The short-term danger of ‘FiduciaryCare’

There have been a ton of articles and commentary on the recent Department of Labor ruling that I have appropriately renamed “FiduciaryCare.” If you have been out of the country, or just fixated on the upcoming Trump/Clinton cage match, the financial advice industry has now joined our health care system as the next bloated government-controlled agency.

Let me go on the record by saying that I think all financial advice should always be in the best interest of the client. This fiduciary responsibility is a no-brainer and shouldn’t have to be wrapped in over 1,000 pages of Washington legal speak. Every industry has bad actors and sales sociopaths, but you don’t throw out all the good financial advice with the dirty-sales-pitch bathwater.

Regardless of the coming lawsuits by the predictably late-to-the-party indexed-annuity industry, “FiduciaryCare” will become law in my opinion and permanently change the industry. That final version of the law is predicted to be fully implemented during the first part of 2018. With that fact in place, consumers (especially annuity shoppers) need to prepare themselves for a short-term tidal wave of sales aggression and persistence never seen before in the financial world.

Annuity-agent death sentence

“FiduciaryCare” is going to eliminate a ton of independent annuity agents. That’s both a good and a bad thing in my opinion. A lot of them are just going to throw in the towel and go find a higher-commission product than their beloved indexed annuities. Many will not be able to afford the annual required “errors & omission” insurance that will likely skyrocket. ObamaCare anyone?

During the next 18 months, a ton of primarily indexed-annuity salespeople are going to sell as if there is no tomorrow. Annuity agents are going to go all in, and do whatever it takes to make as much money as possible before their annuity game is finally over.

Agents know that annuity carriers will be busy adjusting to the new law, instead of monitoring the sales message. Think of the teacher leaving an elementary classroom, but worse, because your retirement money is at stake. It’s going to be a sales-pitch free-for-all.

Consumers will unfortunately be the loser in the end

Obamacare was passed under the guise of taking care of the estimated 30 million people who were uninsured. “FiduciaryCare” is going to be implemented as heartstrings are pulled to “protect the consumer.” In both cases, most rational people agree with both of these emotional closing pleas. However, in both instances, I’m pretty sure that a full government takeover is not the best solution.

Regardless of the legitimate good intentions, I predict that “FiduciaryCare” will produce the same government overreach results that we are now seeing with ObamaCare. Higher fees and less choices will be what the consumer will eventually gets. Yes, there are some good things with the proposed law, but the eventual negatives will far outweigh the positives. Like most good ideas that enter the Washington, D.C., zip code, they are ruined when they finally come out of the political sausage grinder. Isn’t that always the case when the government interferes with the private sector?

Eighteen-month sales-pitch danger zone

If there was ever a time to scream “caveat emptor” (i.e. buyer beware), it’s right now and until “FiduciaryCare” is fully implemented in 2018. Misleading TV and radio ads promoting too-good-to-be-true indexed-annuity unicorn dreams are already running, and make previously overhyped promotions look tame. Bad-chicken-dinner annuity seminars will now turn into high-end-steakhouse events. Be prepared for every advisor to try to sell you their “favorite” annuity. Annuity sales desperation will be on full display over the next 18 months. You’ve been officially warned.

Originally published 5.3.16 by MarketWatch.com