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Financial Adviser Title Gets More Complicated

In a Forbes.com article, dated July 1, 2019, Contributor Julie Jason addresses the SEC's new rules on who can be an "adviser" under its Regulation Best Interest. See Is Your Financial Adviser a Financial "Adviser?" Should You Care?

Ms. Jason spends a good deal of her piece talking about the potential for confusion over titles and, specifically, the challenge of brokers who call themselves "financial advisers." Here she is talking about securities-licensed brokers, many of whom work for "large broker-dealers that are dually registered (as broker-dealers and advisers), for example Merrill Lynch and UBS." She asks the question whether those brokers can be called advisers. She answers with, wait for it... Maybe. "If the broker is 'not also a supervised person of an investment adviser 'he or she cannot use 'the term "adviser" or "advisor" as part of a name or title.' (cite omitted) However, he or she can use the firm's name if the firm uses 'adviser' or 'advisor.'"

After some discussion of the new regulation and its best interest requirements, Ms. Jason states: "In today's world, the term 'financial adviser' is simply a marketing term, which may disappear at some point after brokers are prohibited from using it." This is where there is a clear relationship to a provision that also appears in NY's new Regulation 187, which imposes a somewhat different "best interest" standard than the SEC's.

Reg 187 states that an insurance producer "shall not use a title or designation of financial planner, financial advisor or similar title unless the producer is properly licensed or certified and actually provides securities or other non-insurance financial services." Section 224.5(c). This section is important because many insurance agents also call themselves "financial advisors" as a marketing term. They don't like the perception of "agent" and "financial advisor" sounds better. Some actually go so far as to become securities-licensed as an investment adviser representative, but never actually provide securities advise. They merely use the title for its marketing cache. Both NY and the SEC, seem to be getting at this marketing issue and they don't like it.

Under these two regulations, insurers that permit agents to use financial adviser/advisor in their personal marketing and sales of the carrier's products, are likely to be held to a standard of knowing who is using that title and what the basis is for an individual's use of that title. Gone are the days when the marketing of a broker or an agent as a financial adviser was a low risk proposition. Both NY and the SEC have gone out of their way to say they are concerned about consumer confusion on this point.

Now is the time to let all insurance producers know that "financial advisor" is not a title they can legally use as a marketing tool any longer. If they use it they need to have a registration to support it and, in NY, a practice of actually providing non-insurance financial services.

This is not what effective disclosure looks like.

Much of today was spent in preparation for my presentation at the New England Chapter E-day, to be held on Wednesday of this week: June 12, 2019. My topic is the confusing array of disclosures that are now required in NY, especially with the addition of Regulation 187. The confusion is a result of the proliferation of regulations that, no doubt have good intentions, but for my money, are likely to leave consumers more confused than empowered. I only have an hour in my E-day session and I don’t think I can cover all the overlapping disclosure requirements in Section 3209, Reg 60, Reg 74, Reg 187, Reg 194, and Reg 210. If I can't do that -just explain what they are- how is an agent going to be able to explain to a consumer what each of them are and why the numbers and terms are different when they are talking about essentially the same thing? I am all on board that consumers should know what they are buying from whom. I agree that producers should have an in-depth knowledge of the insurance products they sell. Bait and switch is bad, as are commission-driven sales. Misleading consumers into replacing good products with the latest shiny new object is not tolerable.

But working through all the disclosure requirements today, I don’t think this matrix of regulations gets consumers to a better place. Because information is presented in so many different ways, they will have more information for sure. But will it make sense to anyone?

I haven’t yet seen a package of these disclosures prepared for a real sale. I hope to soon. I hope it is more clear than it appears it will be from going through all these regulations. For the consumers of insurance products in NY, I hope I am wrong. I would love your thoughts on this. My presentation will be posted in our Suitability and Standard of Care Center for E-day attendees and Center members after the event. There is a members-only forum to discuss compliance strategies. Take advantage of the opportunity to network on these challenging issues.

At least there was this…

A room with a view

A room with a view

Successful LHCA Meeting in Portland, OR

LHCA Portland OR

I am sitting in the Delta Sky Club in Portland, OR after a great LHCA meeting here.  I have had really positive experiences at LHCA meetings and some that are not so great. The meetings tend to be small, which is a great thing if the people there are excited to both ask questions and share information. This was one of those. The meetings that are not as good are the ones where the people in attendance don’t get up to the mic and share. If there are only a couple of people answering all the questions and many questions with minimal input, it is hard to feel great about the time spent. This meeting was the kind that makes it more than worthwhile to be there. In our office we have some new staff that are really talented and excited about the work and I see that we are not alone- the new attendees at this LHCA meeting shared that excitement and passion for the work we do. I am going home upbeat and invigorated to keep doing the work! 

I presented on NY’s Reg 187 as it relates to life insurance.  There were fabulous questions and comments about how the various company’s implementation efforts are going. I got great feedback on the presentation and that is always nice to hear.  The slides are being made available to LHCA attendees and are posted in our Standard of Care Center for members’ reference.  

My next presentation on Reg 187 will be at AICP’s E-day in Springfield, MA on June 12. That one will focus on the intersections and conflicts between Reg 187, Reg 210 and Reg 60.  I am sure that, too, will be a lively discussion and I am really looking forward to it.  I hope to see you there.  Of course, that deck will also be available for members at education.currincompliance.com in the Standard of Care Center.  

- Cailie

New Standard of Care Center

Compliance with annuity and life insurance standard-of-care regulations (e.g., suitability,best interest, fiduciary issues) just got A LOT easier!

Currin Compliance Services is excited to announce our new Standard of Care Center (SCC) — an online collection of materials on the various fiduciary standards and suitability regulations, including NY’s new Reg 187. We will be following and creating materials about the NAIC’s efforts to revise and adopt a new suitability model regulation as well.

We are looking at suitability and standard of care issues in small, manageable chunks due to the size and scope of those issues. Our expectation is that this will be an evolving field for a long time and many of us will be dealing with these issues well into the future. We are launching the SCC as a monthly subscription service. As a subscriber, you will continue to receive updates, new information, reference documents, and analysis about developments in this area with unlimited access as long as your membership is current. The lessons are short and to the point. The titles are descriptive so you can find the appropriate lesson quickly. You’ll be able to scan the list of lessons and pick the exact one that you need. Each lesson focuses on a single topic.

We invite you to take a look at the SCC Introduction and Free Sample lesson as a preview into our vision — a one-stop repository for audio/visual lessons with downloadable scripts, reference documents, and other resources on this important topic. If you don't already have an account on our education and training platform (CICEd), you'll need to create one (it is free and without obligation). A CICEd account gives you access to all of our free materials and resources, plus the opportunity to register for paid courses and subscriptions. 

If you're ready to subscribe to the SCC now, use code 10OFFMEMBER and receive 10% off your monthly subscription price. Instead of $950/month your member subscription price will be $855/month — but only if you subscribe BEFORE April 1st. As of April 1st, the subscription price will be $950/month.

Questions? Email info@currincompliance.com or call (518) 692-2494.