Helping you navigate recent changes to the
  • Review and understand the DOL Fiduciary Rule. The National Association of Insurance Commissioners has a helpful LINK.
  • Thoroughly understand your clients’ objectives and complete/retain a Best Interest Questionnaire.
  • Keep a journal of your client conversations.
  • Maintain your product knowledge and clearly document your product recommendations and reasons behind them.
  • Review the sample forms we have included in this email (see red text).
Although GP Agency is not a fiduciary when acting in a wholesale capacity, we value our partnership with you and would like to help you navigate the Prohibited Transactions Exemption or PTE 84-24 rule.  

The DOL Rule is now effective, as of June 9, 2017 – any recommendation you make to your clients regarding rolling over or investing funds from a 401(k), pension plan, IRA, or similar account will be subject to fiduciary obligations and regulations under the new Department of Labor (DOL) Fiduciary Rule.   

The following components of the DOL Rule are now applicable:
• Expanded Fiduciary Definition      • Impartial Conduct Standards    
DOL’s intent was to revise ERISA to limit certain perceived conflicts of interest and provide tighter compliance boundaries around compensation. DOL believed that the marketplace had shifted considerably away from traditional pensions to individually managed retirement plans, requiring updates to ERISA and related exemptions to account for this shift. The result is the “Fiduciary Rule” – the most substantial DOL regulatory undertaking since ERISA was created in 1974.

This rule will remain in place until January 1, 2018. At that time, new compliance requirements may be implemented. The rule’s exemptions incorporate the Impartial Conduct Standards :
  • Acting in the client’s best interest – includes two new duties: Prudence (you exercise the judgment that a prudent investor would use in investing for his or her own retirement) and Loyalty (you put your client’s best interest first and are not influenced by other factors, such as compensation)
  • No materially misleading statements AND includes Disclosure Requirements: your relationship to the insurance company, sales commission, description of charges, conflicts of interest beyond the sales commission
  • Receipt of no more than reasonable compensation

As such, you are required to keep a record of having disclosed to the client commissions earned, any conflicts of interest, and your relationship to the insurance company. This disclosure must be provided to the client prior to the execution of the transaction and you need to keep copies of all documents involved in the sale for at least six (6) years.

We have attached a sample form: click HERE for the Disclosure Statement for Recommendations of Life Insurance Policies to Retirement Investors (revise as you see fit).  
Fiduciary Rule Compliance –  Best Practices:
Best practices to consider as you manage your new duties as a fiduciary.
1. Embrace your new duties as fiduciary. These new duties include prudence and loyalty to your clients in the qualified marketplace. Let your clients know that you have their interests above your own. Similarly, do not make any misleading statements about your role and the products you can offer.

2. Avoid (or disclose) material conflicts of interest.
Whenever possible, avoid conflicts. But if your situation makes those conflicts unavoidable, be sure to disclose them in full – and be open with your clients if they ask questions about your conflicts.

3 . Build your own “best interest process.” While there are many ways to build a best interest process, most come down to 4 basic steps:  
We have attached a sample form: click HERE for the Best Interest Questionnaire (revise as you see fit).

4. Be mindful when you offer fiduciary advice. Investment advice triggers fiduciary status in the qualified marketplace. Investment advice is defined as providing direct or indirect advice for a fee or other compensation for a recommendation…
  • to acquire, hold, dispose of, or exchange qualified monies, including 401ks and IRAs
  • as to how that property should be allocated after it is rolled over or transferred
  • as to management of securities or other property (e.g., portfolio composition)

A recommendation under the Rule is a communication that would reasonably be viewed as a suggestion to take a particular course of action. While a PTE is not triggered until compensation is paid, you still may be providing investment advice without knowing you are. As a best practice, keep communications generalized until you are prepared to make an actual recommendation. Non-fiduciary general communications are excluded from the definition of “recommendation,” and include communications such as newsletters, marketing materials, and widely attended speeches and conferences, etc.  

5. Take a heightened approach to replacements and rollovers. Recommending that a client stop doing one thing with their money and instead do another thing brings about heightened scrutiny whenever that rollover or replacement results in compensation payable to you. As such, be sure to explain to the client why you recommend the new product and how it will better serve the client’s financial needs and objectives. Describe the differences in fees, what benefits would be lost or gained, and document the ultimate reason you and your client agreed that the new product is best.  We have attached a sample form: click HERE for the Suitability – ERISA/IRA Rollover Worksheet (revise as you see fit).

6. Show your work. Just as your math teacher used to tell you to show your work, solving a client’s retirement objectives also requires that you to show your work – especially under the DOL Rule. If you’re ever challenged under the Rule, you will have documentation showing your due diligence and your compliance with your fiduciary duty.

7. Set up your own checklist or reminders for DOL compliance. To help you comply with this Rule, consider putting together a short checklist that you can utilize with each sale.

The DOL Fiduciary Rule has certainly had a major impact on the retirement product industry, specifically the annuity industry. While no one knows what the future holds, it is important to recognize that the Fiduciary Rule is law as of June 9, 2017. Because PTE 84-24 puts compliance directly on agents, it is vital that you take the steps necessary to comply. We hope you found this information helpful; please keep in mind that each carrier may require specific forms in response to this Rule.

GP Agency - Raleigh
3820 Merton Dr., Suite 100 (27609)
P.O. Box 20729, Raleigh, NC 27619
Office: 919.834.7937
Toll-Free: 800.283.TERM (8376)   
Fax:  877.821.7191
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GP Agency - Greensboro
1175 Revolution Mill Dr., Studio 10
Greensboro, NC 27405
Office:  336.852.2786
Toll-Free:  800.242.8522
Fax:  877.422.6981
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Hours: M - TH: 8:00 am - 5:30 pm   |   F: 8:00 am - 3:00 pm

GPAgency is a national full-service insurance brokerage firm that has been dedicated to the success of independent brokers since 1968. Representing nearly 50 carriers, we specialize in life, disability, long-term care, and annuities, as well as difficult to place business.