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Retirement Planning > Saving for Retirement

NARAB II is needed

By Cathy Weatherford

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Consumers today are looking for guaranteed lifetime income during their retirement years to protect against longevity risk. To help meet this demand, the broker-dealer and financial advisor community must rise to the occasion. Yet the current regulatory landscape includes significant obstacles to broker-dealers’ willingness and financial advisors’ ability to sell lifetime income products. 

Among these barriers, new research from the Insured Retirement Institute (IRI) shows that maintaining state insurance licenses across multiple jurisdictions is considered redundant, burdensome, and an impediment to the sale of retirement income products.

The National Association of Registered Agents and Brokers Reform Act (NARAB II), which was recently reintroduced in the House and Senate, would ease these duplicative insurance licensing burdens on broker-dealers and financial advisors. This bipartisan, common-sense legislation would create a one-stop, national insurance licensing clearinghouse for financial professionals operating in multiple states. Establishing this clearinghouse will allow financial advisors to focus less time and resources on complying with redundant licensing rules and more on meeting their clients’ needs.

IRI study finds regulatory environment burdensome

IRI recently released its regulatory environment study that found consumers are more frequently inquiring about insured retirement products. At the same time, financial advisors and broker-dealers believe selling an annuity takes a considerable amount of time and effort because of regulations and licensing requirements.

The study found that 84 percent of annuity producers reported having more client discussions focused on retirement income planning, and 71 percent of advisors reported having a client request to purchase an annuity in the past year. This is a positive development as IRI research shows that boomers who own annuities have higher confidence in retirement expectations, with nine out of 10 believing they are doing a good job preparing financially for retirement.

Unfortunately, the current system creates obstacles to the sale of insured retirement solutions. The average financial advisor spends nearly 22 hours per year to complete continuing education requirements and licensing renewals to sell annuities — compared to just under 16 hours to complete continuing education requirements and licensing renewals to sell securities. Additionally, seven in 10 broker-dealers believe that state insurance licensing can be ambiguous or poorly defined, and eight in 10 broker-dealers believe that state insurance regulations are duplicative. With 83 percent of advisors being licensed in two to 10 states, redundant procedures quickly become a burden. And for some advisors, the repetition can really add up. For instance, in firms with 500 or more financial advisors, 47 percent have licenses in 21 or more states.

Senate hearing highlights extensive support

The Senate Committee on Banking, Housing, and Urban Affairs’ Subcommittee on Securities, Insurance, and Investment held a hearing on March 19 to discuss the NARAB II legislation. I submitted testimony, on behalf of more than 500 IRI member companies, to encourage its passage. This legislation will streamline agent licensing while maintaining important consumer protections.

Fortunately, there is growing support for moving forward this common-sense bill. Senator Jon Tester (D-Mont.), the chairman of the subcommittee, championed the bill in his introductory remarks, stating that a streamlined licensing process would help agents and brokers save time and money, while ensuring strong consumer protections and preserving states’ ability to supervise the insurance market. His remarks were echoed by Senator Mike Johanns (R-Neb.), who said the legislation promises to reduce administrative burdens and increase access to insurance products.

The bill also enjoys support from the National Association of Insurance Commissioners (NAIC), which was represented at the hearing by NAIC Vice President Monica J. Lindeen, the Montana insurance commissioner. She testified that establishing a streamlined non-resident licensing process is an important goal for state insurance commissioners, who under NARAB II would retain the regulatory authority to protect consumers in their states. She also expressed her hope that the bill will continue to attract bipartisan support and “work its way through the legislative process.”

In total, the bill currently has bipartisan support from 14 senators. Companion legislation in the House has the support of 41 members of Congress. But this is just the beginning. Speak up and tell your representatives that you want NARAB II passed so that financial advisors and agents can focus on their clients’ needs. With your help and support, we can work to advance NARAB II and eliminate redundant and burdensome red tape that is standing between consumers and a secure retirement.

For more from Cathy Weatherford, see:

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