In the article “Investment Advice Rule Could Still End Up Back In Court,” InsuranceNewsNet detailed comments Partner Brad Campbell made in a webinar sponsored by the National Association for Fixed Annuities. Campbell focused on a potential legal issue with the best interest standard in the Department of Labor (DOL) investment advice rule.
According to the publication, in 2018, the Fifth Circuit Court of Appeals tossed out the fiduciary rule, a predecessor to the current rule, ruling that the DOL exceeded its authority by creating a new regulatory scheme for the retirement plan space.
Campbell described how there could be plenty more changes in store before the investment advice rule is finally in place, and more lawsuits might still be argued before the industry has a settled rule.
“I think there’s a good argument” that the best-interest standard in the new rule is “inconsistent with the Fifth Circuit decision,” Campbell said. “It could be the DOL was willing to take the risk because they think the opinion of the minority judge might prevail if they were sued again, even though they lost in the Fifth Circuit. That’s an area where DOL I think went a little too far given what the Fifth Circuit said.”
Just complying with those standards is going to be difficult, Campbell stated, and probably not worth it for insurance agents. There are very specific disclosures about any conflicts that must be made on top of that, along with evidence that the sale is in the best interest of the client, he noted.
“You put all that together, and it probably just doesn’t fit a lot of traditional insurance transactions where an independent agent is recommending a product from one of several different carriers, none of whom are going to be fiduciaries for that agent’s conduct and who aren’t really in a position to impose policies and procedures on that agent,” Campbell said.
Insurance agents selling annuities can always utilize the existing prohibited transaction 84-24 exemption, Campbell explained. “There’s a little bit of time to figure out which of these exemptions you’re going to use and put them in place if you don’t have them already,” he added.