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.