“I’m a fan of annuities as components in retirement income plans, and people may accuse me of talking out of two sides of my mouth, but I think they’re both oversold and underutilized,” he says. “Typically, consumers, plan sponsors and advisors lack the proper education to use annuities appropriately.”
The New Fiduciary Rule
The new U.S. Department of Labor fiduciary rule has been revised to come into accord with Regulation Best Interest, the Securities and Exchange Commission’s regulation that falls well short of the DOL’s first attempt at fiduciary rulemaking.
The original rule gave clients the right to use lawsuits to redress the damages caused by a breach of fiduciary duty, but it was struck down by the Fifth Circuit of the U.S. Court of Appeals in 2018.
While the SEC’s regulation is intended to require advisors to act as fiduciaries, it does not contain a right of action on behalf of the clients. Nor does the DOL’s most recent proposal. In essence, the requirements do little more than provide disclosure of real and potential conflicts of interest to clients and prospective clients, Hopkins says.
“The DOL is proposing a loosening of their standard to allow more insurance agents to tell people they’re fiduciaries, but then they will not have to meet all of the conflict-of-interest rules that we previously had,” he says. “When you put it together with the annuity rules, it becomes concerning because you can now get these products into a plan without meeting the fiduciary standard at all.”
The risk for retirement savers is worsening because most workplace plan participants are not receiving quality investment and planning advice, he says.
Last month, Carson Group decided to require advisors to have the certified financial planner designation or an equivalent certification, framing the move as a response to the revised Department of Labor fiduciary proposal.
Hopkins also says that advisors need to explain the fiduciary standard in plain language and clearly demonstrate the value of working with professionals under this standard.