So Shields predicts an increasing shift toward fee-based compensation from commission-based compensation. "The DOL fiduciary rule clearly favors fee-based compensation," he says, "and there will likely be an increase in the number of financial advisors who become investment-advisor representatives using no-load or low-load variable annuity products to avoid the complexity of using the Best Interest Contract Exemption."

Indeed, in February LPL chairman and chief executive Mark Casady announced that he expects a move to fee-based VAs as a result of the DOL rule. Reportedly, LPL will also continue to lower minimums on certain accounts -- some to as low as $5,000 -- for clients who can't afford fee-based accounts. Neither Casady nor another LPL spokesperson was available for comment by deadline time.

Casady also reportedly said that LPL is receiving an influx of advisors who seek to leave independent broker-dealers as a result of the DOL rule. The reason: Independent firms could be especially vulnerable to the new standard's harsh, critical eye because of their exposure to commission-based VAs.

"We've been preparing for a shift to fee-based annuity options for a number of years," says Ethan Young, director of annuity and insurance research at Commonwealth Financial Network, in Waltham Mass. "I don't see a huge impact to our advisors."

Price Wars Likely
Still, another potential fallout is a shift in favor of fixed annuities, which many -- but not all -- observers expect will remain exempt from the fiduciary standard. "I would anticipate there will be a greater focus on fixed annuities," says Billy Lanter, a fiduciary investment advisor at Unified Trust Company in Lexington, Ky. "Any time there’s a shift in regulation or compensation, there is also a shift in product sales."

Price wars also seem a likely possibility, he says. "With full fee disclosure, I would expect to see more competitive pricing between variable annuity issuers, which may ultimately lead to some fee compression," explains Lanter. "You may see pricing broken down into more riders/options that can be chosen while offering a lower cost for the 'basic' product."

But to what extent do these developments actually serve client's best interests?  "Typically, the recommendation to use fixed versus variable annuities comes down to the investment strategy that is right for the client, and fixed annuities do not provide the same investment solutions as the variable products," notes Shields, at Navigant. "So the implications of recommending a fixed annuity simply to avoid the disclosure requirements and commitments of the fiduciary rule should be carefully considered and discussed with compliance and legal counsel."

In other words, if VAs end up under a tougher standard, that doesn't mean they aren't the right product for certain clients. "I recommend a lot of VAs, particularly for clients looking for income and as part of their fixed-income space," says Michael Rosenberg, a managing partner at Livingston, N.J.-based Diversified Investment Strategies. The higher cost for these products may be justified to satisfy a specific need, such as the peace of mind of a guaranteed future income. "I explain thoroughly to clients the costs and fees associated, [and] the client must sign off his or her understanding," he says.

Yet Rosenberg acknowledges there are some bad apples.  "Unfortunately, I believe a few advisors sell high-cost products without explanation, or do not have the client's goals and objectives in mind," he says. "Savvy advisors who follow the Golden Rule of doing right by their clients will be fine [under the new regulations]."

In any case, Raymond James' Stolz suggests such a division may be short-lived.  "I just don’t see how we can tell our clients that we can work with them under one standard for Variable Annuities, but have a lower standard for all of the other types of annuities," he says.