Spitzer goes after ING. Revenue sharing deals examined.

As mentioned in my post earlier this week, the regulators and AG's in the more proactive states are taking dead aim at the undisclosed revenue sharing deals that exist in the mutual fund, wire house and variable annuity businesses.

Today's WSJ Online has another great article about how New York state AG, Eliot Spitzer is currently in negotiations with ING Group to provide plain English disclosures of fee agreements, reimbursement and asset steering deals that have existed in the mutual fund and retirement business for the better part of 15 years. In particular they are looking at what was widely known in the mutual fund and financial planning industry as "buying shelf space" by making sure your product or services got preferred placement in front of a firms financial advisors or reps who might sell it.

The article also discusses the litigation against pension plan administrators for not controlling costs to shareholders as a result of these undisclosed compensation or revenue sharing deals. This is going to be the next big wave of regulation that is about to crash over the insurance and mutual fund industry.  

I think it is no big stretch to realize that the life markets that we do our business with are going to have forced upon them either externally or internally a requirement to end revenue sharing deals, or disclose them to each potential annuity buyer or claimant. Once full disclosure is required, does "revenue sharing" in the settlement industry vanish? Once "soft marketing deals" are required to be disclosed, do life markets cease funding marketing expenses for larger clients?

We can debate the impact but i'll say it again, the snow ball is rolling down hill and if you are a broker you better get ready for a full and open disclosure environment.  

Posted on October 10, 2006 .