Does the Department of Labor Hate the Annuity Industry?

The Department of Labor and the powerful insurance lobby will go to the ring about fiduciary rules.
The Department of Labor and the powerful insurance lobby will go to the ring about fiduciary rules. Photo by: Fuse / Getty Images

The "Fiduciary Rule" Could Be a Game Changer for the Annuity Industry

The current buzz in the financial services industry is the Department of Labor sticking their nose into a subject they know nothing about. I guess that’s typical for Washington, but in this specific case, it really doesn’t make any sense. In the financial business, the Department of Labor proposal is called the “Fiduciary Rule”, and it could permanently change the way annuities are bought and sold.

On the surface, and in an elevator speech, this pending law makes sense. Unfortunately like every good idea that enters Washington, DC, by the time it comes out of the political process the good intentions get lost in the political sausage grinder. 

There’s Always a Power Driven Agenda Backing Changes Proposed in Government

The primary agenda behind the Obama administration and the Department of Labor pushing this rule is power. In this case, the target is the financial industry and more specifically, retirement accounts. In essence, the Department of Labor wants to have oversight when it comes to what products are sold within retirement accounts and how they are sold.  In addition, President Obama is making a mad dash during his last year in office to instill as much government control as possible.

The government “sell” is that they are looking out for the consumer, but nothing could be further from the truth.

If the ruling is implemented as proposed, it would drastically limit the products available to retirement accounts. By the way, that is not a good thing.

As Stan The Annuity Man, it is time for me to weigh in and settle the fiduciary argument once and for all. Does the Department of Labor really hate the annuity industry?

No one knows the true answer, but it sure seems like it.

The Department of Labor's Fiduciary Argument Is a Good Idea Gone Bad

The whole fiduciary argument is a good one in concept and does have the best interest of the client in mind. Anytime the best interest of the client is the primary goal, it’s a good thing. Acting like a “fiduciary” means that the financial advisor puts the best interests of the client at the forefront of all recommendations. Sounds pretty simple and basic, right? It begs the common sense question, “Isn’t that the way it should be working already?”  In a perfect world, the answer is yes. In a perfect world, every financial advisor would always act like a fiduciary.

Guess what, we don’t live in that perfect world. The fiduciary rule should be a given standard for all financial advisors to follow, but there are always bad apples in every industry. The financial industry definitely has their share of bad actors, but I don’t think the bad advisors are driving this agenda of change. Like all things in life, power and money run the show. This fact definitely holds true with the pending fiduciary rule as well.

The DC Process Distorts the Rules of Fiduciary Responsibility

It seems that anything coming out of Washington, DC doesn’t work.

If the fiduciary rule is implemented by the Department of Labor, you can add that to the growing list of dysfunction.

In my opinion, big money always wins. In this case, big money is represented by the all-powerful insurance lobby. There is a big time fight behind the scenes between the DC power brokers and the insurance industry fighting to retain their status quo. My bet is on the insurance lobby. Even if the Department of Labor initially passes, the whole thing will be tied up in the courts for years to come. So, I guess the lawyers are going to win in the end. They always seem to.