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Warren questions annuity companies over opposition to DOL fiduciary rule

BY: NICK NIEDZWIADEK | 04/30/2024 05:00 AM EDT

Sen. Elizabeth Warren is seeking information from more than a dozen of the largest annuity companies about bonuses and other inducements they offer to sellers of their products, potentially influencing their advice to investors.

“These secret kickbacks hurt consumers by incentivizing agents to sell certain products because they will earn a bigger cash bonus or fancier vacation, not because they are in the best interests of their customers,” Warren (D-Mass.) wrote in a letter dated Monday.

The letter highlighted several examples of lavish perks like vacation trips offered by leading retirement investment and insurance companies to top sellers, in addition to cash bonuses for hitting certain performance benchmarks.

Copies were sent to Lincoln Financial Group, Massachusetts Mutual Life Insurance Company, Nationwide Life Insurance Company and New York Life Insurance Company, among others.

Warren intimated that preserving the existing system is a major driver of the industry’s opposition to the Labor Department’s recently finalized regulation requiring that retirement advisers adhere to stringent fiduciary standards when selling certain products — including annuities and 401(k) rollovers — to prevent unscrupulous brokers from steering clients toward high-cost or riskier options.

Opponents of the rule say that it will incur significant costs unnecessarily to ensure compliance with fiduciary obligations, and threaten the viability of a commission-based sales model for one-time investment products.

The rule is not slated to take effect until the fall, and it is expected to face legal challenges from Wall Street and industry-backed groups that could freeze that start date.

Warren’s missive is a reprise of a similar inquiry she initiated during the Obama administration when it was developing a previous iteration of the fiduciary rule that was tripped up in court in 2018 and subsequently trimmed down under former President Donald Trump.

“I remain concerned that these incentives present a conflict of interest for agents and financial advisers that could result in these agents providing inappropriate advice about annuities to investors and selling products that may not meet the retirement investment needs of their buyers,” Warren wrote.

The letter asks for a list of all incentives “including cash awards, cruises or other vacations, electronics, jewelry, and any other items of value” used as rewards for annuity sales, the size of companies’ perk programs, as well as marketing material and other information the companies provide to brokers and sellers.

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