DOL Rules and Impact on Agent

[scagnt83]

You would likely be better off without this form than with it. It makes it look like you're trying to CYA...

I'm not an attorney, but I am at a Holiday Inn Express right now.

I have kicked around the idea of my own secondary disclosure forms for clients to sign in certain circumstances, but never pulled the trigger.

For those of you who are familiar with the Glenn Neasham "criminal charges for selling an annuity" fiasco, one thing that the prosecution made a big deal about was the additional disclosure he had the client sign. The argument was "if you are doing right, then why would you feel the need for more disclosures when the client already signs multiple ones already?"... "Why would an honest person, in a reasonable situation, need disclosures signed above and beyond what the state has already approved as being enough?"

After seeing how it worked against him in court. I opt for the standard state approved carrier paperwork.

 

[DHK]

Eh... I wouldn't use that prosecuting attorney's question as a basis for not creating your own disclosures.

As I was thinking about this, what I would probably put together would be a "Your Costs and anticipated benefits" disclosure vs "My Commission" so that they don't get them confused - at least as it relates to fixed indexed annuities.

In short, it really shouldn't matter whether I'm paid $1 or $100,000... as long as the client knows what THEY are paying. If they understand the terms and costs of their product, the insurance company should be free to pay me whatever they want... as long as the product is in the best interests of the client.

Obviously, that wouldn't necessarily work with securities with their ongoing asset management fees and M&E, funds, and rider fees of VAs... but I think that would be the way I'd want to frame the conversation.

 

[Tahoe Ray]

Eh... I wouldn't use that prosecuting attorney's question as a basis for not creating your own disclosures.

As I was thinking about this, what I would probably put together would be a "Your Costs and anticipated benefits" disclosure vs "My Commission" so that they don't get them confused - at least as it relates to fixed indexed annuities.

In short, it really shouldn't matter whether I'm paid $1 or $100,000... as long as the client knows what THEY are paying. If they understand the terms and costs of their product, the insurance company should be free to pay me whatever they want... as long as the product is in the best interests of the client.

Obviously, that wouldn't necessarily work with securities with their ongoing asset management fees and M&E, funds, and rider fees of VAs... but I think that would be the way I'd want to frame the conversation.

Everything that you're saying is logical, but it doesn't mean that you still couldn't be vilified to a layperson for making a large commission.

Unless you have that same disclosure for every client, it is 100% accurate, and it doesn't have a client waiving their rights in any way, I wouldn't do it.

Even then, it can be twisted in a way to make you look bad.

You could certainly hire an RIA in a box-type company to do some compliant forms and process manuals to help back you up.

I think we likely need a lot more clarity before making any major business model changes anyway.....

 

[scagnt83]

You could certainly hire an RIA in a box-type company to do some compliant forms and process manuals to help back you up.

And a securities compliance lawyer will tell you that if you are a RIA, then regulations prohibit any contracts/agreements not approved by the State or SEC.

I realize that you are talking about a non RR most likely. But the reasoning behind the RIA regs rings true for fixed sales.

 

[DHK]

I suppose that when I mean "disclosure forms" that it was meant as further clarifying explanations, not an attempt to redefine anyone's rights under the law or make a new agreement. Nothing that I would create could ever do such a thing, only bring back to their memory what we've discussed. Clients can have short-term memories.

 

[pfg1]

Clients can have short-term memories.

No doubt. I have one good client that every year I have to completely re-explain everything he has going on. Its as if he literally forgets it all. But hey, its all good.

Another thing to consider... if someone decides AGAINST taking coverage of any type, it might be a good thing to document and have them sign. CYA the other direction.

 

[DHK]

Absolutely! Assurity has that form in their illustration system, although it has less relevance to annuity sales as it does to products that are based on health status.

ACKNOWLEDGMENT OF DECISION NOT TO APPLY

I hereby certify that the features of the policy offered by (XYZ Life) have been explained to me, and I have elected not to apply for coverage at this time.

It is also my understanding that this coverage may not be available to me in the future if there are changes to my occupation, health or income.


Signature & Date

 

[scagnt83]

Another thing to consider... if someone decides AGAINST taking coverage of any type, it might be a good thing to document and have them sign. CYA the other direction.

That is an old school sales technique to get them to think it over one last time... lol. Not saying your thinking that at all. But I used to hear stories about back in the day that some agents would really talk up the fact that they HAD to sign this and that it was a huge deal that they were not taking the policy. LOL.

On a serious note, that is very common in the group benefits world. It is best practices to have employees sign a form saying they were offered certain benefits and declined to take them. A lot of group enrollment forms actually have a box to check saying they decline coverage and they still are asked to sign the form and check the box even if they dont enroll. There have actually been lawsuits against companies where employees claim they were not given a chance to sign up for benefits and then they got sick.

 

[DHK]

Part of a fiduciary duty as a planner is to talk about other kinds of insurance coverage, like disability or long term care. Having a CYA form like this could insulate you from liability for NOT bringing it up. Of course, you should bring it up during reviews too, but at least you documented it each time.