NAIFA Blog: June 2011

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June 2011

June 29, 2011

Rep. Gerry Connolly Visits NAIFA

NAIFA CEO Susan Waters and Rep. Gerry Connolly

Rep. Gerry Connolly (D-Va.) visited NAIFA headquarters in Falls Church, Va., this morning for an informal meeting with NAIFA staff, including CEO Susan Waters and the government relations team. The NAIFA building is in Rep. Connolly’s 11^th congressional district, and a number of NAIFA staff and members are among his constituents.

Waters and the GR team told Mr. Connolly about NAIFA members and the important products and services they provide middle-market Americans. Specifically, they discussed how the current tax status of life insurance and some retirement products and employee benefits is an essential incentive that encourages Americans to provide for their own financial wellbeing.

Mr. Connolly, who said his father was a long-time Met Life agent, told NAIFA staff he believes both Democrats and Republicans must be practical when addressing the nation’s budget and debt problems and cannot be overly bound by ideologies. He said Congress and regulators need to look closely at the laws and rules they impose to ensure well-meaning measures don’t have unintended consequences for average Americans.

Posted at 10:52 AM in Advocacy, Life Insurance, Tax Issues | Permalink | Comments (0) | TrackBack (0)

June 28, 2011

Investors Look to Advisors for Security

While the stock market has recovered, to some extent, from the bleakest depths of the recession, investors remain wary of putting their retirement savings in equities, a new poll by Allianz Life suggests.

More than three-quarters of investors aged 45-75 prefer a product with a projected 4 percent return guaranteed not to lose value over one with a projected 8 percent return with no guarantee on the principal. The findings echo the results of a similar Allianz survey last year, and led study authors to declare that a conservative investing approach is the “new normal” among baby boomers saving for retirement.

The survey results would explain a growing interest in annuity products by investors.

While only 27 percent of investors told Allianz they are currently working with a professional advisor, nearly a third said they are receptive to the idea of working with one, an increase from last year’s survey. Investors most often said they would look to an advisor to “understand the big picture for me financially” and “create more safety and guarantees in my nest egg.”

Posted at 02:21 PM in Annuities, Retirement, Securities | Permalink | Comments (1) | TrackBack (0)

June 23, 2011

We Are Not Alone

NAIFA has consistently said that a poorly conceived universal fiduciary standard imposed on all financial advisors could bring unintended consequences. It could, for example, make financial advice and services more costly or unattainable for the middle market. It could deprive consumers of the ability to choose how they want to pay for those services.

We’ve hardly been alone. Two SEC commissioners have voiced similar concerns, as have members of Congress.

That’s why we’re not sure why the Financial Planning Coalition tried to portray us as an isolated minority during a press call announcing a pro-fiduciary petition signed by a few thousand financial planners.

“There is a small and isolated pocket of opposition from the insurance lobby, particularly NAIFA,” Marilyn Mohrman-Gillis, managing director of public policy and communications of the CFP Board, told reporters during the coalition's call.

NAIFA Vice President of Securities Gary Sanders responded: “We're not trying to scuttle anything. We have raised concerns, and they have not been adequately addressed. A universal fiduciary duty, as they've been describing it, could affect the ability of midmarket consumers not only to afford financial services but also to receive financial advice.”

Others who raise questions about the impacts of a universal fiduciary standard include:

Financial Advisor magazine
JD Power and Associates
Approximately 70% of commentors who responded to an SEC call for comments last year

And while we're not quite ready to say we're in the same camp as Barney Frank on the issue, even universal fiduciary's leading congressional proponent has cautioned the SEC to respect the broker-dealer business model should it decide to write a fiduciary rule.

Posted at 05:11 PM in Fiduciary Standard, Regulation, Securities | Permalink | Comments (0) | TrackBack (0)

While Regulators Consider a Fiduciary Duty, Investors Want Quality Customer Service

Just how important is it to consumers that their financial advisors operate under a fiduciary standard of care?

As it turns out, not very.

A recent J.D. Power and Associates survey of investors found that 85 percent of full-service investors either have not heard of or do not understand the difference between suitability and fiduciary standards. While 57 percent of investors whose advisors have a fiduciary duty said the standard makes them more comfortable, a full 42 percent said it makes them less comfortable.

The Securities and Exchange Commission is currently determining whether to impose a universal fiduciary duty on all advisors, and what that standard might look like, in a move that could have consequences for middle-income advisors.

“While higher levels of satisfaction are generally associated with clients in fiduciary relationships, legislating all advisors to this standard carries an unintended consequence of additional compliance oversight, which could translate into significantly higher costs – likely to be ultimately passed back to consumers,” said J.D. Power Director of Investment Services David Lo.

Lo said that clients are more concerned about having advisors who are good communicators. They want to work with someone who can clearly communicate reasons for investment performance, explain how fees are charged, provide them information on new products and services, and review their strategic plans regularly.

Also important, investors want an advisor who will take their calls and answer their inquiries quickly.

“Proactive outreach from advisors goes a long way in developing the client-advisor relationship, and expectations as far as frequency of contact have increased coming out of the recession,” Lo Said. “Advisors can meet this increased need by utilizing more non-traditional forms of communication, such as email and the firm’s website, which is much more widely accepted by full-service investors of all ages.”

Posted at 04:13 PM in Fiduciary Standard, Securities | Permalink | Comments (0) | TrackBack (0)

Life Insurance as a Way to Give - Reblogged From BusinessWeek

There's a great post on yesterday's Bloomberg Businessweek "Today's Tip" blog:

"Many business owners look for sensible ways to share their wealth with family and/or charities. Life insurance is an often-overlooked way to multiply gift or legacy dollars....

"Life insurance can provide the leverage entrepreneurs are looking for to significantly multiply their gifts to family and charity. Get competent advice and explore the possibilities."

Read the rest at www.businessweek.com

Posted at 10:21 AM in Life Insurance | Permalink | Comments (0) | TrackBack (0)

June 22, 2011

Member of Congress Says MLR Regulation Is Causing a "Desperate Economic Situation" for Agents, Employers and Workers

Rep. Mike Rogers (R-Michigan) has introduced a bipartisan bill along with Rep. John Barrow (D-Georgia) that would remove the compensation of health insurance agents and brokers from the health care reform law's MLR calculation. The MLR is already having devastating effects on agents and brokers and the people who depend on them for quality health coverage.

Last week during a congressional hearing, Rogers made a passionate plea on behalf of brokers and agents and their small business clients.

"[Health insurance brokers and agents] provide incredible value to our health care system and the employer community, especially the small business community," Rogers said. "These agents and brokers are very real people. They’re real business owners; they’re small; they tend to be independently owned. They’re in our communities. And they’re losing jobs today – today – because of this [MLR] rule."

NAIFA supports the Rogers-Barrow bill as a means to stem some of the damage being done by last year's health reform law.

Posted at 11:58 AM in Health Care Reform, The Role of the Agent | Permalink | Comments (0) | TrackBack (0)

June 13, 2011

The Consequences of Health Care Reform

NAIFA President Terry K. Headley explains in a new National Underwriter “Feedback” piece how the medical loss ratio (MLR) provision of last year’s health care law has shrunk brokers’ commissions and made it impossible for many of them to continue vital customer service functions. Terry cites a NAIFA survey that found 75% of brokers have seen commission go down since the MLR went into effect and more than half have seen reductions of 25% or more. Some advisors have had to lay off support staff, curtail the time they spend assisting clients with claims, and in some case even get out of the health insurance business.

Meanwhile, a survey by McKinsey & Company found that because of health care reform “More than 30 percent of employers overall, and 28 percent of large ones, say they will definitely or probably drop [employee health insurance] coverage after 2014.” More than half of companies that say they have a “high awareness” of the health care reform law say they will drop coverage. These figure far surpass estimates by the administration and Congressional Budget Office.

Posted at 08:45 AM in Health Care Reform | Permalink | Comments (0) | TrackBack (0)

June 10, 2011

Studies assess consumer preferences for commissions vs. fees

The results from the Cerulli Associates survey about investors’ preferences for paying a fee vs. commission for financial advice come as no surprise to NAIFA members.

As reported in Investment News, nearly half of the 7,800 households surveyed said they preferred paying commissions for financial advice, compared with just 27 percent who said they would rather pay a fee based on assets. These results are in line with a 2010 LIMRA survey commissioned by NAIFA that asked consumers what they would do if their advisor charged $2,500 upfront for planning: 71 percent said they would seek another advisor or go without professional services all together.

This preference for a commission-based structure may not bode well with the industry trend toward fee-based models (according to the Cerulli survey, 66 percent of advisors were paid by fees in 2010, compared with just 46 percent in 2003.)

NAIFA members are part of the group of advisors who follow the commission-based model. NAIFA President Terry Headley says NAIFA members clients’ – the majority of whom earn less than $99,000 a year – simply can’t afford the thousands of dollars of upfront fees that many investment advisors charge to their wealthier clients.

With the SEC examining how a uniform fiduciary standard of care would work to protect the investing public, NAIFA has stated its concerns that a ‘one-size-fits all’ fiduciary standard will force many consumers into a fee-based model and deprive them of any real choice over how they access financial services.

The Cerulli and LIMRA studies clearly show that consumers seeking financial advice prefer to have a choice. Now is not the time to implement a standard of care that will in the end disenfranchise the middle market by limiting their freedom of choice and access to advice, products, and services that will help protect their financial security.

Posted at 11:29 AM in Advocacy, Business Practices, Fiduciary Standard, Regulation | Permalink | Comments (0) | TrackBack (0)

June 09, 2011

Insurance Customers Want to Buy From Agents

Almost two-thirds of U.S. and Canadian consumers want to work with an agent when purchasing or renewing insurance products, according to a survey by Accenture. Even among 25-to-34-year-olds, who are more comfortable shopping for insurance products online, six out of ten would still prefer to consult a qualified agent.

The number one thing customers look for when choosing an insurance provider is the ability to have problems resolved quickly. Other top considerations are cost and the availability of products that meet their needs.

Still, technology has emerged as an important tool for consumers. More than a third of those aged 25 to 34 said they would consider using social media to research insurance products. Across all age groups, 21% would use social media for research.

Even with the growth of technology, the Accenture survey shows that the role played by insurance agents remains important to a large majority of consumers. Clients want skilled professionals to help them sort through complicated coverage options and help resolve their questions and problems. These are services online distribution channels simply can’t provide.

Posted at 10:01 AM in Business Practices, Life Insurance, Social Media, The Role of the Agent | Permalink | Comments (0) | TrackBack (0)

June 07, 2011

NAIFA CEO Susan Waters Q&A in InsuranceNewsNet

Real challenges face NAIFA members and the insurance and financial industries, but NAIFA CEO Susan Waters explains in a June 2011 InsuranceNewsNet magazine article that NAIFA is working hard to “tell the stories” of agents and advisors so the public and legislators know the crucial role they play and the importance of insurance and other products that help people manage life’s risks.

Susan discusses how NAIFA advocacy is working to head off tax reform proposals that could endanger “the ability of American families and businesses to plan and protect themselves;” how advisors need to “refocus some on risk management and those products that guarantee safety;” and how the industry needs to recruit a new generation of agents and advisors to ensure consumers have access to needed insurance and financial services and advice.

Posted at 03:57 PM | Permalink | Comments (0) | TrackBack (0)

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