Quarterly Newsletter - January 2018
“To appreciate the beauty of a snowflake it is necessary to stand out in the cold.” - Aristotle
For many of us this winter has been so cold that standing outside has been painful. I have heard several people comment that it is crazy to live where the cold can hurt so much. Having come through an unbelievably cold January, spirits are rising here in our office as we desperately notice each small sign that we are moving toward spring. We notice when the temperatures rise slightly, we notice the sun feels a little warmer, and we are very happy when we notice the days are getting longer. That is the great gift of January – we start to put some distance between us and the shortest day of the year.
One of the hardest parts of the frigid temperatures was my regular lunch time walk with Sasha. As an Alaskan Malamute, she loves the cold weather and she would have been happy to double our usual walk. But all I wanted to do was stay inside. Now that the cold snap has departed, I am reminded every day about the pleasure of having our office in this small town. On each walk I see the same people at their desks at local businesses or in their retail shops. I am seen too, which is a reassuring quality. When I am not walking Sasha at 12:30 or so – depending on my call schedule – folks around town worry that something has happened to Sasha. Yep. Sasha.
There is a rhythm to most of our lives, but in a village, it is very visible due to the small number of people moving around each other in a small space. Fortunately, now it has warmed up enough so those of us who are outside at lunchtime are not in pain. Now, when it snows, we will be able to appreciate the beauty of a snowflake because it will not be so brutal just to breathe outside. ~ Cailie
VT Bulletin 198
By Glenda Bean
On Monday, January 8, 2018 Vermont joined Iowa and Tennessee and issued detailed guidance on providing advice for securities and insurance products. Insurance Bulletin 198 (and Securities Bulletin S-2018-01) is a joint bulletin that the Department of Financial Regulation felt was necessary in order to provide financial professionals additional guidance on what activities are and are not permissible when it comes to providing advice on securities and insurance products.
The Department had issued more general guidance back in 2011, however, they stated two specific reasons for providing more detailed information now.
First, the Department said, there has been “an increase in investigations and enforcement actions relating to unregistered investment advice.”
Second, the “continuing evolution of state and federal suitability laws that now require an extensive financial analysis of a consumer’s financial affairs and a discussion of broad financial trends prior to making a recommendation on an insurance product or an investment/securities product.”
One point I found interesting is that, in the past, we’ve thought of this guidance as related to “source of funds”; that is, a specific focus on where the funds are coming from, and who can provide what level advice on those funds. While that’s still something that is being addressed in this bulletin, the #2 reason the department cited is related but broader than just source of funds. It goes to the growing discussions and developing regulations around how financial services are provided to consumers and what standard of care is owed to those consumers of financial services.
With NY’s proposed changes to their suitability regulation (which includes a number of significant changes, one of which is including life insurance within the suitability standards) as well as the questions of what will become of the DOL rule and what will the SEC do, as well as the NAICs current work on incorporating “best interest” standards into the suitability model, it’s clear that there are lots of questions around how financial transactions should be handled and what the burdens of the financial professionals are to ensure consumers are getting the “best” products and services for their needs.
With this bulletin, VT is stepping into the arena to add a bit more clarity at least around who can provide what services, and what types of discussions are permissible depending on the licensing and/or registration the financial professional holds. While only two other states have issued nearly identical guidance, we think it’s prudent for financial professionals to follow these guidelines regardless of what states they live in.
Why? Because this language is the most detailed we’ve seen, except in TN and IA and by using it as a benchmark of how financial discussions should be had and what the limits of those discussions may be, it allows financial professionals to say that they are trying their best to provide advice that they’re qualified to give without stepping over any boundaries. It shows a commitment to using integrity with consumers, and that even for states outside of VT, IA, and TN, it may provide a “safe haven” of sorts to be able to show documentation of complying with these regulations.
Proposed Regulation 187 (Suitability in Life Insurance and Annuity Transaction)
By Cailie Currin
I am sure by now most of you have read the proposed revision to NY’s suitability regulation – or at least a news article about it. There have been quite a few. Because the comment period is still open, it is not too late to make your views known to NYSDFS.
I have many opinions and thoughts about this proposal – some of which I wrote about in a recent blog post. The longer I sit with it, the more thoughts and opinions I have. Here is one that I did not write about on the blog and that I have been ruminating on the last couple of weeks…
Many of us who are involved in annuity filings, and have made DOL-related fee-only or reduced-commission filings, have heard from DFS in recent months that the DOL compliance obligations of producers should not impact what products are offered, by those producers, to consumers. They have pulled out a circular letter from 1955 and are once again focused on all individual products being “generally available.” They are adamant that they will not approve products that are developed for one distributor. Where they will allow some flexibility by distribution channel, they have stated in objection letters that a distribution channel means, for example, all banks in NY, not all Citizen Banks in NY. Absent a recognized distribution channel, our clients have been told, the product must be “generally available.”
In that context, what does the definition of suitable mean? “Suitable means in furtherance of a consumer’s needs and objectives under the circumstances then prevailing, based upon the suitability information provided by the consumer and all available products, services, and transactions” (emphasis added). Does “all available products” mean all generally available products? Read with §224.5(c)(1)(i) of the Reg., it appears they do mean only those products, services, and transactions of a single company because that paragraph states that an insurer shall provide consumers with “all relevant policy information with respect to evaluating any transaction or proposed transaction, including a comparison, in a form acceptable to the superintendent, of all available policies of the same product type offered by the insurer; …”
Presumably the intent is for the information provided by the insurer to line up with the products considered by the producer for recommendation to the consumer. Leaving aside the question of how many insurers’ products must be considered and therefore how many disclosures must be provided to each individual consumer, what about all the distributor-specific products that one insurer might have? Is part of the intent of the regulation to bring us back to the days before the 2000 OGC opinion on class distinctions by making an onerous disclosure and suitability standard? Is this a way to go back to what the DFS has often waxed nostalgic for? That time when one company had only one UL policy or one FPDA because the DFS felt having two, unless the second fell into a small number of clearly recognized distribution channels, was unfairly discriminatory? Perhaps not, but the more I think about it the more it seems so to me. How else can these compliance burdens be met? And more than anything, doesn’t that limit product availability to consumers based on producer and insurer compliance burdens?
Who Moved MY Cheese?
By Suzanne Seay
I have gotten a lot better at accepting change. I am hardly resisting at all the changeover to another new cloud-based document management system here at Currin Compliance. My acceptance, however, did not come from reading Who Moved My Cheese?, the popular business allegory by Spencer Johnson. Rather, I think my acceptance came through long experience.
The workplace culture at Currin is impacted at all times by Cailie’s high energy and unremitting insistence on moving forward. While I have a tendency to want to sit down, lean back, and chat about the recent past, she is standing up and looking forward, much like Sniff and Scurry in the book. Like them, she is on the lookout for new and better cheese at all times.
Apparently, so is her Alaskan Malamute,
Sasha, who comes to work with Cailie each day. Mostly Sasha lies on the cool tile floor in front of Cailie’s office, waiting. But recently our VP, Machael Heise, was in the office for a week with us in upstate New York from her home/remote office in California. For some reason, Sasha decided to lie and wait in front of Machael’s office this day.
When Machael got up from her desk to get a cup of coffee in the other room, Sasha wasted no time in going into her office, putting her front paws on the desk, and snatching a half-pound block of cheese that Machael had purchased that morning (it was on sale at the local grocery store). By the time Machael returned, the cheese was gone.
There was no question who moved her cheese.
But, in the spirit of acceptance, we all laughed. No use Hemming and Hawing, after all.
We received a lot of requests for the information we presented at our November symposium in Hartford, CT. So, not only did we make the Reg. 210 information available to purchase online, we also decided to repeat the symposium in CA (with updated information, of course) providing an opportunity for our West Coast colleagues to attend.
If you’re interested in learning more about NY issues, sharing your challenges, and looking at solutions as a group, join us NEXT WEEK on Tuesday, February 6th in Irvine, CA for our one-day symposium and a deep dive into Reg. 210. We’ll discuss general filing experiences, new rules that have emerged over the last year or so, and talk about common objections on annuities and life submissions.
This day will be full of information with the opportunity to share and discuss your experience and know that you are not alone when it comes to these issues and challenges. Rest assured, this is not just gripe and grumble session. You will walk away with new ways to approach your filings as well as increased knowledge about some specific NY issues, not the least of which is Reg. 210.
A good portion of the day will be devoted to talking specifically about Reg. 210, some of the history that got us to this point, some early experience with the regulation and its mandates, and what we need to think about going forward.
We will have breakfast and lunch available, plus two snack breaks...food will be plentiful.