This survey is for entertainment - results are not scientific.
Our blog provides timely analysis, context and commentary on important issues shaping the industry. The blog also is a place to present the role of the agent and the services they provide, and it will cover newsworthy happenings within the association. The blog’s comments section is a place for you to present your ideas and respond to our posts. We look forward to hearing from you!
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Mark Briscoe
Publications Director
NAIFA
Find out more about NAIFA at www.naifa.org
« June 2011 | Main | August 2011 »
Posted at 11:56 AM | Permalink | Comments (2) | TrackBack (0)
The NAIFA Board of Trustees has voted unanimously to recommend that the Financial Industry Regulatory Authority (FINRA) serve as the self-regulatory organization (SRO) to conduct examinations of Securities and Exchange Commission-registered investment advisers.
In response to a directive in the Dodd-Frank Act, the SEC issued a staff study earlier this year about enhancing the investment adviser exam process and offered three options: authorize one or more SROs to examine advisers, impose fees on advisers to fund SEC exams, or authorize FINRA to examine dually registered advisers.
NAIFA believes the most efficient, cost-effective answer is to authorize FINRA to conduct all RIA exams. FINRA is already subject to SEC oversight, and it would be easier for FINRA to expand its current, substantial examination capabilities to cover RIAs than it would be to establish new SROs or significantly increase SEC exam programs.
“NAIFA supports reasonable examinations to ensure that financial professionals are complying with the law. Statistics have made it very clear that investment adviser examinations are not occurring with sufficient frequency. Because NAIFA members are already subject to comprehensive broker-dealer regulations, engaging FINRA to examine SEC-registered investment advisers will be the most efficient option for dually-registered NAIFA Members” said NAIFA President Terry K. Headley.
In written comments to the SEC on a related Dodd-Frank subject, NAIFA reported that FINRA examines 55 percent of broker-dealers each year. In contrast, the SEC has reported that only 9 percent of RIAs face SEC examinations annually and a full one-third of RIAs have never been examined. The SEC has stated that it lacks the necessary funding to effectively increase its oversight and examination of RIAs.
NAIFA’s comments were written in response to the Dodd-Frank requirement that the SEC examine how the suitability standard governing broker-dealers is applied and enforced relative to the fiduciary standard governing investment advisers.
Approximately 27 percent of NAIFA members are investment adviser representatives according to a survey conducted by LIMRA International. Of these, nearly all are dually-registered as registered representatives of broker-dealers, and thus, already subject to FINRA regulatory oversight. Only 1 percent of NAIFA members are registered investment advisers not currently under FINRA’s regulatory jurisdiction.
In addition, most NAIFA members are community-based small business owners, who provide affordable insurance and financial services to the middle-income market. They are also some of the most comprehensively regulated individuals in the financial services industry.
“Our goal in supporting FINRA as the SRO is to achieve efficiencies and avoid unnecessary duplication in the examination of dually-registered NAIFA Members,” Headley said. “Simultaneous broker-dealer and registered investment adviser examinations would be less burdensome and intrusive than having to submit to different exams at different times in order to comply with different regulators. It just makes sense, in order to achieve cost-effectiveness and reduce the potential for an overlapping examination process.”
Additional Resource:
InvestmentNews article on NAIFA's decision.
Posted at 08:25 AM in Compliance, Regulation, Securities | Permalink | Comments (0) | TrackBack (0)
While Congress continues its back-and-forth over the national deficit and debt ceiling, a new survey of NAIFA members reveals that more than three-quarters say clients are worried about their investments because of the issue.
Fifty-four percent of NAIFA members said clients have approached them with questions about the debt ceiling negotiations, and 25 percent they have raised the issue and clients have been concerned. The biggest worry of both advisors and clients, according to the members, is that Congress will not do enough to address the problem and the budget deficit will continue to grow. Some 59 percent of advisors said this was their biggest fear, while 47.5 percent said this was their clients’ biggest fear.
Only 15 percent of advisors said their biggest concern was that taxes would be raised as part of the deal, while 20 percent said this was their clients’ biggest worry.
Posted at 11:30 AM in Securities, Tax Issues | Permalink | Comments (0) | TrackBack (0)
NAIFA and 17 other members of the Coalition to Promote Choice for Seniors have sent a letter to influential members of Congress urging them to reject any proposal that “shifts [health care] costs to seniors with Medigap coverage” and offering data and expertise to educate Congress on Medigap-related issues.
The letter comes as budget woes on Capitol Hill have once again prompted some members of Congress to eye laws restricting Medigap insurance.
The theory is that Medigap coverage encourages seniors to get expensive medical tests and services they would reject if they had to pay part or all of the cost. However the coalition notes in its letter that Medigap carriers do not determine what medical tests and procedures are necessary, but the coverage simply pays expenses for tests and procedures Medicare has approved but does not cover completely. The letter also cites studies showing that the advice of physicians, not cost-sharing considerations, primarily determine courses of treatment once patients enter the health care system.
Approximately 20 percent of Medicare recipients use Medigap plans to budget for out-of-pocket health care costs due to Medicare's limitations and cost-sharing obligations. Senior citizens already spend 15 percent of their income of health care, and eliminating or scaling back Medigap coverage would result in financial hardship for millions of people.
Posted at 12:27 PM in Advocacy, Health Insurance | Permalink | Comments (0) | TrackBack (0)
The National Conference of Insurance Legislators (NCOIL) has formally resolved to support federal legislation that would remove broker and agent compensation from the Affordable Care Act’s medical loss ratio (MLR) calculation. The resolution endorses H.R. 1206, a bipartisan bill proposed by Reps. Mike Rogers (R-Mich.) and John Barrow (D-Ga.) that has more than 100 cosponsors in the House of Representatives.
The NCOIL executive committee approved the resolution July 17 at its summer meeting. The group “strongly urges Congress to enact [the Roger-Barrow legislation]” and calls on state governors, insurance commissioners and legislators to contact their congressional delegations on behalf of the bill.
"NAIFA commends NCOIL for formally joining the growing list of state and federal officials who recognize the need to fix the MLR provision of the health care reform law," said NAIFA President Terry K. Headley. "State legislators are in a good position to know just how much damage the MLR rule is doing to insurance markets, small businesses and individual consumers around the country."
The MLR rule went into effect in January and has had disastrous consequences for professional insurance advisors and their clients. To comply with the MLR, many insurance companies have slashed agent and broker commissions, in many cases by 50 percent or more. Agents have had no choice but to eliminate customer service, reduce staff, and, in some cases, leave the health insurance business.
NCOIL is an influential group that represents state legislators opposed to mounting federal initiatives to preempt state insurance regulation. In a similar move, a committee of the National Association of Insurance Commissioners (NAIC) also recently voiced its support for the Rogers-Barrow bill.
Posted at 02:49 PM in Health Care Reform, Regulation, The Role of the Agent | Permalink | Comments (0) | TrackBack (0)
Bipartisan bills introduced in the House (H.R. 2529) and Senate (S. 1368) yesterday would change a provision in the health care reform law that now requires people who use tax-exempt health savings accounts and flexible spending arrangements to get prescriptions for over-the-counter medications.
NAIFA has long argued that this requirement was counterproductive and supports the effort to repeal it.
The original measure was supposed to lower costs by discouraging people from buying unneeded medicines. However, NAIFA predicted when the measure was first proposed that it would actually increase costs, because patients would be forced to consult their doctors for minor ailments they had previously been able to manage themselves. According to media reports, this has indeed been the case, and doctors have begun to complain that they are seeing patients who schedule appointments solely for the purpose of getting prescriptions for OTC remedies.
The legislation that would remove the prescription requirement was introduced by Sens. Ben Nelson (D – Neb.) and Pat Roberts (R – Kans.) and Reps. Lynn Jenkins (R-Kans.) and Shelley Berkley (D-Nev.).
A White House official said that the administration would evaluate the legislation and is open to ideas that would improve the health care law.
Posted at 12:01 PM in Advocacy, Health Care Reform | Permalink | Comments (0) | TrackBack (0)
Consumers who don’t want to pay upfront fees for investment advisory services (which is most of them according to recent surveys) may soon be out of luck. The Investment News reports that an expected SEC rule that would impose a universal fiduciary duty on all advisors is the driving force behind a trend that has advisors shifting their businesses from commission-based to fee-based accounts.
Unfortunately, the trend flies in the face of consumer preferences. Nearly half of the 7,800 households surveyed recently by Cerulli Associates said they preferred paying commissions for financial advice, compared with just 27 percent who said they would rather pay a fee based on assets. A 2010 LIMRA survey commissioned by NAIFA that asked consumers what they would do if their advisor charged $2,500 upfront for planning revealed a similar theme: 71 percent said they would seek another advisor or go without professional services all together.
Meanwhile, a survey by J.D. Power found that clients typically don’t care whether their advisor is under a fiduciary standard.They are much more concerned about customer service issues, including whether their advisor will communicate openly with them about their finances and investment options and whether the advisor will respond to their questions promptly.
An SEC fiduciary rule could very well end up harming the people it is designed to protect by increasing the costs of financial products and services and limiting investors' choices when it comes to obtaining and paying for financial products and advice. In short, it offers them something they don't want at a price they cannot afford. And it seems highly unlikely that this was a goal of the Dodd-Frank law.
Posted at 07:51 PM in Fiduciary Standard, Regulation, Securities | Permalink | Comments (0) | TrackBack (0)
If health insurance needed another selling point, CBS MoneyWatch.com reports that 93 percent of recent college graduates and 90 percent of college students think a potential mate is more attractive if they have health insurance coverage.
Other findings from the survey by Kelton Research:
Posted at 12:04 PM in Consumer Information, Health Insurance | Permalink | Comments (3) | TrackBack (0)
Middle-income clients of financial advisors have become more interested in products with risk-protection components in the wake of the economic recession, according to a new survey of members of the National Association of Insurance and Financial Advisors. The trend is particularly pronounced among investors nearing retirement age, with more than eight of 10 advisors surveyed saying clients in this group are seeking products that will protect their investment principal in the event of a down market.
According to the survey of 914 NAIFA members, 84 percent say clients nearing retirement age are more interested in products with risk-protection components, while 57 percent say clients under the age of 40 are more interested in those types of products. When asked if the financial crisis has affected the types of products and services their clients are looking for, just 7 percent said the crisis has had no impact on the investment choices of clients nearing retirement age, while 28 percent said it has not affected the choices of clients under age 40.
“Risk management products like annuities have surged in popularity, particularly among older Americans,” said NAIFA President Terry K. Headley. “Clients are more interested than ever in protecting their nest eggs, ensuring that they can retire when they want and guaranteeing a lifetime income.”
The survey also found that four in 10 advisors (44 percent) said their typical client nearing retirement age has less than $500 a month to invest. Of clients nearing retirement age, advisors said the following:
Nearly nine in ten advisors (86 percent) said their clients under the age of 40 have less than $500 a month to invest, according to the survey. Of clients under the age of 40, advisors said the following:
“It is not surprising that most of our members’ clients have less than $12,000 a year to invest,” Headley said. “Many of our members are community-based small business owners who provide affordable insurance and financial services to the middle-income market.” (According to a LIMRA study of NAIFA members, 58 percent of members’ clients have household incomes of less than $100,000, while just 11 percent have household incomes of more than $250,000.)
“These are regular Americans who are working hard to put aside funds to invest for the future financial security of their families,” Headley said. “NAIFA members provide these smaller investors with a place to turn for affordable financial products, services and advice.”
Only 7 percent of advisors said the financial crisis has had no impact on the investing habits of their clients nearing retirement age; 8 percent said these clients generally are no longer interested in investment products.
Attitudes on Fiduciary Duty Studied
Headley said that as the SEC examines how financial regulations are working to protect the investing public, “we need to be aware of the impact a universal fiduciary duty would have on our members’ ability to continue to serve the middle market. Further regulation could increase costs or force more NAIFA members to no longer provide financial products and advice, which would limit the number of consumers who can benefit from our services.”
According to the survey, seven out of 10 NAIFA members with an opinion said a regulation holding registered representatives to a fiduciary standard would not result in those advisors doing a better job for their clients. This reinforces data from the LIMRA survey of NAIFA members in which just one out of five said there would be a “practical difference” in how they would interact with their clients if they were under a legal fiduciary standard.
Meanwhile, 70 percent of NAIFA members said they did not believe clients would abandon advisors working under the suitability standard of care if the clients had a better understanding that those advisors were not bound by a fiduciary duty. An additional 14 percent said they were not sure.
“Clients aren’t concerned about whatever standard of care might be imposed by regulators or legislators,” said Headley. “They want a trustworthy advisor who responds promptly to their concerns and offers a high level of service along with quality products. An imposed universal fiduciary standard that increases costs and eliminates the ability of investors to choose how, and from whom, they receive financial products, advice and services would not be in the best interests of consumers.”
Additional Resources
Posted at 04:13 PM in Annuities, Fiduciary Standard, Regulation, Securities, The Role of the Agent | Permalink | Comments (0) | TrackBack (0)
A recent Government Accountability Office (GAO) report gives a big thumbs up to annuities for people looking to “ensure income throughout retirement.” The report came in response to a request from Rep. Herb Kohl (D-Wisconsin) and other members of Congress to study ways for retirees and future retirees to adjust to changing conditions, including a growing likelihood that they could outlive their savings and the large-scale market shift from defined-benefit pension plans to defined-contribution plans.
Experts consulted by the GEO said a typical retiree should convert part of their savings into an annuity to cover expenses or take their pension as an annuity rather than a lump sum. The report states:
"An alternative to self-managing periodic distributions from savings is to use one’s savings to purchase an immediate annuity from an insurance company that guarantees income for life. An immediate annuity can help to protect a retiree against the risk of underperforming investments, the risk of outliving one’s assets (longevity risk) and, when an inflation-adjusted annuity is purchased, the risk of inflation diminishing one’s purchasing power."
Other benefits of annuities for retirees include:
Posted at 12:16 PM in Annuities, Consumer Information | Permalink | Comments (0) | TrackBack (0)
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