Investment firms and agents are being canvassed by two industry groups in order to help the Department of Labor better understand industry compensation practices as it implements the new fiduciary standard rule.
The Washington, D.C.-based Insured Retirement Institute said Wednesday that it has partnered with actuarial services firm Milliman, Inc. to conduct a survey of compensation practices associated with sales of annuities and other investment products.
The IRI said it hope this survey will support efforts by financial services firms and financial professionals to comply with the reasonable compensation standard the fiduciary rule.
“We remain committed to assisting members with their ongoing efforts to prepare to implement the rule and operate under its new requirements,” IRI President and CEO Cathy Weatherford said in a press release. “While we believe our members have always strived to design their compensation practices in an appropriate and reasonable manner, demonstrating compliance with this new legal requirement is another matter. Overcoming this hurdle is a significant undertaking, and we are proud to be able to deliver this tool to help our members make this determination.”
Under the Best Interest Contract Exemption and the amended Prohibited Transaction Exemption 84-24 of the fiduciary rule, financial firms and professionals must be able to demonstrate that the amount of compensation received for advice is reasonable.
The survey will be conducted in the coming weeks. IRI officials said it will provide information firms can use as they assess whether their existing compensation structures are “reasonable” compared to others in the marketplace.
The Labor Department did not provide specific examples of reasonable compensation or safe harbors in its rule, instructing advisors to instead rely on a market-based standard, according to the institute. As such, the institute’s compensation survey is designed to gather marketplace information that can be used to set market-based reasonable compensation rates.
Seattle-based Milliman, one of the world’s largest actuarial consulting firms, will conduct the survey independently on behalf of the institute.
“Since its inception, Milliman has provided independent perspective and industry-leading tools to the financial services industry, and our work with IRI is the latest example of this pioneering spirit,” Dan Rueschhoff, a Milliman principal and consulting actuary.
“This tool will assist financial institutions in transparently demonstrating compliance with the DOL’s fiduciary rule,” he said.
The rule is effective next April 1.
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