The B Team: Insurers Delay Fiduciary Standard

It seems I may have been a bit hasty in my assertion that SIFMA was behind the amendment by Senator Tim Johnson (D-South Dakota) that back-burnered the fiduciary duty out of the Senate’s version of financial services reregulation. Apparently, it’s the insurance lobby that has the good Senator’s ear. To my mind, that’s both good news and bad news.

The bad news is that, despite AIG’s problems, the insurance industry emerged from the 2008 Mortgage Meltdown with far less egg on its collective face than did its Wall Street counterparts. Which means that the larger insurers undoubtedly still have considerable political capital in Washington which they have never been bashful about using when they feel threatened. As you may have heard, the insurance industry does not like this whole fiduciary thing one tiny bit.

The good news is that over the years, the insurance folks have never really seemed as, well, sophisticated as the securities guys. This rereg battle seems to be no exception. For example, here’s how Thomas Currey, president of the National Association of Insurance and Financial Advisors (NAIFA) explained his industry’s opposition to a fiduciary duty, as quoted in the Washington Post on March 7: “Most of us operate under contracts with a broker/dealer or insurance company, and you have an agreement that you’re going to look out after the interests of the company.” A fiduciary duty “puts a person with a contract like that in a really untenable situation. There is really no way you can equally serve those purposes.”