Stuck in the DOLdrums

One of my old colleagues, Henry, retired recently. He had been in the industry for over three decades and I consider him a truly wonderful source of insight and experience.

Henry’s area of expertise is qualified plans and their administration. So, I probably should have paid more attention four years ago when he started talking about Advisors being held to a Fiduciary Standard. I told him there was no way anyone could expect every advisor to live up to that standard and that there was no real way to implement and/or monitor such a program.

I was wrong about the implementation, but I believe we are seeing fallout from the problems that monitoring such a standard imposes.

You have likely heard by now that the Fifth Circuit Court of Appeals decided 2-1 against the DOL Standard. As it stands currently, the rule does not exist. However, the DOL can certainly appeal this ruling. Also, the SEC is likely to have their own rules coming soon and there are also talks of insurance departments creating rules of their own.

This past weekend we learned of Facebook and Cambridge Analytica’s alleged abuse of 50+ Million user’s information. A few months ago, we learned of Equifax hiding a data breach that compromised over 143 million people’s information. Yahoo seems to be breached weekly.

Our industry is complex. We have hundreds of thousands of products being sold by hundreds of thousands of advisors with hundreds of thousands of different educations and experiences. I thought that this diversity would insulate us, but where I had a hard time seeing this rule coming into existence, it seems impossible for me to think that this rule, or other similar rules, will not be implemented.

It is true. The DOL, the government, and the public do not understand many of the intricacies of our industry. Lucky for us, they do not seem concerned with understanding it, they just want more transparency.

We have become more transparent in recent years, but we can do better.

Some things I would like to see the Insurance Industry lead with are:

  • Carriers should offer real insight to advisors as to how their specific products work
  • Carriers should be forthright with the public about what information they have, how it is used, and how it is safeguarded
  • Agent licenses should be abolished, because advisors should work on the client’s behalf, not the carrier’s

Taking steps towards these three objectives would immediately put our industry at the forefront of transparency and consumer protectionism. It might even instill enough confidence and goodwill in the public that some sales might come in from the sideline.

As a digital consumer, I want to know that my personal information is secured. I am sure you do too.

Henry understood this years ago. I think it is time we all embrace what is coming. As Gandhi said, let’s be the change we wish to see in the world.