Insurance companies and their trade groups aren’t shy about fighting state conduct standards like the one being pushed in Massachusetts, which would require every agent and broker to become a fiduciary and offer full-service account monitoring.

In fact, a multitude of insurers and their trade groups told Massachusetts Secretary of the Commonwealth William Galvin at a hearing last week that his proposal would in effect force companies to do away with their commission-based brokerage business in the state. They maintain this will hurt smaller investors who don’t have enough assets to hire a fee-based advisor.

“According to the research group Limra, the average income of an annuity owner is $64,000,” American Council of Life Insurers President Susan Neely said at the Massachusetts hearing.

Neely followed up her testimony with a blog entitled: Elitist Proposal Denies Choices to Bay State Retirement Savers.

“Massachusetts is about to impose an elitist, fiduciary-only standard for those seeking financial services,” Neely wrote. “Sadly, as the industry that helps small- and moderate-savers to plan their financial futures, we know this would hurt the very people it claims to protect.”

“Fiduciary advisors typically require a minimum retirement account balance of $100,000 to make managing someone’s money worth their while because they charge a percentage of the account to give advice. How many middle- and working-class savers will be able to pay the freight?  The result is an advice gap for all but the wealthy,” Neely said.

Every day some 252 Massachusetts residents reach age 65. Many are concerned about how they’ll finance their way through retirement, Neely said.

“They’re seeking answers while the Commonwealth Secretary’s fiduciary proposal would curb their access to life insurance and annuities,” she added.

Annuities are rarely on the menu of options from fee-based fiduciary advisors, despite being a viable income-guarantee investment for middle-class investors who need to supplement Social Security Income, Neely said.

Modest-Sized Investors To Be Impacted?

While consumer advocates promote a fiduciary vision for investors, affordability remains a real concern because some investors who don’t have enough assets and/or don’t make a lot of financial transactions can’t justify paying a yearly management fee that would exceed the cost of whatever commissions they would pay.

Executives at top broker-dealers, including Commonwealth Financial Network and Edward Jones, said at a recent Sifma conference that as a result of Regulation Best Interest (Reg BI) they will require all of their brokers to pass the Series 65 exam and become investment advisor representatives.

Privately, advisors at the conference told Financial Advisor they are sending commission-only clients notice that they can no longer work with them if they are unwilling to convert to a fee-based relationship.

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