The Trump administration has ordered a 60-day review of the U.S. Department of Labor’s conflict-of-interest rule, but insurance intermediaries continue to prepare to comply with the DOL rule.
Many of the independent marketing organizations that distribute indexed annuities are hoping to meet the supervision requirements created by the rule by securing financial institution status under the rule, or by teaming up with other IMOs that are financial institutions.
Other IMOs are pursuing a two-track strategy: They are applying to become DOL-compliant “financial institution marketing organizations,” or “FIMOs,” and they are also setting up registered investment advisors.
Annuity producers with securities licenses who work with a two-track IMO can benefit by getting access to a fee-based platform.
The two-track IMO can benefit by extending its pool of financial professionals, by adding advisors who are already operating under a fiduciary standard.
One business pursuing the two-track strategy is AmeriLife Group LLC, a 46-year-old IMO that offers products tailored to meet the needs of seniors.
The company has expanded its portfolio over the years to a wide array of life and health solutions, including life insurance and annuities, long-term care insurance, final expense policies, Medicare plans, dental insurance, and property/casualty insurance. The company distributes insurance from about 75 carriers through a direct-to-consumer web portal, as well as through a nationwide network of 20 affiliated IMOs and about 100,000 insurance agents and advisors.
By adding an RIA arm, the Clearwater, Florida-based company is moving into the investment business, and taking a step that could significantly expand its footprint.
“As a distributor of more than $2 billion in fixed annuity products, we knew that our thousands of annuity producers needed a solution to continue to sell products under the DOL rule pending approval of our FIMO application,” says AmeriLife Chief Executive Officer Scott Perry. “We didn’t want to wait and put all our eggs in FIMO basket. We set up the RIA so those producers would have another qualified financial institution to do business through.”
Targeting the Gracefully Maturing
Perry says adding an RIA has been easier than becoming a FIMO.
To set up an RIA, AmeriLife had to file ADV, schedules and other financial documents with the Investment Adviser Registration Depository system and with state securities regulators.
AmeriLife also had to acquire $100 million in assets under management within 100 days of registration with the U.S. Securities and Exchange Commission, and it had to set up a business entity for the RIA. The SEC approved the application within 45 days.
To start the process of becoming a FIMO, AmeriLife has had to answer DOL staffers’ questions at a series of meetings. AmeriLife has had to provide detailed documentation describing the business processes and procedures it expects to use to satisfy the DOL fiduciary rule’s “best interest contract exemption,” or BICE.
Under the terms of the DOL’s proposed IMO class exemption, released Jan. 19, an IMO that qualifies for the BICE must have generated an average of $1.5 billion in fixed indexed annuity contract premiums in each of the three last fiscal years.