Retirement Savers Need Access To, and Information About, Annuities
ACLI is committed to a uniform, harmonized best interest standard of care for annuities and securities transactions across all state and federal regulatory platforms for financial services firms and financial professionals.
The standard ACLI supports will enable retirement savers at all income levels to maintain access to, and information about, annuities, the only financial products in the private marketplace that can guarantee lifetime income.
According to the latest available data, the median annual household income of annuity owners is $64,000. Eighty percent have total annual incomes below $100,000 and more than a third (35 percent) have household incomes less than $50,000.
Experience with the Department of Labor’s now-vacated investment advice fiduciary regulation showed that when faced with a fiduciary standard, many financial firms moved to a fee-for-service-only model, eliminating commission-based services relied upon by small and moderate balance savers and typical buy-and-hold investors. As a product that is designed as a long-term retirement solution, most annuities are sold on a commission basis.
According to a LIMRA survey, if the Labor Department’s fiduciary regulation had remained in-force, 54 percent of advisors might have dropped or turned away small investors, resulting in as many as 4 million middle-market households losing access to information they need to ensure a secure retirement.
ACLI supports rules requiring all financial professionals, when making a recommendation, to act with care, skill, prudence, and diligence based on the retirement saver’s financial needs and objectives and to avoid or reasonably manage conflicts of interest.
This is consistent with National Association of Insurance Commissioners (NAIC) and Securities and Exchange Commission (SEC) initiatives under way. ACLI efforts for increased transparency include the disclosure of:
• All material conflicts of interest;
• The types and scope of services provided; and
• The types of compensation to be received by the financial professional or that the consumer may pay as due to the recommended transaction.
ACLI’s proposal builds on the strong consumer protections in place today, which, in many states, include a requirement that annuity purchasers be provided a buyer’s guide, written in plain English. Many states also require that buyers be granted a “free-look” period during which they can reverse a purchase and get their money back if they change their mind.
Strong consumer protections and a long history of commitment to retirement savers helps explain why Americans rely on life insurers, insurance agents and other financial professionals to help them achieve financial security in retirement. Adoption of fiduciary standards will cause unintended but adverse consequences for consumers. It will also result in a patchwork quilt of state and federal laws and regulations that will spread uneven protections across the country and across the retirement plan marketplace, jeopardizing retirement savers’ ability to obtain long-term financial peace of mind.
ACLI is offering a better alternative. We believe strongly that retirement savers must have certainty that financial professionals are acting in their best interest when recommending annuity products.