GAO suggests polling the audienceBlog added by Christina Pellett on January 19, 2011
Christina Pellett

Christina Pellett

Clearwater, FL

Joined: September 23, 2010

Passed on July 15, the Dodd-Frank Wall Street Reform and Consumer Protection Act set forth several game plans for whipping the financial services industry into shape. One of the most hotly contested sections dealt with the possibility of a fiduciary standard for brokers and agents dispensing investment advice. Whether this would extend to insurance advisement is unclear, though it most certainly would include variable annuity sales.

Essentially, the legislation gave the SEC the authority to recommend a fiduciary standard after preparing and submitting a study to Congress that examines any gaps or redundancies in the standard of conduct and supervision of brokers, dealers, and investment advisers who offer personalized investment advice about securities to retail customers. The Dodd-Frank Act also included incentives for states to begin investigating and cracking down on the abusive use of financial designations and titles.

Both of these provisions essentially call for more investigation, and the GAO has recently recommended that the SEC and NAIC seek public opinion as part of that investigation.

Nice idea, but how effective will that be? We already know that the industry itself has mixed feelings about a fiduciary standard, and that most agents oppose it. And it’s likely that the designation issue is pretty cut-and-dry with that sector, as well — those who recognize misused designations, will be OK with tossing those into the “do not do” heap, while those who hold distinguished designations will want to keep holding on to them.

The potential problem as I see it may come from consumers who had been burned. This is sort of along the same lines as the 151A controversy: A television show caught a lot of insurance agents with their hand in the cookie jar, and all of a sudden, all annuities were bad. I’d hate for distinguished designations to get caught in the same fire.

When it comes to fiduciary duty and designations, seeking the opinions of all involved – the industry, agents, and consumers — is essential. But I only hope the regulatory bodies lead with reason rather than instinct this time around, keeping in mind what “opinion” really means.
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