Educating policymakers is a top priority for NAIFA as it seeks to create a favorable business environment for agents, advisors and the clients they serve.
A good example is the swift action the association took in reaction to guidelines issued by the Centers for Medicare and Medicaid Services (CMS). In August, CMS quietly issued a revised set of Medicare Marketing Guidelines that would have prevented agents and brokers from contacting their Medicare beneficiary clients via telephone “to discuss other plan options.” Effectively, CMS was telling agents that they were not allowed to advise clients who had hired them to provide advice. Fortunately, common sense prevailed. After discussions with NAIFA, Medicare plan sponsors and other involved parties, CMS in October rescinded its August guidance.
Although all went well in the end, this episode points to a larger problem that can occur when policymakers have an incomplete understanding of exactly how insurance and financial advisors serve their clients. This lack of understanding can lead to regulations that unintentionally harm the consumers they are intended to protect.
Even when they eventually get it right – and we are thankful to CMS for doing so in this case – false starts and backtracking by regulators inevitably inject uncertainty into a space where chaos can do a great deal of harm.
Insurance and financial advisors help clients plan for the future. Uncertainty is the biggest obstacle we face. As advisors, there is much we cannot control or even predict with great precision – such as the economy, illness and death. But with training and experience, we can help our clients mitigate these risks.
Regulatory miscues fall under a different category because they could easily be avoided. If regulators fully understood the role of agents and advisors and the many ways we help consumers, they might avoid proposing rules likely to do more harm than good.
Other Examples of NAIFA’s Educational Efforts
This does not apply to CMS alone. NAIFA has been involved on behalf of advisors and their clients as the Securities and Exchange Commission (SEC) and the Department of Labor (DOL) determine whether registered representatives should be subject to regulations imposing a fiduciary standard of care on their practices.
The association has worked with the SEC, had conversations with each of the commissioners and provided input when they requested assistance with an ongoing cost-benefit analysis. We are encouraged by the SEC’s deliberate pace, inclusiveness and indications that it is interested in ensuring that middle-market investors are not harmed.
The DOL is another matter. In 2011, it proposed a regulation requiring registered representatives to act as fiduciaries on behalf of their retirement-account clients. This regulation effectively would have prevented these advisors from receiving commissions as compensation. In the face of a political backlash and criticism from NAIFA and other groups, DOL withdrew the proposal.
Had the initial DOL proposal gone through, many of my clients with accounts too small to warrant fees would no longer have been able to turn to me or anyone else for affordable, individualized retirement advice. The department now says it will propose a new fiduciary rule as early as this month.
Until recently, DOL officials had rejected numerous offers to have meaningful dialog on the issue with industry stakeholders and even members of Congress. In public statements, they have continued to insist that commissions paid to retirement advisors present a conflict of interest, but have failed to show how the supposed conflict is harming consumers. They ignore or discount the fact that a poorly written DOL rule would provide no access to advice for those who have relatively low account balances or who are unwilling to pay fees.
When I meet with a client, it is never about a single transaction. It’s about providing ongoing service and creating a plan that is flexible enough to adapt to life’s inevitable challenges, successes and setbacks. If DOL regulators understood this, maybe they would be less concerned about the manner in which I am paid. They would ensure that any regulations they propose do not disrupt my relationships with my clients.
NAIFA will continue to educate regulators about insurance. I am convinced that when they know more about insurance and financial advisors, they will better understand how proposed regulations can impact our relationships with our clients.