Not only are fixed annuities now within the scope of the final fiduciary rule, but also a key tax writer is seeking information from the 12 biggest annuity writers about how annuities are sold. It appears that annuities are approaching being at the center of both Congressional and regulatory attention.
On April 30, Sen. Elizabeth Warren (D-MA) wrote to such companies as Lincoln Financial Group, Massachusetts Mutual, Nationwide Life Insurance Company, New York Life Insurance Company, and others, asking for information on “extra” compensation for selling certain kinds of annuities. She suggested in her letter that these extra forms of compensation—things like bonuses, paid vacations, and other “inducements”—potentially influence advisors’ advice to investors. She also claimed that these kinds of sales incentive programs are at least in part behind the industry’s opposition to the now-final new fiduciary rule. This letter is a reprise of her 2015 letter to annuity issuers and her subsequent study on the same issue.
“These secret kickbacks,” Sen. Warren wrote, “hurt consumers by incentivizing agents to sell certain products because they will earn a bigger cash bonus or fancier vacation, not because they are in the best interests of their customers.”
Sen. Warren’s letter asked the companies to provide a list of all incentives, “including cash awards, cruises or other vacations, electronics, jewelry, and any other items of value” used as rewards for annuity sales. Also requested is information on each company’s perk programs size, marketing materials, and other information the companies provide to their sales forces.
Prospects: Annuities are the subject of more interest among lawmakers recently. Some of the new interest is positive annuities’ role in providing lifetime retirement income is important to some lawmakers. Some are adverse, like the comments Sen. Warren is making. And the difference in regulation between fixed annuities and annuities subject to Securities and Exchange Commission (SEC) regulation (indexed annuities) is also part of the emerging conversation. Expect more scrutiny of annuities over the course of the next year or two.
NAIFA Staff Contact: Jayne Fitzgerald – Director – Government Relations, at jfitzgerald@naifa.org.