Focus on outcomes, not mythical legal jargon, says Finseca CEO

Marc Cadin responds to a recent InvestmentNews editorial and explains why he believes the DOL process and pro-fiduciary rule argument are both flawed.

If the final version of the Retirement Security Rule stoked the fire within Marc Cadin, the CEO of Finseca, the subsequent InvestmentNews editorial fanned the flames.

In a phone interview, the leader of an organization that represents more than 9,000 financial security professionals who provide life insurance and retirement planning solutions, criticized the Department of Labor’s process, which he again branded “unAmerican”, took aim at those who think being a fiduciary always leads to better outcomes for consumers, and said this publication’s editorial, headlined “Fiduciary commitment should be table stakes”, was based on a “flawed premise.”

He also said he will be recommending litigation against the new rule to his board and, personally, believes it will be successful.

The Department of Labor’s new fiduciary rule will for the first time subject many agents selling annuities to the Employee Retirement Income Security Act, holding them to the legal fiduciary standard of advice.

InvestmentNews stands by its editorial and its stance on the rule. But as a platform for news and views from across the industry, is open to debate and willing to offer Cadin a right of reply.

In doing so, Cadin explained his belief that the argument for the fiduciary rule, as set out by InvestmentNews and other proponents, mistakenly focuses on legal jargon instead of outcomes for consumers.

“The table stakes, if you will, should be how we increase the financial security of the American people,” he said. “That should be everybody’s objective. It should be the Department of Labour’s objective, it should be [InvestmentNews’] objective, it should be the industry’s objective.

“In our opinion, [consumers] become more financially secure when they get the products and the advice they need. It’s both. It’s not just advice; it’s not just products. We need to create a behavior among more Americans to save earlier and save in the right ways.”

Cadin cited an Ernst & Young study in 2021 he says showed how consumers get better outcomes, and save better, when they combine permanent life insurance, investments and annuities.

He added: “Let’s really focus on outcomes, not process, not mythical legal jargon that says, ‘somebody’s a fiduciary, that must mean they give better advice.’ [Bernie] Madoff was a fiduciary, and he stole from his clients. The legal labels in the process do not guarantee outcomes.”

DOL process is ‘wrong’

Cadin also disagrees with the argument that this rule has been a long time coming. While he accepts work began on it more than 13 years ago, he says the world has “dramatically shifted” given that the first iteration was withdrawn, the second was vacated by the Fifth Circuit Court of Appeals, and Regulation Best Interest was subsequently adopted by the SEC. The latter process, he says, in contrast to the new rule, was “very American”, took in a lot of stakeholder input and “explicitly rejected a fiduciary only approach.”

“The reason why I feel so strongly that [the Retirement Security Rule] process is unAmerican, and I’m abashed about that, is that from the beginning, you have a handful of unelected bureaucrats at the Department of Labor foisting their predetermined worldview on to the American people. They believe they know best.”

Having testified before the DOL and met with them on half-a-dozen occasions, Cadin expressed disappointment in its failure to at any time ask him why Finseca and its members believe what it believes. “That is unAmerican, that’s not how our system of government is set up,” he says. “It’s not how the process should work, and it’s wrong, and the results will be millions of Americans will lose access to financial advice and they will have less access to the products they need.”