Approved FINRA VA Rule Draws Reaction

Attendees at two major national meetings offered their reaction to approval of a variable annuity sales practice rule by the U.S. Securities and Exchange Commission.

On Sept. 7, the SEC approved the rule proposed by the Financial Industry Regulatory Authority, Washington (see above story.)

Both attendees at the annual convention of National Association of Insurance and Financial Advisors, Falls Church, Va., and the annual meeting of the NAVA, Inc., Reston, Va., offered their thoughts on the issue.

At the NAIFA convention, Jim Eaton, agent emeritus with Prudential Financial, Newark, N.J., responded, “We [as an industry] are already doing this through self-regulation. The companies we deal with look at our business, our asset allocations, client’s age, among other factors, and decide whether a VA is suitable. This [FINRA] rule is not necessary at all. It’s probably aimed at the smaller companies that maybe don’t have the background and resources to [evaluate product suitability]. Advisors are already being trained this way [i.e., evaluate suitability]. You hardly ever see anyone not [following the new rule's provisions].”

“It’s very possible that the new FINRA rule may conflict with the NASD and SEC rules that we already have to comply with,” Robert Smith, a financial advisor with Northwestern Mutual Financial Network, Grand Rapids, Mich., offered. We’re really frustrated with inability to get simplification of the regulations to provide consistency while insuring that the consumer is protected.

“I don’t agree [FINRA's view that self-regulation has not been effective]. Our carriers’ compliance requirements with respect to suitability are mandatory. This rule is unnecessary and (a) can be redundant; (b) inconsistent [with existing regulations]; and (c) it creates a third layer of bureaucracy that advisors have to contend with. I say, let the government get its act together; tell us what to do and provide us with consistent standards so that we can work within the framework of the rules. We certainly don’t want to see the consumer injured.”

“I think the rule may be a bit much,” says Michael Castle, a financial representative with Northwestern Mutual Financial Network, Mason City, Iowa.

“My company already follows these provisions pretty closely. In two cases, I had what I thought were very appropriate VA sales but couldn’t process [because of my company's existing suitability requirements]. Right or wrong, it was frustrating as an agent because I felt I was doing the right thing for the clients. And they weren’t happy with the situation. I think it’s very hard for someone who has never had a client and who doesn’t know anything about them to make a good determination as to what is an appropriate sale based on whatever very limited information actually comes with the [VA] application.

“So I feel the [FINRA] rule is unnecessary. Again, my company [Northwestern Mutual] is already following the rule’s four requirements. The company is very proactive on compliance issues.