Junk Fees in Retirement Plans, take two

Link to the proposal in the above link and here:

Specific details are missing but this could be a potential massive shake up in the industry. As quoted in the first link, 14-26% of the firms stopped providing advice when the first rule rolled out and if this is (correctly) applied to insurance products, it would be a tsunami in that industry. I don’t think most of those products (the vast majority of annuities) can exist in a fiduciary capacity. They only exist right now under the lower ‘Best Interest’ standard. Note, even CDs in an IRA have largely gone away under the fiduciary rule because they are not liquid. Very few annuities are created with 100% liquidity.

Just found this that gives more info. I have yet to read it or fully understand it:


Having fully read the fact sheet - it does not appear to be changing very much. Specifically:

PTE 2020-02

PTE 2020-02 allows investment advice fiduciaries to receive compensation for advice that would otherwise be prohibited by law, as long as the fiduciaries comply with the exemption’s conditions, including providing advice in investors’ best interest. The exemption conditions emphasize mitigating conflicts of interest and ensuring that retirement investors receive advice that is prudent and loyal.

The Department is proposing to maintain the core conditions in PTE 2020-02 that provide fundamental investor protections. The proposed amendment would make clarifying changes that build on the existing exemption conditions to provide more certainty for fiduciary investment advice providers and more protection for retirement investors.

PTE 84-24

Currently, PTE 84-24 allows fiduciaries to receive compensation that would otherwise be prohibited when plans and IRAs enter into certain insurance and mutual fund transactions, as well as certain related transactions. The proposed amendment would limit coverage for advice to independent insurance agents and make minor language changes. The exemption is tailored to the special challenges posed for overseeing investment recommendations by independent insurance agents who recommend annuities issued by more than one insurance company.

Under the proposed amendment, a new section would be added to PTE 84-24 to provide relief for independent insurance agents receiving compensation that would otherwise be prohibited for investment advice transactions, subject to conditions similar to those in PTE 2020-02.

However, unlike PTE 2020-02, the insurance company selling its products through the independent agent would not be required to provide a fiduciary acknowledgment and would not be treated as a fiduciary merely because it exercised oversight responsibilities over independent agents. Instead, the independent insurance agent would be required to acknowledge its fiduciary status, and the insurance company would be required to exercise supervisory authority over the independent agent with regard to an agent’s recommendation of the insurance company’s own products.

Best interest is already a lower standard than fiduciary. On the surface, I an not seeing how this changes much of anything.