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Tracking NARAB II and why it matters

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The House Financial Services Committee recently approved an amendment adding the National Association of Registered Agents and Brokers Act (NARAB II) to the TRIA Reform Act of 2014 (H.R. 4871). 

In a press release issued by the Washington, D.C.-based Insured Retirement Institute (IRI;, IRI president and CEO Cathy Weatherford states, “NARAB II would remove a regulatory barrier that impedes broker-dealers’ ability and financial advisors’ willingness to sell lifetime income products. 

At the same time, this commonsense legislation maintains important consumer protections and preserves each state’s authority to regulate the insurance marketplace. Securing passage of NARAB II remains one of IRI’s top legislative priorities, and we will continue to work with congressional leaders to achieve this goal.”

Senior vice president and general counsel Lee Covington manages and oversee IRI’s Government Affairs. I asked him why this legislation matters for retirement advisors. Here are his e-mailed responses: 

LifeHealthPro: Can you explain why the current regulation presents a regulatory barrier for lifetime income products? Also, can you provide detail on how you’re defining “lifetime income products”?

Lee Covington: IRI conducted a study of the regulatory environment to determine what barriers could be precluding the availability of lifetime income products. We found that maintaining state insurance licenses across multiple jurisdictions is a regulatory obstacle that may impede broker-dealers’ ability and financial advisors’ willingness to sell lifetime income products such as annuities. In a mobile society, with clients relocating to other states on a regular basis, NARAB II would ensure that these clients could continue to work with their financial professional and still have access to a full suite of lifetime income strategies, without forcing the advisor to overcome the burden of redundant insurance licensing requirements.

LHP: How does NARAB II remove that barrier? 

Lee Covington: It removes the duplicative, burdensome process. NARAB II would establish a one-stop, national licensing clearinghouse for financial professionals operating in multiple states. Once financial advisors have become a member of NARAB, financial professionals could select which states they plan to operate in and pay the licensing fees all through the NARAB. Ultimately the streamlined process will save financial professionals a consider amount of time, it will reduce the administrative requirements of applying in multiple states, and will allow them to more quickly operate in new states. This will allow financial advisors to maintain the focus on their clients’ needs, rather than administrative processes.

LHP: Do advisors need to take any actions to comply with the legislation, assuming it gets passed?

Lee Covington: Once NARAB II passes, a clearinghouse – the NARAB – would be established for non-resident licensing. Financial professionals who are already licensed in their home state could apply for NARAB membership. As part of the process, they would have to undergo a background check, if they have not undergone one in their home state within the past two years.

LHP: Do you have a sense of the likelihood the legislation will become law?

Lee Covington: The House passed standalone bipartisan NARAB II legislation, which passed by a 397-6 margin and had 90 co-sponsors, in September of 2013. The Senate passed NARAB II legislation, as part of a flood insurance bill, in late January. The House, however, passed its own version of the flood bill that did not contain NARAB II, so it has not passed Congress yet. But considering the legislative victories, it’s clear that there is unprecedented momentum and support for moving NARAB II forward. We believe that this will ultimately pass; it’s just a matter of by which legislative vehicle. Legislation to reauthorize the terrorism risk insurance program may be that vehicle.


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