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October 08, 2009 at 08:00 PM
The Association for Advanced Life Underwriting wants the House Financial Services Committee to mandate “differentiation” of financial professionals’ roles in the marketplace, rather than “harmonization.”
The AALU, Falls Church, Va., has sent the committee a letter recommending that lawmakers replace “one-size-fits-all” fiduciary standard language in the Investor Protection Act of 2009 draft.
“As life insurance producers, our members strive to decrease the proportion of American who lack life insurance coverage, currently at 40%,” AALU officers write. “It is critical that regulatory reform does not create artificial barriers which interfere with the ability of life insurance producers to help consumer.”
The IPA draft bill was released earlier this month by Rep. Paul Kanjorski, D-Pa., chairman of the committee’s capital markets subcommittee.
The bill draft calls for all sellers of securities to consumers to meet a fiduciary standard of care, meaning that they would have to act in the “best interests of the consumer.”
Today, a fee-based registered investment advisor must meet a fiduciary standard of care.
A broker-dealer that earns commissions and does not take a fee must meet a looser “suitability standard,” and attempt to ensure that any product sold to a consumer is suitable for that consumer.
Currently, consumers have the choice of paying a fee to retain a registered investment advisor on a fiduciary basis to help them with their needs, or utilizing the services of a broker-dealer, who does not charge a fee, but is compensated by securities commissions upon sale of a suitable product to the consumer, the so-called “suitability standard.”
The IPA bill draft also would impose limits on some sales practices, compensation schemes and other arrangements, and it would give the U.S. Securities and Exchange Commission authority to prohibit or restrict use of mandatory pre-dispute arbitration in sales contracts.
