Life insurance agents' advocacy groups teamed up this month to ask 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 him calling for the review of a provision in the draft financial service reform legislation being considered by the committee.
That section would refine 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. It would put broker-dealers under the same fiduciary standard as advisers.
In their letter, the trade groups say that the provision would require agents already registered as 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 that they could 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 groups argued that clients don't pay fees to insurance agents as they do to asset managers. Rather, the carriers pay the agents based on their sales.
The AALU, NAIFA and NAILBA noted that agents have an incentive to serve their clients properly because consumers won't keep products in force unless what was sold to them is in their best interests.
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,” they wrote.
Meanwhile, the House Financial Services Committee voted Nov. 4 to submit its version of regulatory reform legislation, the Investor Protection Act of 2009, to the House floor for a vote next month.
E-mail Darla Mercado at [email protected].
