Close Close
Popular Financial Topics Discover relevant content from across the suite of ALM legal publications From the Industry More content from ThinkAdvisor and select sponsors Investment Advisor Issue Gallery Read digital editions of Investment Advisor Magazine Tax Facts Get clear, current, and reliable answers to pressing tax questions
Luminaries Awards

Financial Planning > Tax Planning > Tax Reform

Taking the pulse of advisors

Your article was successfully shared with the contacts you provided.

Most financial professionals (53.8 percent) don’t have an exit plan in place. And more than 8 in 10 of them don’t plan to retire or sell their practice within the next 1 to 5 years.

The source of these figures: an informal poll a colleague and I conducted of independent advisors attending an evening reception on Sept. 7 in San Diego. Hosted by the National Association of Insurance and Financial Advisors at its annual meeting, the gathering afforded me and my fellow pollster — Vanessa De La Rosa, an associate editor at sister publication — an opportunity to elicit the views and plans of 60-plus NAIFA members.

The results of the 5-question poll were not surprising. When asked whether they support or oppose a pending redraft of the Department of Labor’s rule defining the term “fiduciary” under the Employee Retirement Income Security Act (ERISA), nearly all reception attendees (96.8 percent) opposed the revised rule, due to be unveiled after January 2015. The poll result is consistent with NAIFA’s vigorous opposition to the redraft because the rule (as now framed) would effectively ban the earning of commissions on retirement account advice. 

At NAIFA’s Legislative Forum Sept. 7, Judi Carsrud, NAIFA’s director of federal government relations, said the DOL needs to “slow down and get it right,” (i.e., the anticipated ban should be removed from the rule’s final language). NAIFA, she added, fundamentally disagrees with the DOL’s position that financial professionals who receive commissions through a broker-dealer are “conflicted,” their recommendations possibly adverse to the client’s interests.

Why did two reception attendees depart from NAIFA’s official position on the issue?

Though my colleague and I didn’t ask attendees to elaborate on their answers due to time constraints, I suspect a key reason underpinning their support for the redraft is the standing in the field. A growing number of life insurance professionals have acquired advanced designations, such as the CFP mark, have become registered investment advisors or are now dually registered with an RIA and broker-dealer.

Upshot: They’re already being held to a fiduciary standard of care requiring them to act in the best interests of the client. I suspect this is true, too, of a growing number of NAIFA’s members. To oppose the DOL’s position might therefore be contrary to their view that compliance with a fiduciary standard is a competitive advantage. Also giving advisors an edge isthe ability to promote the tax benefits of life insurance to clients and prospects. On this issue, reception attendees mostly expressed optimism about the outlook for the industry’s products. More than 9 in 10 of our respondents (93.7 percent) forecast that the tax-favored treatment of life insurance will “survive a Congressional debate on tax reform in 2015.”

The high percentage is, clearly, as much as a hope as a prediction. For the industry’s stakeholders — NAIFA among them — have long warned of the negative impact on clients if the industry’s tax benefits (notably tax-deferral of the inside build-up in permanent contracts) were taken away.

The price tag resulting from a rollback of so-called “tax expenditures” in a tax reform bill is potentially huge. Counting all financial services products that could be targeted, NAIFA’s legislative team pegged the figure at $3.2 trillion.

I doubt, however, that tax reform is in the offing, at least not in 2015. Congress seems incapable of passing major legislation, a result of the increasingly polarized politics on Capitol Hill and the seeming inability of key players to bridge the Republican-Democratic divide.

Which brings us back to exit planning. For unlike prospects of Congressional legislation, retiring from the business is a certainty, a milestone that all advisors will have to cross, often earlier than anticipated because of unforeseen health or other issues.

The need to engage in exit planning is evidently not a high priority for most of the advisors at NAIFA’s reception because they don’t anticipate retiring near term. The prudent course — for you and your colleagues in the industry — is to take the far-sighted view and plan for the unexpected.

See also:

NAIFA YAT Forum panelist: Expect a new wave of life products

Farmers’ agent: Follow the plan and you’ll reap the rewards

Before annual meeting, NAIFA’s McNeely takes 11 questions



© 2024 ALM Global, LLC, All Rights Reserved. Request academic re-use from All other uses, submit a request to [email protected]. For more information visit Asset & Logo Licensing.