Insurance agents to Dodd: Don’t force us to take on RIA role

Life insurance agents’ advocacy groups teamed up on Friday to ask Connecticut Senate Banking Committee Chairman Christopher Dodd, D-Conn., to reconsider a legislative provision that would require life agents to become registered investment advisers.
The Association for Advanced Life Underwriting, the National Association of Insurance and Financial Advisors and the National Association of Independent Life Brokerage Agencies wrote a letter to Mr. Dodd, calling for the review of Section 913 of the Restoring American Financial Stability Act of 2009.
That section redefines the role of an “investment adviser” in the Investment Advisers Act of 1940, eliminating a part of the rule that excludes broker-dealers from that definition and thus harmonizing regulations for broker-dealers and advisers.
In their letter, the trade groups say that the provision would require agents who are already registered representatives to register as investment advisers. This, in turn, would require them to take on greater responsibility and liability, as well as force them to limit the products they can offer to clients.
“It is a radical departure from current law and has never been the subject of committee hearings or significant analysis of its cost or impact on a host of financial services industries, product choices for consumers or the broader economy,” the groups wrote.
The three groups also asserted that the clients aren’t paying fees to insurance agents as they would to asset managers. Rather, the carriers pay the agents based on their sales. The NAIFA, AALU and NAILBA note that agents have an incentive to properly serve their clients because consumers won’t keep products in force unless the insurance was sold to them in their best interest.
Further, the three associations said that agents who are registered representatives are subject to rules from the Financial Industry Regulatory Authority Inc., as well as supervisory procedures from their broker-dealers. Thus, additional oversight through the Investment Advisers Act would be superfluous.
“There is no reason to impose another registration and regulatory statute on these insurance professionals, when it will not add protections for customers but will end up limiting their choices.”
Mr. Dodd’s committee started markups on the bill last Thursday, but has since halted work on it. Meanwhile, the House Financial Services Committee voted on Nov. 4 to submit its version of the bill to the House floor for a vote in December.