further regulatory or legislative changes.
As of June 9th, those who give advice and/or make a recommendation regarding assets in retirement accounts and expect to be compensated based on the advice/recommendation will
be held to the Impartial Conduct Standards, which has three requirements:
- Advice is in the best interest of the customer
- Compensation is reasonable
- Statements about investment transactions, compensation & conflicts of interest are not misleading
During this initial phase-in through the end of the year, the Prohibited Transaction Exemption (PTE) 84-24 can be used to sell traditional fixed annuities, fixed indexed annuities
and life insurance involving qualified retirement assets. Under current law, transactions on or after January 1, 2018, will require additional scrutiny and only traditional fixed
annuities and life insurance can be sold using PTE 84-24. Fixed indexed annuities will need to be sold through a Financial Institution as defined by the Rule using the Best
Interest Contract Exemption (BICE).
PTE 84-24 requires you, the writing agent, to declare to the contract buyer what your relationship is with the insurance company, any conflicts of interest you may have and what
your compensation is. Through the end of the year, most companies are treating this disclosure to the contract buyer as your responsibility. To help you with this requirement
of the new law, we are currently developing a standardized form for your use. Until released, we suggest you use this
form as provided by one of our companies.
Regardless of the form used, you are required to make these disclosures and document that you have done so. Retain a copy in
the client's file and provide a copy to the annuity purchaser if requested. Unless required as part of the suitability paperwork of the insurance company, do not send a copy of
the disclosure with your new business paperwork. When not required, it is for your records only. Additionally, the disclosure must be maintained for six years after the
termination of the involved annuity contract.
Please note that registered representatives should contact their broker/dealer for guidance on sales involving qualified retirement assets.
A large portion of our industry has been slow to react to the initial phase-in of the Rule due to the threat of repeal or change by the Trump Administration. The Administration has
gone on record stating that the Rule will ultimately do more harm than good. But until changes are made (if any), you
must adhere to the Rule as it is Law.
As with all the other challenges brought before our industry, The Brokers Network will be here to guide you as best we can. But please remember, it is your responsibility to make
sure that your product recommendation for an individual's qualified retirement assets is in their best interest and that all required disclosures have been made.
Please refer to the News section of our website for ongoing insurance company updates and
contact us if you have any questions.
800-749-9900, ext. 143
Rex Huffman & Associates, Inc. (dba The Brokers Network) or any of its affiliates are not acting as a Financial Institution as defined by the Department of Labor Fiduciary Rule.
The Brokers Network may provide you sample documentation designed to assist you in your compliance, but will not be responsible for verifying that such documentation was
properly provided, completed, returned or stored. For all transactions written through contractual relationships of The Brokers Network, The Brokers Network will not be
responsible for determining whether a recommendation was made in the client's best interest as required by the Department of Labor Fiduciary Rule.
Reply to this message or contact Kevin McNulty at 800-749-9900, ext. 143, for additional information.
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