Consumer advocates often press regulators to make financial services sales standards flexible, to keep crooks from using loopholes to avoid prosecution.
Four financial services groups are arguing that state and federal efforts to develop a “best-interest standard” are so flexible, and so vague, that trying to comply with the standard would be a nightmare.
“Requiring producers by law to act in the best interest of a customer may seem innocuous and unremarkable, but the reality is that such a standard is abstract, nebulous, subjective and replete with adverse consequences,” the groups argue, in a letter influencing debate at the National Council of Insurance Legislators (NCOIL).
“This lack of consistency and clarity is troubling, and it will open the door to second-guessing and retrospective scrutiny years after an initial recommendation is made,” the groups write.
Four industry group officials signed the letter: Wesley Bissett, a senior counsel at the Independent Insurance Agents & Brokers of America (IIABA); Sarah Ferman, a senior government relations representative at the American Bankers Association (ABA); Laura Pachman, director of regulatory affairs at the National Association of Professional Insurance Agents (NAPIA); and Jessica Waltman, a regulatory consultant at the National Association of Health Underwriters (NAHU).
New Annuity Sales Standard Battles
The four industry group sent the letter to a panel at the National Association of Insurance Commissioners.
A panel at the NAIC, the Annuity Suitability Working Group, is trying to develop a best interest standard for annuity sellers, to supplement the current suitability standard, and to replace the fiduciary standard the U.S. Department of Labor tried to impose.
The current suitability standard requires annuity issuers and sellers to verify that an annuity sold to a consumer suits the consumer’s needs.