PROPOSED:  Fiduciary Standard. The Dodd-Frank Act requires that the Securities and Exchange Commission (SEC) study the effectiveness of existing legal and regulatory standards of conduct that currently apply to a variety of financial services professionals, including life insurance producers who sell variable products. There is significant speculation the SEC will recommend and apply a single fiduciary standard of care on broker-dealers. This could cause insurers and agents to cut back on the financial products they offer and how they offer them.    

These regulatory reforms are neither necessarily wrong nor ill-informed. But they're disruptive to brokers and make it difficult to determine how one gets paid. With MLRs, is there room in the premium cost structure for a broker's commission? With 401(k) disclosures, how will margins be protected?  With a fiduciary standard, does the fear of lawsuits mean the middle market will be deserted? 

What's a Broker to Do?   

A recovering economy includes a market and a need for employee benefits.  Employers know that during the recession, employees were overworked, underpaid and underloved. They also know if they're going to retain their best employees and keep morale up, they need to provide attractive benefits. 

To serve this need, brokers need to reinvent themselves with an extreme makeover. At industry meetings all over the country, I've noticed a lot of new faces. Many of these people are benefits brokers looking for new ideas and concepts to share with their business clients. In many cases, these brokers are reintroducing themselves to product lines such as life and disability insurance and other non-medical benefits. They're  learning about new niches in the marketplace — voluntary benefits and executive compensation, for example. 

Retooling may be necessary for survival. Some advisors feel they are "A" students in health insurance, but "C" students" in areas such as executive benefits. How do they bring themselves up to speed in these advanced markets?

• Go back to school and learn both the "sizzle" and the "steak" of these concepts. Many brokers are showing up at NAIFA meetings, seeking designations, and scanning the Web for ideas and information on products that are traditionally outside their comfort zones. 
• Team up with an advisor who has technical skills in these areas. This causes the benefits broker to accelerate his or her entry into these new solutions by being the "A" student" in relationships while the technical advisor is the "A" student in the technical aspects of the sale.  Properly structured, a team like this can be better than the sum of its parts. 

One thing is clear about selling in the benefits marketplace: you must adapt or exit. If and when the above regulatory issues are resolved, there is little question that another challenge will emerge. "Business as usual" is an oxymoron in today's market, and the broker needs to be prepared for repeated makeovers. 

Disclosures:

While this communication may be used to promote or market a transaction or an idea that is discussed in the publication, it is intended to provide general information about the subject matter covered and is provided with the understanding that the author is not rendering legal, accounting, or tax advice. It is not a marketed opinion and may not be used to avoid penalties under the Internal Revenue Code. You should consult with appropriate counsel or other advisors on all matters pertaining to legal, tax, or accounting obligations and requirements.