Industry Reps Say Companies Not Inflating Harm of DOL Rule
February 16, 2016 by Frank Klimko, Washington correspondent, BestWeek: frank.klimko@ambest.com
WASHINGTON – Insurers and industry representatives rebuffed lawmaker accusations that financial services firms are overstating how a proposed fiduciary conflict-of-interest rule would destabilize the market and make it harder to provide adequate retirement advice to consumers.
In a letter to U.S. Labor Secretary Thomas Perez, U.S. Sen. Elizabeth Warren, D-Mass., and U.S. Rep. Elijah Cummings, D-Md., accused companies of claiming calamity from the proposed rule and then painting a more hopeful picture during investment calls.
The American Council of Life Insurers said companies have been transparent in their message about the proposed rule, which the ACLI said would impose unworkable standards on investment advisers.
“ACLI and its member companies have been clear and consistent,” the ACLI said in a statement. “While life insurers may have no choice but to conform to the Labor Department’s final fiduciary regulation, the proposal as drafted would hurt lower- and middle-income consumers preparing for retirement.”
If implemented as proposed, the group worried they would see substantial decreases in such areas as savings due to lack of access to investment, the number of small business employee-retirement plans and annuity options available in the workplace.
“ACLI agrees that financial professionals should work in consumers’ best interest,” the ACLI said, “but Americans’ best interest will not be served by a regulatory scheme that hinders access to the advice and products that they want and need.”
In their letter, the lawmakers singled out 2015 earnings calls made by Lincoln Financial Group and Prudential Financial Inc.
“In contrast to their public doomsday predictions, industry leaders have told their own investors that they ‘don’t see this as a significant hurdle,’” the letter said, “and that they are well-positioned to ‘adapt to any regulatory framework that emerges.’”
During investors calls, firms must abide by strict legal requirements about the challenges they face, the lawmakers said.
“Publicly traded companies are rarely held accountable for the assertions they make when lobbying in Washington, even if those assertions are untrue,” they wrote. “But when communicating with investors, publicly traded companies are required by law to provide full and accurate information.”
There was no conflict between the public and private comments, said Scot Hoffman, Prudential vice president, head of communications, corporate.
“As we have said consistently, the Department of Labor fiduciary rule could have the unintended consequence of limiting client access to financial advice and retirement solutions,” Hoffman told Best’s News Service. “We have a business mix and business strategies that enable us to navigate that potential disruption better than most of our competitors, but that does not lessen our concerns about unintended consequences for American households.”
Michael Arcaro, Lincoln vice president and head of corporate communications, was equally adamant the company was not trying to mislead anyone.
“We also stand by our comment letters to the DOL, in which we voiced support for the best interest standard and requested two minor improvements,” Arcaro told Best’s News Service. “These changes will prevent the potentially negative impact that the rule may have on middle-class Americans’ ability to obtain much-needed guaranteed lifetime income that is provided by variable annuities.”
Arcaro noted during the fourth-quarter investor call, officials said the company has only about 30% in variable annuities products that would be impacted by the DOL proposal.
“If necessary, Lincoln can pivot to other products that are not affected by the DOL rule, further reducing our dependence on the impacted sales,” Arcaro said. “The products that Lincoln would pivot toward, however, may not provide the same flexibility and opportunity for growing income as variable annuities, impacted by the rule.”
A House committee earlier this month approved a pair of industry-backed bills to modify the pending rule. It just moved to the Office of Management and Budget for a last-stage regulatory review before it becomes final (Best’s News Service, Feb. 2, 2016).
