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Event Calendar
Association Leadership Conference
July 21-22, 2016
Copper Mountain Resort

NAIFA National Conference
September 17-19, 2016
LasVegas, NV at the RIO

November 20, 2015

NAIFA SmartBrief
News covering the insurance and financial advising industry

Top Story
Second week of open enrollment nets 535K applicants, feds say
About 535,000 people signed up for health insurance under the Affordable Care Act in the second week of open enrollment, and one-third of those applicants are new customers, according to the Obama administration. The Hill (11/18)
Industry News
Expert: Annuities mitigate the risk of outliving savings
Annuities can help alleviate the risk of running out of money in retirement, writes Jamie Hopkins of the American College. "Given the hundreds of different annuity options out there, there is bound to be one that can accommodate your unique set of circumstances," he writes. Forbes (11/18)
How to analyze charitable gift annuities
Christopher Woehrle of The American College of Financial Services looks at the key issues when using a charitable gift annuity or charitable remainder trust to fund retirement or a family member's education. WealthManagement.com (U.S.) (11/19)
In retirement, spending discipline is critical
Research from the Employee Benefit Research Institute finds that in their first two years of retirement, 46% of households spend more than they did just before retirement. These households were "not exclusively high-income households," said Sudipto Banerjee of EBRI. PlanAdviser.com (11/19)
Investment Trends
FinaMetrica: Riskier portfolios could help retirees
Reducing risky asset exposures in retirement may not be the right move, FinaMetrica says. A fear of "sequence risk" can lead people to reduce equity risk, potentially undermining portfolios in the long term, FinaMetrica says. ThinkAdvisor (11/18)
The consequences of misunderstanding yield
Some investors have misguided notions of yield. They often "blur the distinction between yield as an investment characteristic and yield as a source of income for retirement spending," writes Phill Rogerson of Russell Investments. That can have tough consequences. InvestmentNews (11/19)
Does value investing pay off over the long-term?
To take advantage of value investing strategies, many people turn to value-oriented mutual funds. But according to Research Affiliates, over the past 23 years, investors in such funds have not kept pace with the S&P 500 Index. ValueWalk (11/19)

Why the DOL Fiduciary Proposal Would Have a Huge Impact on Advisors and Investors Click here for a .pdf of this document

The Department of Labor has proposed new regulations that will have serious consequences for insurance and financial advisors and their clients planning for retirement. The proposed rule would redefine a retirement investment advice fiduciary under the Employee Retirement Income Security Act (ERISA) and the Internal Revenue Code.
As a result, many NAIFA members who have operated effectively on behalf of clients under a suitability standard would now be considered fiduciaries and subject to fiduciary-specific restrictions under ERISA and the tax code. As currently written, the proposed rule is unworkable for retirement savers and their advisors. It would fundamentally change the way advisors do business, disrupt long-established client-advisor relationships, increase costs for advisors and consumers and prevent advisors from providing retirement investors with certain types of important advice and services.
The regulations would certainly reduce the availability of services and advice as some advisors would either shift their practices away from the retirement sector or would drop middle- and lower-market clients who would not be able to afford the increased costs. Consumers may find themselves unable to continue working with advisors they know and trust and may be unable to receive advice in a number of common, yet complicated, retirement-investment situations.
Increasing Costs
A leading concern for NAIFA, our members and their clients is that the proposed rule would drive up the cost of retirement investment advice and services.
Advisors receiving commissions, revenue-sharing and other third-party compensation would be required to sign a complicated and potentially confusing "best interest contract" with clients. The contract would require advisors to act in the best interest of the retirement investor (as defined by ERISA), adopt written policies to mitigate conflicts of interests (such as a policy creating only level commissions that do not vary based on which products the advisor recommends), and complete increased disclosures and paperwork with each transaction.
The exemption would also require advisors to complete a (potentially lengthy) annual disclosure document for each client detailing all transactions, fees and expenses, and the advisor’s direct and indirect compensation. On top of that, financial institutions would have to maintain and update web sites that show the amount of compensation advisors would receive for each of its product offerings. This would be particularly burdensome for smaller firms with limited resources. They may choose to exit the market, resulting in decreased competition and consumer choices.
The increased paperwork, record-keeping requirements and disclosures combined with the need for financial institutions to create and frequently update web sites with data would drive up the cost of advice and services. The best interest contract would increase advisors’ liability and potentially expose them to frivolous lawsuits. Advisors could be sued in state courts for alleged contract violations and in federal court for alleged violations of fiduciary duty under ERISA. In these suits, the burden of proof would be on the advisor.
With this huge increase in liability, advisors’ costs would inevitably go up. These costs would need to be passed along to consumers. Some advisors and smaller financial institutions would exit the market rather than deal with the new regulatory and liability burdens.  
Limiting Access
But even advisors who continue to serve retirement investors would face restrictions making it difficult or impossible for them to perform some service clients have grown to expect from them.
For example, the proposed rule would prohibit advice on plan distributions, including individual retirement account rollovers.
Any advisor affiliated with a plan service provider, such as an insurance company, would not be allowed to sell a variable annuity from that provider. The advisor would still be allowed to sell fixed-rate annuities, but this would obviously limit the clients’ choices.
It is unclear how the advisor would be able to work in the best interest of the client under this situation. What if a variable annuity product would be in the best interest of a client but the rule prohibits the advisor from selling that product? Similarly, would an advisor not licensed to sell securities violate his or her fiduciary duty simply by limiting advice to non-securities solutions? The rule is unclear on this. What is clearer is that the rule would limit consumers’ options.
The proposal would ostensibly allow advisors to provide consumers with retirement investing education without triggering fiduciary liability, but the rule’s definition of education is extremely narrow. Advisors would not be allowed to give specific product examples. It is unclear whether web sites that include retirement investment calculators would trigger a fiduciary liability.
These are just a few of the problems the proposed rule would present for advisors and their clients.

What Is NAIFA Doing?
NAIFA is uniquely positioned to represent the interests of all insurance and financial advisors, whether they are captive, affiliated or independent, and their middle-market clients. NAIFA’s goal is to help regulators create a workable best interest standard that is business-model-neutral and preserves access for middle-income people and small businesses.
NAIFA leaders, including NAIFA President Juli McNeely, have met with DOL officials on multiple occasions to discuss the proposal and the ways it will impact advisors’ clients. McNeely also testified at a DOL public hearing on the proposal and at a congressional hearing before the House Financial Services Committee. NAIFA submitted formal comments on the rule to the DOL, outlining proposed changes.
A NAIFA grassroots campaign resulted in more than 18,000 letters to Labor Secretary Perez and members of Congress on the proposal. NAIFA members have also met in person with their legislators to discuss the matter. The DOL proposal was a primary focus at NAIFA’s 2015 Congressional Conference, when nearly 800 advisors went to Capitol Hill for meeting with their members of Congress.

NAIFA will continue to work with DOL officials and members of Congress to endure that the final rule is workable and will not place undue burdens on advisors or their clients.


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A Brief History of NAIFA-Colorado

NAIFA-Colorado, originally founded as the Colorado Association of Life Underwriters (CALU) in 1935, was based on the precept that those engaged in life underwriting occupy the unique position of liaison between the purchasers and the suppliers of life and health insurance and closely-related financial products. Inherent in this role is the combination of professional duty to the client and to the company, as well. Ethical balance is required to avoid any conflict between these two obligations.
NAIFA-Colorado’s mission:

NAIFA-Colorado is an organization of insurance and financial advisors whose purpose is to serve as an information resource, to promote ethical conduct, and to enhance our professional skills and public image, and support our local associations.

The NAIFA-Colorado Board of Directors meets four times per year, promoting educational programming and continuing education. In addition, we promote advocacy through legislative functions, including IFAPAC, APIC, Legislative Receptions, and a Day on the Hill. We also send representatives to the Division of Insurance’s Producers Advisory Council to articulate our views on rules, regulation
s, and pending legislation, as it affects the field of insurance and financial planning.

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