Transcript Headley PowerPoint Presentation

Impact of Wall Street
Reform on Main Street
Agents & Advisors
February 2012
Who We Are
For more than 120 years, NAIFA members in
communities across the country have shared the
common interest that insurance is the foundation
of any sound financial plan.
What We Do
• Educate clients about how to manage financial risks
through the purchase of insurance products.
• Build relationships with clients over many years and
even decades.
• Offer products and services that allow middle income
consumers to have access to affordable insurance
and retirement products and services.
Who We Serve
Who We Serve
• www.naifa.org/ServingMainStreetInvestors
• LIMRA surveys conducted October 2010
• Most NAIFA member clients are middle-market
consumers with modest funds to invest.
Who We Serve
NAIFA Members Serve
Middle-Market Consumers:
• 58% of clients earn less
than $100,000
• Just 11% earn more than
$250,000 a year
Consumers Surveyed
Only 17% can afford to invest more than $250 or more a month
Consumers Surveyed
7 out of 10 do not want to pay a fee up front
If $2,500 Fee for Initial Analysis
5%
5%
19%
Not mind
Pay it
Another advisor
36%
35%
Do it myself
Not sure
Compensation
NAIFA members are paid through sales commissions
In Other Words…
NAIFA members are Main Street
and serve Main Street
Why It Matters
Now more than ever, individuals and small
business owners rely on the advice NAIFA
members provide regarding cost-savings
measures and coverage options.
The Dodd-Frank
Wall Street Reform and
Consumer Protection Act
• Enacted July 21, 2010
• Reaction to financial crisis
• Target: Wall Street
– Collateral Damage: Main Street
• Massive:
– 533 required regulatory rulemakings
– 60 studies
– 93 reports
Federal Reforms in Dodd-Frank
Significant Issues for NAIFA members:
• SEC fiduciary standard for broker-dealers
• Federal Insurance Office (FIO)
• Financial Stability Oversight Council (FSOC)
– Systemically Important Financial Institutions (SIFIs)
– Federal Resolution Authority over Non-Banks
Federal Reforms in Dodd-Frank
Other Major Reforms:
• Consumer Financial Protection Bureau (CFPB)
• Surplus Lines and Reinsurance Regulatory
Reform (NRRA)
• Banking and Securities Reforms:
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Derivatives
Hedge Funds
Swaps
“Volcker Rule”
• Corporate Governance Reforms
Fiduciary Standard - SEC
Dodd-Frank Act Provisions
• SEC study of suitability standard versus fiduciary
standard was included in the final bill
• Following the Study, if SEC moves forward with
establishing a fiduciary duty for broker-dealers, the Act
includes statutory protections for individuals to receive
commissions and sell proprietary products.
Fiduciary Standard - SEC
Post Dodd-Frank Challenges
•
SEC staff study released and recommends fiduciary
standard for broker-dealers providing advice
•
Study fails to support its findings
•
Two SEC Commissioners agree with NAIFA’s concerns
•
NAIFA fears costs will rise and middle-market
investors will be negatively impacted.
Dodd-Frank Act
Implementation
• Federal Insurance Office
• Financial Stability Oversight Council
Federal Insurance Office (FIO)
• Housed at the Department of Treasury
• Director Michael McRaith – took office May
2011
• Federal Advisory Committee on Insurance
(FACI)- 15 member panel named November
2011
• Modernization & Reform Study – report
delayed but expected soon
Financial Stability Oversight
Council (FSOC)
•
First Meeting October 2010
•
Ten Voting Members
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Secretary of the Treasury (chairs the Council)
Chairman, Federal Reserve
Comptroller of the Currency
Director, Consumer Financial Protection Bureau
Chairman, Securities and Exchange Commission
Chairman, Federal Deposit Insurance Corporation
Chairman, Commodities Futures Trading Commission
Director, Federal Housing Finance Agency
Chairman, National Credit Union Administration Board
An independent member with insurance expertise
 Roy Woodall confirmed by Senate, September 2011
FSOC
• Non Voting Members
• Director, Office of Financial Research
• Director, Federal Insurance Office
•
Michael McRaith took office May 2011
• A state insurance commissioner
 Missouri Commissioner John Huff appointed September 2011
• A state banking supervisor
 William S. Haraf, Commissioner of the California Department of Financial
Institutions appointed September 2011
• A state securities commissioner
 North Carolina Commissioner David Massey appointed
September 2011
Federal Grant Program
• Provides states grants to protect seniors from being misled by
meaningless designations and fraudulent marketing.
• $500,000 Grant if states adopt requirements of the NAIC and
the NASAA senior-specific designation models as well as the
NAIC’s revised Suitability in Annuity Transactions Model
Regulation.
• States can apply for a lesser $100,000 grant if they adopt either
the NASAA model law or the NAIC senior-specific designation
model in addition to the annuity suitability model.
Senior-Specific
Designations Model
• Protects seniors by ensuring that they are not subject to
misleading sales practices involving the use of improper
credentials and professional designations.
• 29 states have adopted the NAIC Model, which applies to the
sale of insurance-related products.
• 27 states have adopted the NASAA Model, which covers the sales
of securities and other investment-oriented products.
• NAIFA worked with the NAIC and NASAA and supports both
models.
Annuity Suitability Model
• Ensures annuities sold to a consumer are suitable, for that
consumer’s needs and goods.
• Requires insurer review of all recommended annuity transactions,
and establishes general training and specific-product training for
insurance producers.
• 19 States have adopted the revised NAIC Model (2010 version);
7 States have proposals pending.
• NAIFA was actively involved in the development of the
revised model and supports its adoption in the states.
www.naifa.org