Dennis Martin, FSA, FCIA, MAAA,

In a single word, the market for asset-based long term care (ABLTC) protection is booming. All factors considered the growth outlook continues to be promising for financial professionals and carriers alike, and most important for the policyholders who seek the peace of mind provided by the guarantees and benefits that ABLTC provides. 

In fact, 2017 marked the third consecutive year of double-digit growth for ABLTC products. In contrast, sales of stand-alone LTCI declined 22.8 percent from 2016 to 2017, following the 12.6 percent decline in 2016 (from 2015). ABLTC sales are now more than 10 times the premium volume of stand-alone LTCI.

In its recent report on sales of combination products, LIMRA reported more than $4.1 billion in premium, and more than 260,000 policies sold, in 2017.¹  This includes policies with chronic illness and acceleration-only riders, as well as long term care extension products, which offer a more robust and fulsome long term care benefit solution. All told, these products now represent 80 percent of the overall market for individual long term care solutions. 

When we look more narrowly at ABLTC products offering extension of benefits for  long term care expenses, the data show those to be the fastest-growing segment. The number of  long term care extension policies sold in 2017 grew 24 percent compared with 2016, while long term care acceleration policies sold grew two percent in that period, and chronic illness acceleration policies declined three percent. The latter two types are primarily life insurance sales and accordingly more closely follow life sales trends. 

For the fast-growing ABLTC-or long term care extension-market, the top three carriers accounted for 68.8 percent of the market share in 2017, down slightly from 71.2 percent in 2016. Those three carriers -Lincoln Financial, OneAmerica® and Pacific Life-have remained unchanged, as have other carriers in the top 10 in terms of market share. 

In addition to accelerating the policy death benefit, long term care extension products extend benefits for long term care expenses if the death benefit is exhausted. And, if a policyholder doesn’t exhaust the death benefit for long term care expenses, the remaining portion will still pass to heirs. Another common feature of these products is that they offer guaranteed premiums, benefits and cash surrender values. In an era of rate hikes on stand-alone LTCI policies, these products are becoming attractive to a growing number of people as they become aware of their options and the significant need for long term care planning as part of their overall financial plan. 

More options, more carriers
The market is continuing to increasingly embrace recurring premium ABLTC protection, one of the more recent innovations since ABLTC products were first introduced several decades ago. Recurring premium options allow greater flexibility for long term care planning in the context of individuals’ overall financial plans, allowing them to choose say 10-year, 20-year, or even up to lifetime premium payment options. 

Single-premium options, including annuity-based long term care protection, continue to remain attractive for many. As people re-evaluate their financial plans near retirement, repositioning an asset to provide long term care protection is often an opportunity and a common sales theme in this market. Other times, people have a lump sum-like an inheritance or buyout- and find a single-premium ABLTC product a good option to provide long term care protection if it’s needed or a way to leave a legacy to the next generation through the remaining death benefit if long term care benefits aren’t exhausted. 

By the numbers, recurring premium policies are ever more popular and fueling the growth. Last year, recurring premium ABLTC policies accounted for 89 percent of all ABLTC policies sold according to LIMRA. The average premium for these policies was $6,397, and the average face amount was $319,776.  At one time recurring premium options couldn’t compete on price with stand-alone LTCI insurance, but as rates have risen for stand-alone LTCI the value offered by the recurring premium options has become more attractive-especially given the guaranteed rates and additional benefits that stand-alone long term care insurance can’t provide.  

As we’d expect, given the growth opportunity, more carriers are evaluating and entering the ABLTC market although the pace has been measured. These products offer growth potential, but they also offer some inherent complexity from both business and actuarial management perspectives. Given the challenges and headlines in the stand-alone LTCI market in recent years, it is important to “measure twice and cut once.” To me, this means taking the time to learn from challenges in the stand-alone LTCI market and ensure we have a full understanding of the risk profile so our products will stand the test of time. 

Independent agents lead the way
In 2017, independent agents sold more than 60 percent of all ABLTC policies and reported 28 percent growth in premium on those policies, even though the number of policies sold remained flat from 2016 according to LIMRA. Across the market, we’re seeing a growing awareness among financial professionals of how ABLTC can help protect a client’s income throughout retirement by helping with long term care expenses. 

Affiliated agents and broker/dealers also showed strong growth in both policies sold and premiums from 2016 to 2017, showing that, across distribution channels, financial professionals and their clients see the value in ABLTC protection. The only channel that posted declines in both ABLTC premium and policies was banking and savings institutions, which likely had more to do with structural changes and uncertainty around the DOL Fiduciary Rule than ABLTC products, and we would expect to see a rebound in that channel as DOL concerns are resolved. 

Bright outlook continues
ABLTC’s emphasis on guarantees is likely to resonate even stronger if uncertainty in today’s broader economic climate continues to emerge, and their value will be magnified in the event of an economic downturn. The guarantees also provide a strong backdrop for advisors, regardless of what best-interest standard might emerge. Quite simply, these products do what they are designed to do: Provide peace of mind year after year. 

Demographic trends also favor this market. The 50-and-over demographic is growing. By 2020, more than 118.7 million people will be 50+, up from an estimated 108.7 million in 2014.² As the number of people grows who are either retired or preparing for retirement, the market for solid financial guidance grows as well. 

That doesn’t mean ABLTC is only for those nearing retirement however. There’s growing evidence that younger people find ABLTC an attractive alternative to “use-it-or-lose-it” stand-alone LTCI protection. This generation is also seeing their older relatives cope with long term care expenses in retirement, and are increasingly building long term care protection into their financial plans. LIMRA reports that about half of in-force ABLTC policies-48 percent by number of policies and 56 percent by face amount-are held by people under 50, although those numbers include acceleration-only policies so aren’t necessarily indicative of broad long term care awareness. 

And finally, a reminder of one of the chief advantages of ABLTC protection: Although growth in the market is fairly recent, the products themselves are time-tested. Throughout economic downturns, healthcare upheaval, and disruption in the stand-alone LTCI market, ABLTC products have a decades-long history of delivering on their promises when customers need them most! This could be seen as a result of developing technology that helps with management resources, such as CMMS for Healthcare, which is often tied with asset management as well as other support systems.

References:

1. “U.S. Individual Life Combination Products Annual Review 2017,” LIMRA.
   
2. “Getting to know Americans Age 50+, AARP, accessed Dec. 11, 2017, at https://www.aarp.org/content/dam/aarp/research/surveys_statistics/general/2014/Getting-to-Know-Americans-Age-50-Plus-Demographics-AARP-res-gen.pdf.
   

Now Is The Time To Educate Your Clients On The Living Benefits Of Asset-Based Long Term Care

What do your clients know about long term care? Do they understand the living benefits that asset-based long term care protection can provide? 

Recent research suggests most of them don’t. 

In August, OneAmerica® commissioned a national survey, conducted online by Harris Poll1 to gauge some of the misperceptions about long term care that professionals in our field have been hearing for years. The results were eye-opening. On one hand, for many years, the long term care insurance market has been dominated by traditional, health-based LTCI, so it’s not surprising that Americans understand less about how asset-based products work. However, even among Americans age 45 and over—the segment we typically think of as preparing for retirement—showed a lack of general understanding about how paying for long term care needs might affect their retirement strategies. 

You might have seen some headlines about these findings, but the results are worth exploring more. These results can be useful in thinking about how to bring up long term care protection in your next client conversation. 

Paying for long term care
Let’s start with the basics—how do people plan to pay for long term care needs? The survey responses (see fig. 1) show a widespread lack of planning at worst, and potential gaps in planning at best. A whopping 61 percent of Americans age 45 and older said they’d expect Medicare or health insurance to help foot the bill, even though neither of those typically cover long term care. Only nine percent answered they’d use Medicaid to pay for long term care needs, when in reality about 62 percent of current nursing home residents are supported primarily by Medicaid.2

Are people confusing Medicare and health insurance with Medicaid? Maybe, and if so they may also be confused about Medicaid’s qualification requirements. They may be surprised to learn that, unlike Medicare, Medicaid has strict asset limitations that could affect the assets they’ve earmarked for retirement or the legacy they plan to leave. One of the benefits of asset-based long term care protection is that the client maintains ownership of their asset—which can be used for long term care costs if necessary but otherwise can be left as a legacy. 

Fewer than half—40 percent—of Americans ages 45 and older said they’d pay for long term care needs with personal savings and/or other assets. For those who plan to self-fund long term care, it’s worth a conversation to make sure they understand a) the tax implications of liquidating assets when they’re needed for long term care; and, b) the true cost of long term care, whether it’s provided in-home or in a facility. 

The cost of care varies depending on the duration and type of care needed and where you live, but averages range from $20 an hour for a health aide to $7,698 per month for a private room in a nursing home.3 Those averages are generally higher in the northeast and on the west coast. 

At even the low end of costs, long term care expenses can quickly exceed retirement savings, resulting in an income gap that depletes assets faster than you or your client planned. Long term care protection can help close that gap by providing income to be used for long term care expenses.

Tax implications of self-funding also may take a bigger bite out of your client’s assets than they realize. Liquidating assets to pay for long term care will often have tax consequences, whereas benefits paid from qualifying long term care protection are non-taxable. What client doesn’t want to avoid unnecessary tax burdens in retirement?

Living benefits of long term care protection
If the need for long term care protection is so high, and quality coverage is available, why don’t more people have it? Estimates vary, but the latest data from LIMRA suggests that less than seven percent of consumers over age 50 have long term care coverage.4

Once again, our survey pointed to misconceptions about long term care insurance and to a need for education on the living benefits that asset-based long term care can provide—which can overcome a number of the traditional objections to long term care insurance. 

More than half of Americans who don’t have long term care insurance – 53 percent – said the reason they don’t have it is because it’s too expensive (see fig. 2). Interestingly, this perception held true regardless of income level, with 48 percent of Americans with an annual household income of $100,000 or greater listing expense as a reason they don’t have long term care insurance. Anecdotally at least, this perception seems to be driven more by the experience or fear of significant rate increases that have been experienced for traditional LTCI. 

In reality, asset-based long term care products put protection within reach of more people than many realize. While asset-based long term care is not inexpensive, once clients understand the features and benefits they quickly see the value. Guaranteed premiums give clients the peace of mind they seek, and flexible payment options let clients budget their long term care protection expense in a way that best fits into their overall strategies. Some clients may want to reposition an existing asset into an asset-based long term care policy; others may choose to pay over a longer period of time and enjoy guaranteed premiums and the option of lifetime long term care benefits.

Asset-based long term care protection works to provide living benefits by allowing 100 percent of an accelerated life policy death benefit, or 100 percent of an annuity accumulation value, to be paid for qualifying long term care expenses (paid monthly). A continuation of benefits rider can ensure payments continue after the death benefit or accumulation value is exhausted. And a joint protection option can insure two lives with one policy. Benefits not used for long term care while the insured is living are passed on to heirs.

Beyond expense, 25 percent of Americans who don’t have long term care insurance said it’s because they don’t want to pay for something they may never need. This is the “it won’t happen to me” crowd—a crowd who would benefit from learning more about the death benefit provided by asset-based long term care protection in the event the long term care benefits aren’t exhausted. Asset-based long term care may also offer a return-of-premium option if clients change their mind about continuing protection. 

Americans in the highest annual household income level—$100,000 a year or greater—were more likely than other income brackets to say they’ve heard negative things about long term care insurance (19 percent vs. six percent of those whose annual household income is less than $100,000), suggesting it’s time to introduce your higher-income clients to asset-based long term care protection. Sales of asset-based long term care products are on the upswing as more people discover its value —LIMRA’s latest data4 suggest six in 10 consumers would consider such a product.

This brings us to the 13 percent of Americans who don’t have long term care insurance and say it’s because they’ve never heard of it, and the nine percent who say they don’t know how to get it. Consider them your invitation to start the conversation about long term care, including the living benefits that hybrid policies can provide.

References:

1. This survey was conducted online within the United States by Harris Poll on behalf of OneAmerica Financial Partners from August 17-21, 2017, among 2,065 U.S. adults ages 18 and older, among whom 1,565 do not currently have long term care insurance. This online survey is not based on a probability sample and therefore no estimate of theoretical sampling error can be calculated. For complete survey methodology, including weighting variables, please contact tammy.lieber@oneamerica.com.
   
2. Medicaid’s Role in Nursing Home Care, The Henry J. Kaiser Family Foundation, accessed Feb. 6, 2018, at www.kff.org/infographic/medicaids-role-in-nursing-home-care.
   
3. Costs of Care, U.S. Department of Health and Human Services, accessed Feb. 6, 2018, at http://longtermcare.acl.gov/costs-how-to-pay/costs-of-care.html.
   
4. Combination Products Giving Life Back to Long-term Care Market, Nov. 9, 2017, LIMRA Industry Trends blog, www.limra.com/posts/pr/industry_trends_blog.
   

Five ways to build trust with clients, keep cool through regulatory chaos—and win by embracing change

Change happens. It’s ubiquitous. And it can be tumultuous—especially in the case of the Department of Labor Conflicts of Interest Rule, aka the Fiduciary Rule. 

After a series of fits and starts, on June 9 the Fiduciary Rule officially kicked into effect. While full enforcement is on hold until at least January 1, the rule has already had an effect on our industry and is certain to shape the future, regardless of how it may change. 

Now more than ever, those of us in the financial services industry best serve our customers by handling this uncertainty thoughtfully and strategically. It’s an ideal time to reflect on how and why we do what we do. With that reflective perspective in mind, I offer five ways to apply a level-headed approach to developing and marketing your business and your products.

1. Give change a warm welcome.
One thing I’ve learned from my boss and mentor, Pat Foley (president of OneAmerica Individual Insurance and Retirement Services), is to embrace change. Pat’s philosophy—look for the positive in change—has transferred to our entire organization. It’s all about lowering your resistance. Instead of fighting change, look for the good things that can come about as a result of it. That may sound glib, but I’ve found the approach offers a healthy framework for moving forward. Pat’s advice is to look for three positives in any change. What’s the bright side? What are the opportunities? Most people resist change and end up losing time and energy as a result. When you keep a positive attitude you expend less negative energy.

The Fiduciary Rule really is another opportunity to prepare for and capitalize on change. Compliance with the rule has had an impact on our business, yet we must keep moving forward and looking for ways to grow within the framework of the regulations.

How? Here’s one example: As millennials enter the marketplace, we’ll all need to develop new ways to market our products. Millennials expect both authenticity and multi-channel marketing. We’ll have to learn how to communicate authentically and in ways that resonate with younger consumers. In today’s world, that requires a greater degree of transparency than we’ve had traditionally. The Fiduciary Rule’s focus on transparency offers an opportunity to communicate with younger consumers in the way they expect. 

Here’s another example: We’ve approached the Fiduciary Rule as an opportunity to fine-tune and streamline our products. Although the Fiduciary Rule focuses a lot on fees and expenses, we know that the cheapest products won’t necessarily be the best products in the long run. 

This effort led us to discontinue new sales of our proprietary variable annuity products and to make some changes to our fixed indexed annuity products. We also introduced improvements and adjustments to commission structures, bonuses and renewals as part of a compensation modernization project that happened to coincide with the Fiduciary Rule. 

In the end, the rule gave us an imperative to adjust our product offerings, and we worked hard to improve both our customer and distribution value propositions at the same time. 

2. Innovate inside the box.
Outside-the-box thinking isn’t easy to do when you’re part of a heavily regulated industry. In our business, we manage for long term financial strength. The products we develop need to be viable 20, 30 or more years down the line. You can’t get too far outside the box and still maintain prudence and the best long term view, which centers on meeting the customer’s needs and maintaining financial strength. 

The insurance industry may not have a reputation for innovation like the tech field does, but that doesn’t mean we can’t be forward-looking. For us, innovation is about creativity within a framework.

When you’re targeting a new audience for example, everything old is new. Building relationships through transparency and trust are more important than ever. So we’re going to have to leverage technology and be more creative to really communicate and reach people.  

We focus on collaborating with our distribution, and providing them with more than products to sell. We provide education, materials and systems to help build relationships with clients and help them make the emotional connections to the need for our solutions. Rather than focusing on bad things that happen (such as death, disability or a long term care event), we focus on helping people understand consequences and improve outcomes so they know if bad things do happen they’re prepared and their loved ones will be protected–which provides the peace of mind they’re seeking.

3. Try new combinations.
Another way to innovate inside the box is to take things you know work well and put them together in a new way. For example, one of our products combines asset-based long term care and whole life insurance. It’s like combining chocolate and peanut butter to create something new. The result is a product that’s stable, predictable and guaranteed. And while it’s not new (it’s been around 28 years), it’s still viewed as innovative. Building something that can stand the test of time and maintain its relevance is its own kind of innovation, especially in today’s rapidly changing world.

Indexing is another example of a popular, robust product feature in the marketplace. We combine it with participating whole life insurance to create an indexed dividend option. This provides the best of both worlds by offering the strength of whole life guarantees along with upside potential based on changes in a market index.

Along the same lines, we’re looking for opportunities to work with our distributors in new ways, not only to navigate the new fiduciary regulations effectively, but also to help more clients protect their lifestyle throughout retirement. 

We recently refined the structure of our marketing and distribution teams to ensure we’re best positioned to support and collaborate with each of our distribution channels. In an ever-more-demanding world forging such relationships is critical to meeting and navigating regulatory requirements, but it also ensures the best use and return on available time and marketing dollars.  

4. Start with values.
What are your values? Are you committed to helping clients prepare for the future? To recommending products that will perform regardless of economic conditions?  To doing the right thing?  

When you have a strong set of core values, it’s a lot easier to deal with change and make decisions quickly. It’s also easier to build trusting, long term relationships with your customers. We believe in discipline, stewardship and integrity. We’re more into the steak than the sizzle. These values create a foundation that guides us in our decisions. 

Values can provide stability in times of change—both for employees and for customers. If you haven’t articulated and shared core values for your company or brokerage, now’s an ideal time to do so.

5. Be one of the good guys … and keep earning commissions.
Our industry exists to protect people and secure their financial futures. If everyone had more than enough savings when bad things happen we’d all be fine. But most people don’t, and they need the insurance industry and their products to step in when the unexpected happens. 

Most people also don’t want to think about the end game, or about the consequences when bad things happen. In fact, most of us don’t think bad things will happen to us–they only happen to other people. As a result, very few of us actually seek out and purchase life, disability or long term care insurance on our own. That’s where a qualified insurance agent makes a difference. He or she is trained to help identify potential clients and, through the discovery process, learn what’s important to them, educate them about the potential consequences, and about products that could be a good fit for their personal financial picture. 

All this education is provided at no initial cost, on the prospect and belief that once people understand the complete picture they’ll choose a solution that pays a commission to the agent. Of course, if the client doesn’t purchase there’s no cost for the education and no commission.  Commission-based products certainly have received a bad rap under the Fiduciary Rule, but these products also have a positive impact on consumers:

• They provide an incentive for agents to meet new clients.  An agent’s incentive is to ultimately make commissions, of course, but it’s also an incentive to do the important work of educating people and helping them address the consequences of bad things that inevitably happen.  
• Consumers receive personal attention and a review of their situation at no cost, without any obligation to purchase. They wouldn’t typically receive this from any other type of financial professional.  
• For most life insurance and related products, the expected holding period is seven to 10+ years.  As with any “buy and hold” type of product, commissions usually provide the lowest cost option (as compared to an ongoing level fee).

The Fiduciary Rule encourages all of us to take a closer look at commissions. In many cases upfront commission sales may be the best choice for some clients—including millennials. This is especially true when the client’s individual circumstances call for a buy-and-hold strategy like life insurance and annuity products.  

Looking to the future, we’ll increasingly have more transparency and disclosure around compensation practices. However, with appropriate disclosure and understanding (which already happens in many cases), our model will stand the test of time. We’ve built our industry on individual relationships, based on trust and integrity, and with a long-term focus. 

We must continue to keep these values in mind and adapt our approach and messaging to the emerging environment. Our products remain strong and relevant, and companies that adapt most effectively will continue to have opportunities, no matter what regulatory changes come next.

What does it mean to be a fiduciary?  With the looming DOL Conflict of Interest Rule (commonly referred to as the fiduciary rule) scheduled to come into effect next April, this question is no doubt on the minds of most financial professionals.  

Indeed, many who would have answered that question confidently even 12 months ago are trying to understand what all the fuss is about and what it means for them and their practice.  While there is still much uncertainty around the impact of the rule, one thing is certain—it will create change across the financial services industry.  

There are varying perceptions, positive and negative, around the rule depending on the constituency. I believe the insurance industry and insurance-based distribution will respond to the rule as mandated and continue to deliver valuable products to our customers. 

But before we explore how the rule is changing the industry, let’s take a look at more elemental issues. What does it mean to be a fiduciary, and how will this change affect you?  

First, consider these questions:

1. Do you believe you offer prudent recommendations in the best interest of your clients?

2. Do you avoid misleading statements in your sales process?

3. Do you feel you’re reasonably compensated for the services you offer your clients?

If you quickly and confidently answered yes to these questions, congratulations are in order. You are, at least intentionally, meeting the impartial conduct standards required of a fiduciary under the new DOL rule.  So why, then, is the rule such a big deal?  

How did we get here?
In the 40-plus years since the federal government enacted the Employee Retirement Income Security Act (ERISA), the retirement landscape has changed dramatically. That’s one reason the DOL has asserted it introduced changes to its fiduciary rule. Between 1974, when ERISA was passed, and today, the ways in which people think about and save for retirement have evolved.  Back then, individual retirement accounts (IRAs) were brand new. Today, IRAs capture roughly 30 percent of the retirement market—and trillions of dollars in assets that, and until the DOL’s ruling, hadn’t been subject to ERISA’s protections. That was a sticking point for DOL leaders. 

The major intent behind the rule as asserted unabashedly by the DOL was to increase the DOL’s oversight of and influence on the IRA marketplace.  Under the new rule, the DOL will hold the ERISA plan and IRA marketplaces to a broader fiduciary standard, which will be enforced by the DOL, in the case of ERISA retirement plans, and the plaintiff’s bar (under the newly-required “Best Interest Contract (BIC)”) in the case of rollovers and IRAs. The rule also will govern distributions from qualified accounts—even after they’ve rolled over into an IRA. 

Fixed indexed annuities also have been drawn into the rule.  Under the final rule, a BIC will be required to receive a commission when recommending a fixed indexed annuity.  This was one of the “surprises” in the final rule, and could end up having some of the greatest impact on the market.

It’s worth noting that the rule does not cover non-qualified assets, so a financial professional can offer recommendations on these products without being subject to the requirements of the rule.

In essence, the rule expands who is considered a fiduciary and what constitutes a fiduciary act. Under the old rule, these five points defined “fiduciary advice” as: 

1. Making investment recommendations

2. On a regular basis

3. Pursuant to a mutual understanding

4. As the primary basis for a plan’s investment decision

5. Individualized to a plan’s needs

The new definition of fiduciary eliminates numbers 2, 3 and 4. So, in effect, anyone who is compensated for making investment recommendations, which are individualized to a plan or individual investor’s financial situation, is acting as a fiduciary.

Key implications and some silver linings
Some of the key implications of the fiduciary rule relate to disclosure, fixed indexed annuity changes, and the extended rules to rollovers and distributions.  Each of these areas represents a center of significant change—as well as some areas of opportunity in the industry for those who are able to pivot.

Increased disclosure will most likely create downward pressure on fees and commissions, and we’ll see standardized compensation models emerge.  Looking at the real estate industry may provide an indication of how this will play out for financial professionals.  When looking to sell a home, people can select the level of service they want–everything from a full-service broker to a listing agent only, to self-representation.  Disclosure and transparency provide consumers an opportunity to assess value for cost and choose their desired level of service. No one is surprised by the compensation, and most consumers, including me, will continue to choose full-service brokers, because they’re willing to pay for the value of more robust services.  

I fully expect low-cost and “do it yourself” models will continue to emerge in financial services, just as they have in real estate. But for high quality financial professionals, the fiduciary rule and the corresponding increased disclosure and transparency create a requirement to call attention to the full value provided to clients.  Indeed, many professionals are already in good shape in this regard, and many more will learn to pivot and communicate with their clients about all that financial professionals do.  While the costs associated with these services will be disclosed, the value of the services will also be revealed.  

As the fiduciary rule relates to the BIC and fixed-indexed annuities, the most dominant implication will likely be a disruption of existing distribution channels.  

The BIC is an enforceable contract between the financial institution and client that commits the financial institution, through the actions of the financial professional, to a fiduciary standard of giving advice in the client’s best interest.   Under the final rule, a financial institution is defined as a bank, insurance company, broker-dealer or RIA.  Notably, independent marketing organizations, who are the primary distributors of fixed indexed annuities, are not included in the definition (although they can apply for an exemption).  Absent such an exemption, the insurance carrier will be required to sign the BIC and assume the associated liability (the BIC will be essentially enforced by the plaintiff’s bar).  The rub here is that the insurance company typically doesn’t have sufficient control or influence over IMOs in today’s world to be comfortable accepting this fiduciary liability risk.  As a result, IMOs and carriers alike, continue to review strategic alternatives to continue to provide valuable advice and products to consumers in their best interest, in compliance with the new DOL rule.  

The outcome is still not clear, and it is likely to vary between different companies and firms, at least in the short term.  What is clear is that the BIC requirements will prove to be a catalyst to reevaluate business models and strategies.  Increased regulations and compliance in the new environment may make it more difficult to go it alone. Companies, marketing organizations, and financial professionals alike will need to evaluate their business models, consider their core competencies, and identify what is needed in the emerging environment.  

While independent distribution will clearly continue to play a significant role, we may see companies and IMOs being more selective in who they align with to ensure that they can establish the policies, procedures, and sufficient controls required in the new environment.  

It will also lead to changing roles for many financial professionals. Some may resign from certain aspects of their business, but others likely will choose to accept the new standard and align themselves with firms that can help them thrive.  In most cases, financial professionals will need to more closely align with a financial institution (or marketing organization with established fiduciary capabilities).  Importantly, financial professionals should also keep in mind that marketing groups, firms, and carriers likely will become more discerning with respect to the professionals they bring on board. 

Rollovers and Distributions
As the fiduciary rule pertains to rollovers and distributions, it is sure to apply pressure to the asset-gathering business. Smaller rollover opportunities may become less appealing, and more “stay in plan” decisions may be made. 

If this sector represents a small portion of your revenue, it will be important to weigh the potential cost associated with continuing in the same direction versus the potential benefits of reshaping your practice and looking for new opportunities. Financial professionals who have a sizeable block of assets under management may, however, simply have to deal with the complexity of the new rule.  

If financial professionals find themselves squinting to see the opportunity in all of this, they’re not alone.  But some options are beginning to come into the picture.  One could simply choose to focus on traditional insurance and risk transfer products for non-qualified assets that are outside the scope of the DOL and avoid the complexity altogether. Alternately–and more likely– renewing concentration on these products may help offset potential lost revenue. 

Another option would be to identify additional products or solutions for your client base to help restore or even grow revenue. Asset-based long term care products have the potential to be a nice fit in the new environment as a wealth protection tool.  If a financial professional is already talking to a client about fee structures, it makes sense to talk about products like these and repositioning assets. 

As much as financial professionals may be feeling fatigued by the combination of market volatility and regulatory change, savvy clients may be experiencing the same.  Being able to introduce a solution that is stable, predictable and guaranteed may be an ideal complement to an existing business model. 

What next?
The industry is evolving, as it has been since its inception.  We happen to be at a point of more significant change than many of today’s professionals have experienced in their careers, and that can be unsettling.  But those who remain intent on finding opportunity amidst the uncertainty will create the strongest advantages for their businesses after the fiduciary rule is implemented.  

Walking into the offices of a nearly 140-year-old company every day has some advantages–among them being a constant reminder that change in the industry is both inevitable and survivable. Nearly 140 years ago, my company’s earliest clients were still 50 years away from having electricity in their homes.  Times certainly have changed, and the financial services industry continues to evolve right alongside new technological advances. But the strength, stability, and peace of mind that foundational insurance products represented to so many families then remains at the core of our business today. It’s important to look at the fiduciary rule through that lens as we create plans to thrive in the new environment. 

OneAmerica® is the marketing name for the companies of OneAmerica.