CFP Board is calling on the National Association of Insurance Commissioners to develop a new annuity sales model regulation. The group says the current Suitability in Annuity Transactions Model Regulation #275 does not offer real consumer protection.
CFP Board recently submitted a comment letter to the NAIC Annuity Suitability Working Group. The letter addressed implementation of the model regulation and the supervisory practices insurers use to meet their obligations.
The group also published a comparison guide measuring the NAIC model against CFP Board’s Code of Ethics and Standards of Conduct. The guide concludes the model regulation has structural weaknesses and does not provide an effective framework for annuity recommendations.
CFP Board says the rule does not require insurance producers to act as fiduciaries. It also says the model does not impose a clear and enforceable duty to place the consumer’s best interests first.
The group criticized the regulation’s treatment of compensation. According to CFP Board, the model excludes cash and non-cash compensation from the scope of material conflicts of interest.
That means producers must disclose how they are paid, but they do not need to identify and reasonably manage conflicts created by fixed annuity sales compensation. CFP Board said cash and non-cash compensation remain among the most common and serious conflicts in annuity sales.
CFP Board told the NAIC that continued implementation would reinforce an inadequate framework. It said the current model risks embedding standards that do not meaningfully protect consumers.
The organization urged regulators to pause the process and begin again with a new model rule. It said any replacement should be built from the ground up around genuine consumer protections.
CFP Board said a new rule should incorporate established fiduciary principles. It also said compensation should count as a material conflict of interest when producers recommend annuities.
The group said annuity recommendations need to meet a best-interest standard in both form and substance. Its position places fiduciary duty and compensation conflicts at the center of the NAIC debate.
CFP Board consists of Certified Financial Planner Board of Standards, Inc. and Certified Financial Planner Board of Standards Center for Financial Planning, Inc. The organization operates the CFP certification program for financial planning professionals in the U.S.
More than 109,000 CFP professionals have committed to CFP Board standards. As part of certification, they agree to act as fiduciaries when providing financial advice.
Erin Koeppel, CFP Board’s Managing Director, Government Relations and Public Policy Counsel, signed the comment letter. She thanked the working group for reviewing the comments and offered to discuss the group’s position further.
CFP Board of Standards sets and enforces the requirements for CERTIFIED FINANCIAL PLANNER certification – to uphold standards of competency and ethics for financial planners who are committed to CFP Board of Standards to putting their clients’ best interests first.
CFP Board Center for Financial Planning advances competent and ethical financial planning and expands CFP professional diversity for the benefit of the public.
