CHICAGO -- “We are not going to default on our debt, but we are certainly in for some tumultuous times,” political affairs expert Andy Friedman told attendees at the Insured Retirement Institute’s annual Vision conference in Chicago this week.

While the coming fiscal debate looms in the background -- along with probable accompanying market volatility -- there are a number of other possible legislative and regulatory items that also affect the insurance and advisory industry.

According to IRI President and CEO Cathy Weatherford and general counsel Lee Covington, there are at least four major legislative and regulatory issues that advisors should be on the lookout for in the months ahead.


While IRI opposes fiduciary reform under Dodd-Frank, the advisors speaking on a panel at the conference say they generally support it.

“Complying is clearly more difficult and with the additional 1,200-plus regulations from Dodd-Frank, it will be even more so,” says Chicago-based UBS Financial Services advisor John Jacobs, exaggerating for effect, regarding the effects of regulation on advisors’ practices. But he still sees it as a positive for clients: “We don't like having to do it, but at end of the day it helps our industry in the eyes of the people who are our clients.”

IRI and other major players in the financial services industry argue that it will become too costly for firms to continue serving low-end to mid-market investors effectively. “All indications are that the small investor is not going to receive the same kind of advice because they're not going to pay for it, it’s going to cost too much under the rule,” says Covington.

Covington acknowledges that fiduciary reform would have less impact on fee-based advisors than on registered representatives compensated based on commissions.  


As legislators look for ways to reduce the deficit, “everything’s on the table,” Weatherford says.

Tax deferrals for annuities and retirement products represent a large tax expenditure, along with the mortgage interest-deduction, the charitable deduction and the employer health insurance deduction, Covington notes. Yet eliminating or reducing tax deferral properties in retirement products means many Americans will save less or not at all, he says.

IRI has been lobbying against reductions in or eliminations of the tax deferral properties of annuity and other retirement products. “We’ve engaged in a very aggressive education effort to educate members of Congress about how these tax reform efforts affect their constituents,” Covington says.

“Now is not the time to do tax reform on the backs of middle income Americans,” he adds.

And while tax deferral may not be the primary reason an advisor chooses a particular product or strategy, it is certainly a consideration in a retirement savings strategy, Weatherford says. “And we certainly know that maintaining tax deferral for our products is powerfully important for our clients.”


There are a few possible regulatory changes under consideration that would affect qualified plans, Covington says. Among them:

  • The Treasury Department’s proposed rule regarding longevity annuities would allow 25% of the account value, or $100,000, to be excluded in calculations of the required minimum distribution in retirement accounts, so “you have a pot of money that you can use for that longevity risk,” Covington says.
  • Treasury’s proposed partial annuitization rule, now under consideration, would allow consumers to choose to annuitize a portion of their account value as opposed to taking out the entire account.
  • A pair of efforts -- one from the Department of Labor and another, the Lifetime Income Disclosure Act, making its way through Congress -- would offer clients more information about retirement income. Both are aimed at requiring retirement plan sponsors to include on participant statements an annuity equivalent, showing how the account value would convert into a lifetime income stream, Covington says.


The National Association of Registered Agents & Brokers Act of 2013 (dubbed NARAB II) has gone to the Senate after being passed twice in the House. The bill would create a single, nationwide licensing entity for agents/brokers. 

Advisors have become increasingly mobile in their practices, serving clients in multiple states. According to Covington, the average advisor is licensed in eight states. Passage of NARAB II would eliminate some of the “administrative burden” for advisors and insurance agents, he says, but adds that it would not decrease regulation and would preserve all consumer protections.

“We’re thinking we might see it pass the Senate this fall,” Weatherford says. “Our hope is that by 2014 they will be enacting a new national licensing system law.”

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