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TPA principal lauds new fee disclosure rules at MDRT

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At the 2014 MDRT annual meeting in Toronto, NU Senior Editor Warren S. Hersch secured an interview with Michael Weintraub, president of the Retirement Plan Division of Ascension Benefits & Insurance Solutions, based in Walnut Creek, Calif. The following are excerpts of the interview.

Hersch: Why do you find the MDRT annual meeting valuable to attend? What do you hope to take away from this year’s show?

Weintraub: Our practice doesn’t just sell products. We’re also a third-party administrator or TPA that manages qualified plans for business clients. There’s always something new to learn — at the main platform, afternoon workshops and when networking with advisors who share our practice focus.

There’s a wonderful sharing of ideas at the annual meeting — I think of it as a big fraternity or study group — which we don’t always see at other trade show gatherings. Given the regulatory and legislative changes in recent years, an evergreen topic of conversation is how best to serve clients while remaining in compliance with new government rules.

Hersch: How has the round table evolved in recent years, both in terms of the focus and the composition of the membership?

Weintraub: The meeting has become more of a global convention than a gathering of predominantly U.S. producers. Also, the distribution channel has changed a lot. It’s no longer dominated by producers who only sell life insurance; many of our members also provide investment and financial planning. So we in the profession have to be more agnostic about the products and services we offer.

Hersch: Given the current tax regime, what opportunities do you foresee for incorporating life insurance into employer-sponsored retirement plans?

Weintraub: We haven’t used life insurance in qualified plans. There may be opportunities to do so now that the estate tax has been solidified. Given this year’s $5.3 million estate tax exemption level, you can have life insurance in a plan without worrying about the policy being estate taxable. The tax was previously a concern because it was very difficult to keep the death benefit out of the estate for estate tax purposes.

Hersch: Are income tax rates at an appropriate level, in your view?

Weintraub: Everyone would love to see lower income tax rates. But under the circumstances — I refer to the federal budget deficit and the national debt — we have to expect them to be where they are.

Frankly, the higher the income tax rate, the better it is for the products we sell. But I would love to see lower tax rates for a number of reasons — income taxes in particular — because they really affect the planning I provide business owners.

Hersch: As you know, the Securities and Exchange Commission and the Department of Labor are exploring implementing fiduciary standards, the SEC’s for investment advisors and the DOL’s for retirement plan advisors? What concerns do you have about these proposed standards?

Weintraub:  Over the years, the regulatory environment has changed dramatically; we now have one staff person who deals only with compliance issues. Yes, we have to stay to abreast of regulatory changes that might impact our practice. But I’m not sure that new rules will protect people any more than the current ones do today.

Every time the government adds a layer of complexity to the rules, the delivery of finances services becomes more confusing for consumers. One example: multi-page prospectuses written in 10-point type. Consumers don’t read them, much less understand them. I don’t see the value of disclosure requirements that apply to the documents. Consumers would be better served by a one-page, plain English summary of what’s in a prospectus.

Hersch: If I may return to the proposed fiduciary standards, can you envision best case and worst case scenarios for the final wording of these rules?

Weintraub: However worded, I can’t imagine that any new standards would be detrimental to our business. I’m not a CFP [certified financial planner], but any advisor who endeavors to operate a transparent practice is, I would think, already doing what the DOL and SEC might have in mind in terms of disclosure, compensation-related or otherwise.

Hersch: You seem more sanguine on this point than your colleagues at sister industry organizations — among them the AALU, ACLI and NAIFA — which regularly warn of the potentially negative consequences of new fiduciary standards on the advisor community. Are their concerns not justified?

Weintraub: The people who lobby on behalf of those associations necessarily take a more extreme position on the issue to ensure that the final form of new standards are less strict than that of the regulators’ initial formulation. When all is said and done, I feel confident that we’ll arrive at a happy middle ground.

Hersch: What changes would you like to see in carrier products?

Weintraub: In a low interest rate environment, as we have now, it’s tough for the carriers to offer sexy products. Low interest rates translate to less investment earnings for the insurers, and thus less generous product offerings. This remains a concern.

Sometimes you hear predictions from experts that, given the current macroeconomic environment, carriers will not be able to fulfill their promises on annuities and life insurance products. I don’t think we can take seriously these forecasts because the companies know they have to deliver on their promises. For our part, we use only the highest rated carriers, so balance sheet liabilities are less of a concern.

Hersch: How will your practice adapt over the coming months and years?

Weintraub: We’ve been growing at 12 percent annual rate over the last three to four years. And that’s because the need for our solutions, not least our third-party administration services, have been very robust. We administer hundreds of qualified plans, from those with as few as 5 or 6 participants to plans with thousands of employees.

Many of our clients are doing better than they were before the 2007-2009 recession; and they’re looking for a TPA that can provide better services at lower cost. New fee disclosure rules have been a good deal for us, as we’re now taking business from competitors that now must be more transparent about disclosing their higher fees.