As you know by now, the DOL Fiduciary Rule has been delayed for a shorter period of time than anticipated... This delay has made it even tougher for brokers to plan for the future. Do you really understand what the rule is even about? If you want a very concise explanation of what may happen, you can listen to the following webinar by Todd Berghius, Senior ERISA Counsel from Integrated Retirement by clicking here.
Assuming you listened to the piece, you will probably still have one major question, and that is, "What can I do to be prepared just in case all or part of this rule is upheld?" The best information available to you today is to divide the rule into two parts, the B.I.C. and the B.I.C.E.
The B.I.C. - It seems no one (carriers or associations, legal counsel, etc.) will fight, argue or disagree with the fact that agents should operate in the “best interest of the client”, so most likely anyone who works for commissions is going to have to adjust the way in which they present and track the options they recommend to clients. You are going to have to be able to show the clients risk tolerance, source of funds, financial wherewithal, and even what compensation you will make on the various products you suggest.
In regards to the B.I.C.E, most agree that this is where the problems with the rule really begin to jump out. Who wants or can afford the legal liability of being a “fiduciary”? How can the industry as a whole comply with what the ruling demands regarding leveling all compensation across the board so no one product pays more than the next? The questions like these go on and on.
For right now, let’s start simple, at AMC Life Marketing we are prepared to help you solve both of these problems immediately, if the need arises. Over the next two weeks we will show you how we can help you continue working without interruption no matter which way the DOL decides to go on these two major points. Be ready, keep reading, and we’ll answer all of your questions over the next two weeks!
Diana Britton | Mar 11, 2017
In a field assistance bulletin posted Friday night, the Department of Labor announced a temporary enforcement policy meant to avoid confusion over a proposal to delay its fiduciary rule.
On March 2, the DOL proposed a rule that would delay the fiduciary rule implementation date (April 10) by 60 days. That will give the agency time to collect and consider information related to issues raised in President Donald Trump’s memorandum on the rule. The public has until March 17 to comment on the proposal, and, if passed, the 60 day-delay would begin on the publication date of a final rule. But April 10 is fast-approaching, and it’s unknown whether the department will finalize the delay by then.
“Although the Department intends to issue a decision on the March 2 proposal in advance of the April 10 applicability date, financial services institutions have expressed concern about investor confusion and other marketplace disruption based on uncertainty about whether a final rule implementing any delay will be published before April 10, whether there may be a ‘gap’ period during which the fiduciary duty rule becomes applicable before a delay is published after April 10, or whether the Department may decide either before or after April 10 not to issue a delay based on its evaluation of the public comments,” writes John J. Canary director of regulations and interpretations, in the bulletin.
In the first part of the temporary policy, the department says that even if April 10 comes around and a delay hasn’t been finalized, they will not pursue enforcement actions against advisers or financial institutions who fail to satisfy the conditions of the rule or prohibited transaction exemptions. If an adviser fails to provide a client with a disclosure document, for example, they won’t be subject to disciplinary action.
In the second part of the temporary policy, if the DOL decides not to issue a delay and it is past April 10, the department will not pursue enforcement action for violations of the rule “within a reasonable period after the publication of a decision not to delay the April 10 applicability date.”
And if the department makes a decision on proposed delay and that causes more confusion, the agency will consider additional temporary relief, the bulletin said.
John Canary continued, “It has been the Department’s longstanding commitment to provide compliance assistance to employers, plan sponsors, plan fiduciaries, employee benefit plan officials, and financial services and other service providers so that the fiduciary duty rule and exemptions are implemented in an efficient and effective manner."
MAR 09, 2017 | BY TAYLOR BOYD
For many Americans, Wall Street is perceived as a confusing and mysterious world of fluctuating stock prices, complicated fiscal equations and, most importantly, incredibly high risk.
And why shouldn’t this be so?
After all, portfolio management is not something taught in mainstream scholastic curriculum, and the topic of money and financial matters are often shied away from in the home. After years of working towards a comfortable retirement, many pre-retirees would prefer to avoid investing altogether out of fear of losing their hard-earned retirement dollars. In fact, many Americans have a mutually exclusive view of risk: Either it’s invested and risky or in cash and safe. There are, however, many varying scenarios, and a properly diversified portfolio can focus on mitigating risk and increasing return.
When evaluating whether to invest or avoid the markets, most people — and the markets themselves — are subconsciously driven primarily by two emotions: fear and greed. When investors compete to buy a possibly scarce resource such as a specific market commodity, prices rise sharply with greed in control. On the other hand, when fear is the dominant force due to uncertainty over future outcomes, people cash out in haste or stop investing altogether, which causes markets to dive and crash. This all-or-nothing attitude almost makes Wall Street feel like a giant gambling casino, where one can win big or lose big, without any possibilities in between. But what about winning small? Or medium? With a much broader spectrum of winning and losing, every investor would do well to focus instead on developing a portfolio where the potential volatility is within an accepted comfort range. This minimizes the chance — through any market cycle — of becoming anxious and going to cash, which over the long-term reduces the probability of meeting retirement goals.
For a financial advisor, evaluating the client’s tolerance for risk is one of the first hurdles to clear when strategizing a financial plan for any portfolio. Higher risks yield higher returns but carry the weight of potential high losses, while low-risk investing offers less return but invariably more peace of mind. The volatility of a portfolio can be measured using standard deviation, or the measure of dispersion of a set of data points from its mean. For example, a volatile small cap stock may have a high standard deviation, while the deviation of a stable large company stock is generally lower.
Here are a few tips to consider:
The bottom line is that no one needs to go at it alone. Particularly for investors who don’t have the time, energy or desire, or don’t feel that they can keep their emotions out of the decision-making process, hiring a professional will help them navigate their financial future — and stay sane. It’s important to review an advisor’s background and credentials and request a list of references, all of which will help with the due-diligence process. It’s also essential to feel comfortable sharing thoughts and concerns and, above all, enjoy the process. Investing for retirement doesn’t have to feel as if it’s a game of chance, like the spin of the roulette wheel or the roll of a dice. It should be well thought out, organized and calculated, with the estimated cost of retirement at the core. By identifying long-term income needs based on an intended lifestyle, an experienced advisor can help anyone at any level develop a sound investment strategy that is realistic and on target to land on the right numbers.
*Past performance does not guarantee future results.
From The New York Times
By ROBERT PEAR and THOMAS KAPLAN
WASHINGTON — House Republicans unveiled on Monday their long-awaited plan to repeal and replace the Affordable Care Act, scrapping the mandate for most Americans to have health insurance in favor of a new system of tax credits to induce people to buy insurance on the open market.
The bill sets the stage for a bitter debate over the possible dismantling of the most significant health care law in a half-century. In its place would be a health law that would be far more oriented to the free market and would make far-reaching changes to a vast part of the American economy.
The House Republican bill would roll back the expansion of Medicaid that has provided coverage to more than 10 million people in 31 states, reducing federal payments for many new beneficiaries. It also would effectively scrap the unpopular requirement that people have insurance and eliminate tax penalties for those who go without. The requirement for larger employers to offer coverage to their full-time employees would also be eliminated.
People who let their insurance coverage lapse, however, would face a significant penalty. Insurers could increase their premiums by 30 percent, and in that sense, Republicans would replace a penalty for not having insurance with a new penalty for allowing insurance to lapse.
House Republican leaders said they would keep three popular provisions in the Affordable Care Act: the prohibition on denying coverage to people with pre-existing conditions, the ban on lifetime coverage caps and the rule allowing young people to remain on their parents’ health plans until age 26.
Republicans hope to undo other major parts of President Barack Obama’s signature domestic achievement, including income-based tax credits that help millions of Americans buy insurance, taxes on people with high incomes and the penalty for people who do not have health coverage.
Medicaid recipients’ open-ended entitlement to health care would be replaced by a per-person allotment to the states. And people with pre-existing medical conditions would face new uncertainties in a more deregulated insurance market.
The bill would also cut off federal funds to Planned Parenthood clinics through Medicaid and other government programs for one year.
“Obamacare is a sinking ship, and the legislation introduced today will rescue people from the mistakes of the past,” said Representative Kevin McCarthy of California, the majority leader.
Democrats denounced the effort as a cruel attempt to strip Americans of their health care.
“Republicans will force tens of millions of families to pay more for worse coverage — and push millions of Americans off of health coverage entirely,” said Representative Nancy Pelosi of California, the Democratic leader.
Two House committees — Ways and Means and Energy and Commerce — plan to take up the legislation on Wednesday. House Republicans hope the committees will approve the measure this week, clearing the way for the full House to act on it before a spring break scheduled to begin on April 7. The outlook in the Senate is less clear. Democrats want to preserve the Affordable Care Act, and a handful of Republican senators expressed serious concerns about the House plan as it was being developed.
Under the House Republican plan, the income-based tax credits provided under the Affordable Care Act would be replaced with credits that would rise with age as older people generally require more health care. In a late change, the plan reduces the tax credits for individuals with annual incomes over $75,000 and married couples with incomes over $150,000.
Republicans did not offer any estimate of how much their plan would cost, or how many people would gain or lose insurance. The two House committees plan to vote on the legislation without having estimates of its cost from the Congressional Budget Office, the official scorekeeper on Capitol Hill.
But they did get the support from President Trump that they badly need to win House passage.
“Obamacare has proven to be a disaster with fewer options, inferior care and skyrocketing costs that are crushing small business and families across America,” said the White House press secretary, Sean Spicer. “Today marks an important step toward restoring health care choices and affordability back to the American people.”
The release of the legislation is a step toward fulfilling a campaign pledge — repeal and replace — that has animated Republicans since the Affordable Care Act passed in 2010. But it is far from certain Republican lawmakers will be able to get on the same page and repeal the health measure.
On Monday, four Republican senators — Rob Portman of Ohio, Shelley Moore Capito of West Virginia, Cory Gardner of Colorado and Lisa Murkowski of Alaska — signed a letter saying a House draft that they had reviewed did not adequately protect people in states like theirs that have expanded Medicaid under the Affordable Care Act.
Three conservative Republicans in the Senate — Mike Lee of Utah, Rand Paul of Kentucky and Ted Cruz of Texas — had already expressed reservations about the House’s approach.
In the House, Republican leaders will have to contend with conservative members who have already been vocal about their misgivings about the legislation being drawn up. “Obamacare 2.0,” Representative Justin Amash, Republican of Michigan, posted on Twitter on Monday.
Representative Mark Meadows, Republican of North Carolina and the chairman of the conservative House Freedom Caucus, also offered a warning on Monday, joining with Mr. Paul to urge that Republican leaders pursue a “clean repeal” of the health care law.
“Conservatives don’t want new taxes, new entitlements and an ‘ObamaCare Lite’ bill,” they wrote on the website of Fox News. “If leadership insists on replacing ObamaCare with ObamaCare-lite, no repeal will pass.”
The move to strip Planned Parenthood of funding and the plan’s provisions to reverse tax increases on the high-income taxpayers will also expose Republicans in more moderate districts to Democratic attacks.
The bill would provide each state with a fixed allotment of federal money for each person on Medicaid, the federal-state program for more than 70 million low-income people. The federal government would pay different amounts for different categories of beneficiaries, including children, older Americans and people with disabilities.
The bill would also repeal subsidies that the government provides under the Affordable Care Act to help low-income people pay deductibles and other out-of-pocket costs for insurance purchased through the public marketplaces. Eliminating these subsidies would cause turmoil in insurance markets, insurers and consumer advocates say.
However, the House Republicans would provide states with $100 billion over nine years, which states could use to help people pay for health care and insurance.
The tax credits proposed by House Republicans would start at $2,000 a year for a person under 30 and would rise to a maximum of $4,000 for a person 60 or older. A family could receive up to $14,000 in credits.
Even with those credits, Democrats say, many people would find insurance unaffordable. But Republicans would allow insurers to sell a leaner, less expensive package of benefits and would allow people to use the tax credits for insurance policies covering only catastrophic costs.
While Republicans have argued over how to proceed, Mr. Trump has expressed only vague goals for how to repeal the Affordable Care Act and improve the nation’s health care system. On Capitol Hill, lawmakers and their aides are waiting to see whether he uses his platform, Twitter account and all, to press reluctant Republicans to get behind the House plan.
The new version of the House Republican bill makes several changes to earlier drafts of the legislation.
It drops a proposal to require employees with high-cost employer-sponsored health insurance to pay income and payroll taxes on some of the value of that coverage. In addition, it would delay a provision of the Affordable Care Act that imposed an excise tax on high-cost insurance plans provided by employers to workers.
Congress had already delayed this “Cadillac tax” — despised by employers and labor unions alike — by two years, to 2020. The new legislation would suspend the tax from 2020 through 2024.
House Republicans would offer tax credits to help people buy insurance if they did not have coverage available from an employer or a government program. Under earlier versions of the bill, the tax credits increased with a person’s age, but would not have been tied to income. Backbench Republicans said the government should not be providing financial assistance to people with high incomes.
Accordingly, under the new version of the bill, the tax credits would be reduced and eventually phased out.
By Mark Schoeff Jr.
The Office of Management and Budget concluded its review of a rule that would delay the implementation of the Department of Labor's fiduciary rule.
In a posting on its website on Tuesday morning, the OMB also noted that it has changed the designation of the delay to "economically significant," a more rigorous category than the previous not econonomically significant label that it carried when the delay was submitted to OMB by the DOL.
The change in the economic-impact of the delay's status occurred after several proponents of the DOL fiduciary met with OMB officials over the last two weeks.
The higher designation could mean that the delay rule would require a longer comment period. The DOL has not yet determined when it will release the delay rule. It is expected to carry at least a two-week comment period.
The DOL fiduciary rule, which would require all financial advisers to act in the best interests of their clients, has an initial implementation date of April 10. The DOL is seeking a delay, which could be for 180 days, after President Donald Trump instructed the agency to reassess the rule and modify or replace it if it is determined to cause harm to investors or firms.
The finanical industry argues that the rule is too complex and costly and will price investors with modest assets out of the advice market. Backers of the rule say that it is required to protect workers and retirees from conflicted advice that results in the purchase of inappropriate high-fee investments that erode savings.
Earnings season continues
FEB 24, 2017 | BY ALLISON BELL
Scott Flanders, the chief executive officer of eHealth Inc., said today that he thinks the Trump administration wants to shut down HealthCare.gov
Former President Barack Obama's U.S. Department of Health and Human Services set up HealthCare.gov to provide Affordable Care Act exchange administration services for states that are unwilling or unable to handle ACA exchange enrollment services themselves.
"I've heard from two senior officials in the administration that it is their ambition to shut down HealthCare.gov," Flanders told securities analysts today during conference call.
Even if HealthCare.gov continues to operate, it might become a health plan information site, rather than an enrollment and e-commerce site, Flanders said. Once more people realize that running HealthCare.gov costs $1.9 billion per year, pressure to revamp it is likely to increase, Flanders predicted.
Flanders' company, the Mountain View, California-based parent of eHealthInsurance.com, held the conference call to go over fourth-quarter earnings. The company reported a net loss of $17 million for the quarter on $44 million in revenue, compared with a net loss of $12 million on $50 million in revenue for the fourth quarter of 2015.
The number of relationships with Medicare plan enrollees increased 33 percent, to 304,900, but the number of relationships with users of commercial individual major medical coverage fell 28 percent, to 360,600.
Flanders said policymakers have to make big changes soon if they want to see insurers offer commercial individual coverage in 2018.
The market has started to collapse, and the collapse is accelerating, Flanders said. Already, he said, eHealthInsurance.com has no individual products to offer consumers in some markets.
Carriers are still leaving the individual market, and some of the remaining players have stopped paying commissions on sales of individual products because the business is so unprofitable, Flanders said.
"If no action were to be taken in this market, there won't be one for the 2018 enrollment year," Flanders said. But Flanders said he is optimistic about how the Trump administration will respond to the problems.
The administration is "highly oriented to eliminating waste and government interference with the private sector," Flanders said.
Managers of HealthCare.gov have had a complicated relationship with web brokers, and Flanders said a shift of HealthCare.gov out of the health insurance sales business should be good for eHealth. For now, Flanders said, eHealth is trying to focus on increasing sales of Medicare plans and of coverage to employers with 20 or fewer employees.
By Warren S. Hersch
Critics are hoping the revisions will be significant
President Trump’s flurry of executive actions since taking office is upending the established order in the nation’s capital. Financial services professionals have a huge stake in the outcome for two of them.
Those executive orders — one calling for an “updated economic legal analysis” of the Department of Labor’s fiduciary rule, the other detailing “core principles” that could gut the Dodd-Frank Wall Street Reform and Consumer Protection Act of 2010 — have unsettled federal oversight of financial services to a degree unseen since the end of the 2007-2009 downturn.
For industry stakeholders, the actions bring a welcome respite from impending regulatory changes for which many were ill-prepared.
That’s notably true in respect to the fiduciary rule, which was due to be phased in beginning on April 10. The myriad requirements of the DOL “conflict of interest rule,” stretching to 1,000-plus pages, had called into question business development plans for players throughout the distribution channel.
As expected, the Department of Labor filed a notice Thursday with the Office of Management and Budget to delay implementation...
“The executive order [respecting the rule] is a positive development because much of the industry wasn’t ready for the April 10 applicability date,” says Jason Smith, founder and chairman of Clarity 2 Prosperity, a Westlake, Ohio-based independent marketing organization. “Business partners I’ve spoken with — advisors, broker-dealers, and other IMOs — had all halted or substantially slowed their development efforts. The delay was definitely needed.”
Putting the rule on hold
The DOL filed on February 9 a Notice of Proposed Rulemaking with the Office of Management and Budget to delay the fiduciary rule’s implementation. The OMB’s review of the notice, expected to last 14 days before being approved and published in the Federal Register, doesn’t stipulate a new implementation date. But market-watchers anticipate a delay of up to 180 days, which would shift the original phase-in from April to October 2017. Whether the DOL thereafter elects to revise or repeal the rule may hinge, in part, on recent court rulings, all of which have sided with the DOL’s position on the rule under the Obama administration.
AUG 30, 2016 | BY GREGORY E. SCHWABE
Here's how to reach some of the prospects you may not have considered
If your prospecting is mainly with the age 55-80 group, you know it’s not what it was even a few years ago. “Almost tapped out” is the way some advisors are describing it.
If your practice is feeling that pain, there’s a way to reach a broader, motivated and largely untapped audience: Consumers age 36-55.
You can do it with Indexed Universal Life (IUL) insurance policies. What grabs the attention of this age group is the concept of a “tax-free retirement.”
Unlike IRAs and other qualified retirement accounts, there are few cap limits on IUL contributions. Essentially, this means your clients can invest as much as they want into IUL savings vehicles.
These accounts not only help them hedge any risks associated with their retirement savings; they also offer your clients the potential of having tax-free distributions in retirement. The higher contributions are not only wonderful news for your clients, but you can also benefit from a greater earning potential based on the regular and automatic deposits they make to these accounts.
IUL opens up more sales opportunitiesAs you know, IUL is experiencing double-digit growth in the insurance and financial services industry. Continue reading to find out why.
The growth that these types of policies are experiencing is so significant, you can be sure that if you’re not selling IUL, the competition is out there getting the business.
Here are some of the ways you could be pitching IUL to new prospects:
Even at a lower rate of return, the values are far better than nearly all GULs on the market. Would a client trade the handcuffs that most GULs come with for a few less years of guarantees and the future flexibility than an IUL offers? It has been said this product offers “optionality,” the flexibility of deciding how to use it in the future without having to make any decisions today.
Continue reading to learn by many advisors now prefer IUL over mutual funds.
Why do accountants and advisors often prefer IUL?Here's why:
It’s easy to understand why IUL is setting sales records, particularly with 36-55 year old prospects. They’re motivated consumers who take retirement seriously and want to do all they can to maximize their assets. While IUL may not fit every prospect, the opportunities are enormous.
BY ALLISON BELL
A team at the National Association of Insurance Commissioners is working on an update of the standard Life Insurance Buyer's Guide.
The NAIC's Life Insurance Buyer's Guide Working Group held one conference call meeting on the topic earlier this month and scheduled a second conference call meeting for Feb. 7.
The group has posted an example of a life insurance calculator on its section of the NAIC's website, a consumer guide prepared by the American Council of Life Insurers, and one regulator's proposed revision of the existing NAIC guide.
Related: Life buyer's guides are a compliance maze
The NAIC is a Kansas City, Missouri-based group for state insurance regulators. It has no direct authority to change state insurance regulations and procedures, but states can choose to use NAIC models as the basis for creating their own laws, regulations, consumer publications and technical guidance materials.
Regulators have been talking about updating the buyer's guide at NAIC meetings for months.
In April, for example, participants in a Life Insurance and Annuities Committee session at an in-person NAIC meeting in New Orleans said the American Academy of Actuaries wanted to see the NAIC rewrite the guide. The ACLI told the committee it would not necessarily mind seeing the NAIC rewrite the guide, according to the meeting minutes.
Some regulators and consumer group reps have talked about wanting to update the guide to modernize it and make it more useful to consumers.
Birny Birnbaum, a consumer rep with the Center for Economic Justice, said he would like to see the guide contain more plan-specific information.
A deferred annuity buyer’s guide roundup
Nebraska commissioner to lead NAIC life committee