Charlie Gipple's Big 16 in a DOL Rule - Private Right of Action World

By: Charlie Gipple, CLU®, ChFC®       Senior VP of Sales and Marketing,

Partners Advantage

Questions are whirling around about the upcoming DOL fiduciary rule. Is it really going to go through? Will the new administration make changes?  Can we leave things the way it is now? These are all valid things to consider despite the fact right now the DOL rule goes into effect in April 2017. But what if it remains status quo?

What we need to remember that this is the third time in 11 years the fixed indexed annuity world has been faced with a rule or regulation that would be daunting. All three of these “rules” sought to effectively take the annuity products and plug them into a securities world. The NASD Notice went through in 2005, while the Rule 151A by the Securities and Exchange Commission was vacated in 2010.

Now the industry is faced with the DOL proposing the agents be held to a “fiduciary standard” when working with qualified money; a standard that, up until now, has been largely associated with securities sales via “fee-based advisory” platforms. Furthermore, for indexed annuity sales with qualified money, after April 10, 2017 an agent has to be supervised by a “Financial Institution.” 

What should IMOs and financial professionals ask during this “in-between world” of uncertainty on whether the DOL will go through or not? This is especially stressful for the IMO whether they file to be a “Financial Institution” or not.

Here is my “Big 16” of items an IMO looking to become a financial institution should consider. However, even if the IMO does NOT become a “Financial Institution,” they will likely still need to implement some of the below IF the DOL Rule were to go through. Why? The reason is whatever financial institution the IMO relies on will most likely still hold them accountable for certain things to share the liability in the “Private Right of Action” world.

Big 16 items to Consider:

1. Product platform (those that abide by the “reasonable comp” rule)
2. Agent background checks
3. Field force training on “fiduciary matters”
4. Web-based financial planning tools
5. DOL compliance review for client and agent facing material
6. Best Interest Contract creation
7. Negative Consent: IE. Notice to “retirement investors” of the fiduciary status
8. Fact finding, risk tolerance, software sales system for “uniform” recommendations from client to client with similar objectives
9. Staff and systems for suitability review
10. Email surveillance
11. Website for data retention and disclosures
12. Ongoing compliance (audits)
13. Designate person to identify conflicts of interest
14. Recordkeeping/file retention for six years
15. Primary legal liability
16. Technology for business issuance, review and case management

Looking at this list can be daunting, especially if you implement all of these items. The question for the IMOs is “do I assume the DOL will go through and I invest in this stuff or do I assume the DOL is not going to happen and thus not invest in it at all?”

In reality, every IMO principal needs to consider putting in place some of the “Big 16” items whether or not the DOL rule is vacated or not. Because most likely changes like what’s found in the DOL rule are going to come eventually. It’s where it’s wise to invest into the training resources, technology, compliance, holistic planning, etc. and put them into place no matter what.

This places urgency on many shoulders should the April 10, 2017 date become official. But it’s best to be prepared rather than wishing you had.

Looking to find out more about how Partners Advantage can help you prepare? Contact me at 888-251-5525, Ext. 358.


For financial professional use only. Not for use with consumers.

Discussion of the Department of Labor (DOL) fiduciary rule is based on the information available from the DOL, pending litigations, and other sources deemed to be reliable as of the date this article was written. The views and opinions of author are subject to change as guidance from DOL becomes available and court opinions are published.

This article should not be considered legal advice and is intended for educational purposes only.

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