Posts tagged #Annuity

DOL Fiduciary Deadline is coming, what compliance is essential?

The decision earlier this week by Labor Secretary Acosta to not further delay the implementation of the DOL Fiduciary standards on June 9th. This is creating a huge push for compliance guidelines for annuity sales staff, annuity brokers and structured settlement experts. Ok, maybe not the structured settlement experts, they are exempted from just about all suitability and regulatory oversight other annuity purveyors are being held to. That said, these standards will very likely become the defacto expectation regarding duty of care to clients and structured settlement professionals would be wise to immediately adapt their business practices to adhere to them. 

The future. Photo Credit Shutterstock

The future. Photo Credit Shutterstock

This morning ThinkAdvisor published what I think is a very handy check list of dates, guidelines and duties related to how and where this new Fiduciary Standard is being applied. It is as follows:

  1. Applies to IRAs: The rule applies to investment advice concerning IRAs, ERISA plans, and plans covered by Section 4975 of the Tax Code.
  2. Best interest standard starts June 9: Beginning June 9, financial institutions and advisors to covered plans must provide advice in the retirement investor’s “best interest,” which includes a duty of prudence and loyalty.
  3. BICE compliance starts Jan. 1: The extensive compliance requirements of the best interest contract exemption, which would apply to non-level fee products, are not in force until Jan. 1, 2018.
  4. DOL expects changes by Jan. 1: During the transition period (June 9-Jan. 1), Labor will collect additional information from the industry to determine how compliance practices such as the use of mutual fund “clean shares” should reshape the rule.
  5. Proprietary products with commissions permitted: During the transition period, firms can recommend proprietary products with commissions so long as they satisfy the best interest standard.
  6. Need policies and procedures: Labor expects firms to adopt policies and procedures necessary to ensure compliance with the best interest standard.
  7. Robo-advisors can rely on BICE: Robo-advisors may rely on the BICE during the transition period to ensure compliance with the rule.
  8.  Investment advice narrowly defined: Investment advice, for purposes of the rule, does not include plan information or general financial, investment and retirement information.
  9. Can rely on written representations from intermediaries: The rule does not apply if an independent fiduciary provides written representations (including negative consent) that the fiduciary is a bank, insurance company, BD, RIA, or independent fiduciary managing at least $50 million.
  10. DOL will focus on compliance over enforcement: Labor says it will prioritize compliance over enforcement during the transition period so long as firms work diligently and in good faith to comply with the rule. ( Source:, published 5/26/17)

In short, we are entering a world where a ton of annuity sales used in IRA roll overs by the Fixed Index Annuity markets is being swept into a standard that requires full disclosure of commissions, conflicts and making sure the recommendation is demonstrably in the best interest of the client. There are a lot of effective compliance tools and courses developed for this transition, I strongly suggest structured settlement professionals and structured settlement planners adopt them on the same schedule and be ahead of the curve instead of behind it. 

Posted on May 26, 2017 and filed under Settlement Expert.

Does selling a structured settlement to a senior citizen expose agents to criminal prosecution?

A recent court case in California should give pause to virtually every structured settlement planner, agent or broker in the country as it seems to indicate that the sale of annuity products to seniors or claimants with impaired decision process could lead to criminal prosecution.

In this weeks “ Speaking of Settlements “ video broadcast, Mark Wahlstrom looks at the recent case of annuity agent Glen Neasham, a 52 year old annuity agent in California, who was recently convicted of felony theft charge and sentenced to 90 days in jail for selling a $175,000 annuity to an 83 year old woman who prosecutors alleged exhibited signs of dementia at the time of the sale. He was prosecuted under what are broadly referred to as “Elder Abuse” statutes that cover not only physical or nursing home abuse, but increasingly exploitation of seniors in the decision process of handling investments, savings and financial planning.  Annuity agent criminal intent

The article, written by WSJ staff reporter Leslie Scism, does an excellent job of covering the facts of the case and looking at the issues involved. You can read the full article by clicking here.

However, in this weeks broadcast Mark Wahlstrom elaborates on how this might impact structured settlement planners, annuity agents and others who deal with anyone over the age of 65. A great number of laws have been passed that REQUIRE banks and other’s to report suspected elder abuse or inappropriate influence in the planning or sales prospect, as happened in this case, making the likelihood of other such cases being pressed in other states quite high.

Some of the issues at stake here for structured settlement planners going forward are:

  • If state laws now indicate that any person doing planning over the age of 65 is considered elderly and is thus covered under these statutes, do planners and agents need to take particular care in dealing with anyone 65 or older if recommending a structured settlement annuity?
  • If the compensation for annuity sales in the form of a commission is going to be used to establish “criminal intent” as was the case in the Neasham prosecution, are there additional disclosures necessary on how an agent is compensated when dealing with any impaired claimant or senior?
  • How might this decision impact the structured settlement factoring business? If the high cost of “getting out of the product” is used as evidence of harming the clients, as it was in this case, what does this say about factoring company advertising and inducements to “ get your cash now” when it causes demonstrated financial loss to claimants in many cases to proceed down that path?

We anticipate there will be a great deal of follow up on this case and others like it around the country and we will continue to follow it and comment on how it might impact structured settlement sales and consulting moving forward.

Posted on March 21, 2012 and filed under Speaking of Settlements.

AIG affirms it's commitment to remain in structured settlements

In what is now becoming an almost daily update on AIG and it's constantly changing situation and profile in the news I now have some positive news for those who are involved with or work for the AIG structured settlement division.

Rick Woolams, Chief Claims officer for AIG Commercial Insurance sent a memo out to all AIGCI staff to address the concerns about whether or not AIG will retain a structured settlement arm or process in the event of a sale of American General or other life markets. In that memo he stated the following:

"AIG Chairman and CEO Ed Liddy announced AIG’s intent to focus the company on its core property and casualty insurance businesses, while entertaining the opportunity to sell several attractive businesses, including possibly AIG American General. These sales will generate the funds needed to repay the outstanding debt taken from the Federal Reserve Bank of New York. Many of you have asked about the impact of the potential sale of AIG American General on the structured settlement process. We don't anticipate changes to the current process. Our desire to offer a structured settlement as a settlement option has not been altered by recent events. The current approach in which both sides participate in negotiating periodic payments matched to needs promotes a resolution of the basis of fair compensation to the claimant and cost efficiency to the defense and the tort system. AIG American General remains a first option annuity provider and along with the other approved providers is part of a quality offer that is capable of meeting the needs of any claimant that elects to explore a structured settlement option. In essence, it will be business as usual. AIGCI will continue to have a dedicated structured settlements department that will work closely with you in the claims resolution process to maximize benefits to all involved. We will continue to handle large claims volumes (over 455,000 in 2007), make significant claims payments (over $73 million dollars in claims paid each business day) and offer structured settlement when it is appropriate to do so.

What will happen if there is such a sale? We will continue to attach great importance to our policyholders and to the relationships built in serving them. We will continue to offer premier, value-added service and support and we will continue to identify opportunities in the claims process to offer structured settlement solutions."

Obviously, very comforting to hear for those working with and at AIG in the structured settlement area and I commend Mr. Woolams for getting this out there. There has been a tremendous amount of uncertainty in the market, speculation on what the sale of AIG units could mean to the structured settlement community and what the business imperative would be for AIG commercial lines to keep a structured settlement unit. I know I have done plenty of speculating myself, largely on the premise that the loss of life markets would remove a substantial business purpose for a casualty company to retain a coordinated structured settlement program such as AIG has run for the last 20 years. I think it was an important step and statement by AIG leadership to get accurate information and a clearly stated position out to it's stakeholders so we can at least discuss the intent of AIG, even if no one really knows just yet what the final form of AIG is actually going to end up looking like.

My concern, as yesterdays commentary illustrated, is that once the US Government was let into the AIG house with the $85 billion infusion and now today news of an additional $35 billion of credit, the fate of AIG was removed from the hands of it's management and put into the hands of politicians. As the Congressional hearings illustrated, and a glance at todays headlines which are filled with stories of the $35 billion infusion, another big sales conference and other issues, AIG is up on the radar screen of the media and politicians. That is a very, very bad thing for any company in that it looks as if it is becoming the poster child of the credit bust and can't get out of the headlines. The purpose of yesterdays credit extension was to avoid the need to engage in fire sales so that tax payer return on the $85 billion can be maximized, but my question remains as to how exactly AIG is going to sell $85 billion in assets and retain it's essential core in a market where it's logical buyers are cash strapped as well.

Time will tell but this was a welcome clarification for those of us in the structured settlement industry.