The DOL fiduciary rule is likely to be a disruptive force within the insurance and financial industries during the next several years. Panelists during a session Monday at the Insured Retirement Institute's Vision annual conference in Colorado Springs explored some of the possible outcomes of the rule.
While industry players are still absorbing the language and nuances of the rule as well as the practical impact on their operations, the potential for class-action lawsuits was top of mind for panelists.
"Trust me, they will come," said Bernie Gacona, senior vice president and director of annuities for Wells Fargo.
"We've definitely got litigation in mind," said David Rauch, chief operating officer and general counsel for Annexus. "We're thinking of ways to insulate us and our partners from class-action liability, which is potentially huge. It's going to take a number of years before we know if we made the right decisions."
Those lawsuits will encompass not only the products and advice that are given, but also the omitted products and advice, said Rauch.
But the potential for litigation should not paralyze the industry to the point that it misses an opportunity to think broadly in terms of client relationships, said Stephen Truso, senior vice president of U.S. Bancorp Investments Inc. Advisors should focus on broad themes with clients, including discussing long-term care needs and retirement income planning, he said.
"If we can show on paper that we've captured the goals of our clients and put a plan in front of them, and that we are executing against that plan, we are OK," said Truso. "My fear is that we will tend to shift to single solutions and miss an opportunity to get in front of customers and fulfill their full breadth of need."
Impacts on industry
The panelists universally agreed that 2017 is shaping up to be a rough year as the rule's first deadline approaches in April.
"As an industry, we are going to see a big hit to anything other than managed money solutions," said Truso. "That's the big winner."
Paula Nelson, head of annuity distribution at Global Atlantic Financial Company, said a major sales disruption is likely after the April 2017 compliance deadline, and possibly sooner. "Advisors are feeling anxious about how to sell these products," she said. "It's a pretty comprehensive rule that impacts virtually everyone who talks to a retiree."
Gacona said the annuity industry will face a difficult year in 2017 but expressed hope that by 2018, the industry will begin to experience a resurgence.
Rauch also predicted a downturn in 2017 for annuities, but perhaps not as big of a hit on the fixed index annuity market as some have predicted. By 2018, the industry will find a new comfort level and growth will resume, he predicted.
