More Uncertainty over DOL Fiduciary Rule for Independent Agents Selling Fixed Indexed Annuities

It’s no wonder agents selling fixed indexed annuities are confused regarding the Department of Labor’s new fiduciary rule. How will it apply? Who is responsible for oversight? How will it be enforced?

Like most rulings, this one is also lengthy and confusing. And at more than 1,000 pages, not many independent insurance agents have even read a portion. While aimed at the financial institution industry, regulators have not addressed the distribution channel and carrier relationships unique to the independent insurance agency platform.

Most independent agents across the country access insurance carriers through a third- party relationship with an FMO/IMO (Field/Independent Marketing Organization) who contracts agents to sell the products directly to consumers.

One issue of concern is that financial institutions would be required to acknowledge the fiduciary status of their downstream advisors under the ruling’s “Conflict of Interest” section. However, because the DOL does not currently recognize FMO/IMOs as classified financial institutions under the ruling, FMO/IMOs would not be able to make the required fiduciary acknowledgement regarding the agent.

The DOL has acknowledged that there is still work to be done. Questions regarding oversight responsibility and enforcement procedures are a big concern to critics who cite the fact that the Best Interest Contract Exemption section of the ruling doesn’t even mention or define the term “independent insurance agent.”

It remains to be seen – as some experts believe – whether or not fixed indexed annuities will be removed from the new rule.