By Nick Bates, Vice President of Annuity Sales
One of the critical unresolved questions raised by the Department of Labor (DOL) fiduciary rule is how the industry will handle the Best Interest Contract (BIC) for qualified fixed index annuity sales. In a nutshell, the BIC is a contract between a Financial Institution (FI) and the client that, among other things, will allow producers to qualify under an exemption to receive commission-based compensation tied to qualified business after the DOL rule goes into effect in April 2017. There are many considerations in the contract that will have to be satisfied, but it does at least enable the producer to continue receiving commissions.
If you are affiliated with a broker/dealer (B/D) or an investment adviser (IA) firm, it is likely that one of those entities will sign off on the BIC, when required, for your FIA business after April 2017. However, not every organization may decide to take on this responsibility or if they do, they may not do so for all producers. So if you are with a B/D or an IA firm, you should check with them on their plans for handling the BIC and any qualifications (e.g., background, production) they might require of their producers.
For insurance-only producers, the situation is less straightforward.
As an insurance-only producer, the BIC may impose some limitations on what FIAs you will be able to sell after April 2017. Although none have made an official decision yet, we hear that some insurance carriers are considering signing the BIC, while others are going to rely on other FIs such as B/Ds and IA firms to sign the BIC for their affiliated producers. Carriers are still weighing the impact of such decisions, since signing the BIC places many requirements on them and increases their liability. Some insurance-only producers with no other FI affiliations could feel like they are out on an island come April 2017.
If you’re concerned about how to move forward, take a deep breath. Ann Arbor Annuity Exchange is working on a solution for our insurance-only producers. Our network of affiliated marketing organizations has applied with the DOL to be considered a FI. This could allow us to sign the BIC under certain circumstances. We will share more information with you on this as we have updates.
If you are an insurance-only producer, it is more important than ever to be affiliated with a marketing organization such as Ann Arbor Annuity Exchange that is working to have viable solutions for your business in a post-DOL industry. If you would like to discuss how your business may change under the DOL rule, please give us a call at 800.321.3924.
Nick Bates | Vice President of Annuity Sales
Ann Arbor Annuity Exchange
Ph: 800.321.3924 x121 | Dir: 734.786.6121
Ann Arbor Annuity Exchange is not affiliated with the Department of Labor or any other governmental entity.
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