One benefit of being a mom of tweens is having an excuse to read their books. I love reading, but I feel a bit out of place perusing the young adult section at the library for fun, quick novels rather than picking up more weighty tomes like “War and Peace” in the adult fiction section. Let’s face it, with tweens in my house, I need more fun and quick, and less weighty reads.
Recently, my son was assigned a book called “Life as We Knew It,” by Susan Beth Pfeffer. I ended up stealing it from him and reading the entire book in one sitting. The story follows the struggles of a high school girl and her family after an asteroid hits the moon and causes a variety of increasingly dire consequences for the people on Earth.
The characters knew the impact was going to happen, and initially, they weren’t too concerned. But chaos quickly ensued when the impact was larger than expected and the moon was knocked out of its orbit, causing changes in the ocean tides that led to mass destruction of the world’s infrastructure.
For most of the world not directly impacted by the initial destruction, day-to-day life didn’t change all that much. At least not right away. Everybody knew things were now radically different, but they weren’t sure exactly what that would mean for them on a personal level. It turns out the consequences for the characters would be immense, but they happened gradually over a long period of time.
Shortly after I finished the book, the DOL issued its final fiduciary rule. I noticed a few similarities between the events in the book and the release of the rule — anticipation of a significant event, chaos and confusion in the immediate aftermath, and then a settling in while the consequences begin to reveal themselves. I began to wonder if the industry would soon be thinking back to its pre-DOL-rule days as “life as we knew it.”
LIMRA’s CEO Bob Kerzner, speaking at the association’s retirement industry conference last month, said he believes the DOL rule will cause seismic change within the industry. Many people agree, but there is no clear consensus on what those changes will be.
Some speculate products will become more vanilla as advisors recommend options that are simpler, have higher guarantees and are manufactured by A+ rated carriers. Others believe this phenomenon will actually spur innovation rather than stifle it because lower-rated companies will develop unique features to differentiate themselves from competitors and better fit individual consumer needs.
Another uncertainty is how the rule will impact compensation. Some believe the days of commissions may be numbered and fee-only advisory will flourish. Certainly commissions will face scrutiny under the rule, and some predict high commission-based advice will be targeted in initial lawsuits. But not everybody believes fee-based compensation is the only possibility in the future. A rationalization of commissions seems as likely as a forklift operation to fee-only models.
How distribution will be impacted is another unknown. Under the rule, carriers, banks, broker-dealers and RIAs can sign best interest contracts with consumers as designated financial institutions. Where does that leave IMOs and insurance-only agents with no affiliation? Nobody seems to know.
For now, I sense people in our industry, like the characters in the book, are stealing glances at the moon, knowing things are not quite the same but not sure how exactly this new reality will affect them over the long term. Perhaps some are preparing to comply while others are hoping challenges to the law will allow life to go back to the way it was before.
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