But those new fee-based relationships could discriminate against new or smaller investors.
“Many fee-based advisory firms require minimum account balances of $500,000 or more, putting them out of range for more modest investors,” said National Association of Insurance and Financial Advisors CEO Kevin Mayeux.
In its current form, the Massachusetts proposal “will likely lead to large numbers of broker-dealers and their registered representatives changing their business practice from a commission-based brokerage practice to a fee-based business model,” Mayeux said in testimony on the Massachusetts proposal.
NAIFA is also concerned that the proposal would appear to apply to variable annuities and insurance products in general.
“Variable annuities are already subject to comprehensive regulation by state insurance regulators, Finra and the SEC, and they are among the most heavily regulated products in the financial marketplace,” Mayeux said. “Subjecting these products to an additional layer of regulation by the state’s securities regulator will not provide any additional meaningful consumer protections and will likely result in increased costs to consumers.”
Echoing the industry’s sentiment, Insured Retirement Institute president Wayne Chopus urged Massachusetts to defer to the SEC’s Reg BI which takes effect June 30, 2020.
“In our view, Reg BI will achieve [Massachusetts’] goals without the need for further rulemaking. Moreover, it does so in a manner that will preserve investor choice and access to the products and services they need to achieve their financial goals,” Chopus said.
In a nod to the insurance industry, Massachusetts Governor Charles Baker also asked Galvin to defer to the SEC’s Reg BI and to the model regulation being prepared by insurance regulators.
“Those efforts are still ongoing and I respectfully request that you defer further action until this work is complete,” Baker said.