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Rollovers and Annuity Sales Soar After DOL Rule's Death

February 26, 2019

With the Department of Labor’s fiduciary rule out of the way, individual retirement account rollovers and annuities sales are picking up, according to a recent report.

Several years ago, researchers had predicted the rollover market would reach $550 billion by 2018, but the DOL’s rule, which purported to require retirement account advisors to put clients’ interests first, put a damper on the market, according to a recent report from the Limra Secure Retirement Institute, FA magazine writes.

But after an appeals court vacated the rule last spring, sales heated up again, Limra says, according to the publication.

Nonetheless, Limra has adjusted its forecast, and now estimates that rollovers will top $466 billion this year and reach $505 billion by 2021, according to the report cited by FA magazine.

Meanwhile, the death of the DOL rule was an immediate boon to annuities. Variable annuity sales reached $25 billion in the third quarter of 2018, up 25% year-over-year, Limra says, according to the publication. Sales of fixed-index annuities were up 28% in the third quarter of 2018 over the same quarter the previous year, according to the report cited by FA magazine.

With the DOL’s rule now in the background, all eyes have been on the SEC, which could be rolling out its own advisor and broker conduct package as soon as the third quarter.

But if passed as it stands now, the SEC’s Regulation Best Interest would mean that the “industry continues its conflicted practices,” Phyllis Borzi, architect of the DOL’s fiduciary rule, tells ThinkAdvisor’s Human Capital newsletter. That’s because the proposed regulation lacks a definition of best interest, she says, according to Human Capital.

“A federal standard has to protect investors, and what’s currently being considered [in Regulation Best Interest] I don’t think is going to move the ball forward,” she tells the publication. “In fact, I think it might lull some consumers into thinking that the problem has been solved because under Reg BI, people can represent that they’re acting in somebody’s best interest without being legally obligated to do so.”

Separately, the state securities regulators are also slamming the SEC’s proposal as not going far enough. In a comment letter to the SEC, the North American Securities Administrators Association urges the commission to “reform its interpretive guidance,” in large part because of the support it’s received from financial industry trade groups that “fought tooth and nail to overturn” the DOL’s rule.

“Fresh off their victory, many of the DOL Rule opponents have now submitted laudatory comments in response to Proposed Reg BI,” the letter says. “Given the significant resources expended by these groups in opposition to the Department of Labor’s effort to address the abuses associated with conflicted advice, the Commission must ask why the sudden about face in light of the agency’s efforts to address the very same practices targeted by the DOL Rule.”


The current version of the regulation, and in particular its “interpretive nuances,” are viewed by opponents of the DOL’s rule as serving “as confirmation that pretty much anything and everything will be considered ‘acting in the client’s best interest’ – where disclosure occurs,” according to NASAA. That’s the wrong message if the SEC’s goal is indeed bringing forth a standard that would eliminate and mitigate conflicts to the maximum benefit of investors, the group says.

NASAA suggests that the SEC uses language that would better reflect “a robust best interest standard” and demonstrate how its rule would resolve concerns about conflicted advice, including examples of what type of conduct would be consistent and inconsistent with the new standard. To that end, NASAA provides examples of conduct that’s already prohibited by similar regulations in other countries, such as Canada, as well as interpretations of a best interest standard to various scenarios by other U.S. entities, such as NASAA itself and Sifma.

By Alex Padalka
  • To read the FA Magazine article cited in this story, click here.
  • To read the ThinkAdvisor article cited in this story, click here.