Understanding the DOL Rule and Its Impact on Agents | 7 Figure Annuity Sales Podcast | Ep. 295

Well, the first thing you want to do with the new DOL rule is not panic. Don't panic, guys. We have until September 23, 2024 before this rule actually becomes effective. Welcome back to the Seven Figure Annuity Sales. It's Caleb North. I am rolling solo again today and I'm talking about something that you've probably seen on social media, on the Internet, in the news, whatever, but it's the new DOL rule regarding ERISA transactions and, and whatnot. And guys, I want to say looking back to 2016, the last time that this DOL, a similar DOL rule was, was proposed and eventually passed and then overturned in court, there were lots and lots and lots of agents that began panicking. And it really doesn't help anything to panic because at the end of the day, it's a rule that instates a few new requirements. Nothing too crazy, and we abide by them, we do them. And truth be told, I'm going to go over it in a little bit, but most of us, if you're doing what's best for the client already, if you're already operating in a fiduciary type of responsibility, the way that I've described that to agents before is almost this moral fiduciary where historically you might not have had the legal obligation to, but because you're a good human being and you care about people more than you care about yourself, you've done things in a fiduciary manner. There's not a ton that's going to have to change or whatever. There might be some record keeping and some application paperwork and things that get adjusted. But all in all, what they're trying to do is to get people to consider their clients more than themselves, consider their clients more than the commissions or the fees that they're going to be making. And if you've been operating that way, not a whole lot that's going to throw a wrench in your process and what you're doing. So all of that to say don't panic. We do have, like I said, Until September 23, 2024, before this rule becomes effective. But I want to talk about what this means for you guys as agents. And really to start, it's just by defining who, who is legally obligated now under this rule to operate as a fiduciary. And, and I've got it pulled up here. I'll read it to you. It says the person, either directly or indirectly, through or together with an affiliate, makes professional investment recommendations to investors on a regular basis. As part of their business. And the recommendation is made under circumstances that would indicate.

To a reasonable investor in like circumstances that the recommendation is a based on review of the retirement investors particular needs or individual circumstances that it reflects the application of professional or expert judgment to the retirement investor's particular needs or individual circumstances and may be relied upon by the retirement investor as intended to advance the retirement investor's best interest. Okay, that's fiduciary. Here's the deal. There's a sub note that the person represents or acknowledges that they are acting as a fiduciary under Title 1 of ERISA, Title 2 of ERISA, or both with respect to the recommendation. And the recommendation must also be provided for a fee or other compensation which would include commissions, direct or indirect as defined in the final rule. What does this mean? It means that you're dealing with 401ks, 403s, other employer plans, pension plans, IRAs now included as well individual retirement arrangements. You are legally obligated as of September 23, 2024 to operate as a fiduciary in your dealings with those clients. So what does this mean you have to do? Well, according to the rule, fiduciaries must one, give advice that is prudent and loyal. Okay, prudent and loyal. It's good advice and is loyal to the consumer. And must avoid misleading statements about conflicts of interest. Fees and investments must follow policies and procedures designed to ensure the advice given is in an investor's best interest. Okay, so fact finding, asking good questions, figuring out what they actually need, all kinds of analysis, product exploration, all those kinds of things. And then charge no more than is reasonable for their services. And give investors basic information about any conflicts interest.

That's the high level overview of the rule. Again, the actual rule is hundreds and hundreds and hundreds of pages long. You can go read it if you'd like. I actually recommend most certainly that you do your own research into this and that you keep up with it as it progresses. But at the end of the day, what I've seen so far is.

Basically a wreath. Distribution of who is legally obligated to act as a fiduciary is kind of the main emphasis of the ruling and then it defines what that actually entails and what those responsibilities are. So there's a couple of things that as a result of this, I would encourage agents to be getting in order. Okay, so where do you, where do you go from here? Well, first, familiarize yourself with the ruling yourself. There's a lot of great information out there that you can find, you can read. You can go and actually read the entire ruling for yourself on your own. As I've already mentioned, there's a lot in there that may not necessarily pertain to you directly, but the parts that do pertain to you directly. Be extremely valuable to actually read that ruling yourself. Continually be on the lookout for litigation developments that could end up overturning the ruling. This is what happened in 2016. The rule pass, and then it got litigated and there was lawsuits against it, it ended up getting overturned. What does that mean? Over the coming months, this thing could be.

Completely nixed. We don't know. We don't know. Right. I would find it probably unlikely that that were to occur, but historically that has happened before. The rule is, I don't think, quite as extensive as the 2016 rule was. That got overturned. So that set a precedent, and this is more lenient, a little bit less intrusive. Then perhaps it doesn't actually get overturned in an appeals court. We'll see. Right. But there are already groups, agencies, entities out there on the move.

Preparing litigation against DOL for this rule. So be on the lookout for those. Don't rush yourself into rash decisions out of fear, okay? And don't let organizations use the ruling to try to create a fear that causes you to make rash decisions. If you go back to 2016 and the OL rule was passed, you were to be in the IMO scene or you were an agent in the industry at the time. You may remember, IMO is scrambling to create these programs that basically made it possible for their agents to get their securities licenses through them. So what happened? They start recruiting agents on the basis of, hey, come get your securities license. We've got this program, we've got it. It's easy for you. Get you squared away, no problem. So now these agents, they've been working with a particular IMO for however long. They've got a great relationship with their marketer, whatever. Now they're jumping ship because these IMOs are using the rule as a recruiting tool. Okay? So what you need to be aware of is IMO's out there that may try to recruit you on the basis of, hey, come over here and get your securities license. You've got to be a fiduciary. Now all this stuff.

Guys, don't make rash decisions. If you want to go get your securities license, that's fine, but to do it out of fear is the wrong motive. So that's my encouragement to you there. Don't make rash decisions out of fear. In response to the ruling. And no, based on everything that I can tell right now, there is no legal requirement for you to actually be a securities licensed individual to continue selling annuities. They've not changed the classification of annuities. What they've done is they've amended, adjusted who gets deemed legally obligated to act as a fiduciary when dealing with ERISA funds. So.

Number three, only sell. Oh, wow. No, pardon me, that's lower on my list here. Number three, review your process. Okay, so go over it. What are you doing? Ensure that you're in compliance with the new ruling. So what does that look like? Practically, number one, fact find as you've got to discern the needs and the desires of the client and determine what is actually in their best interest. Okay? If you don't know what they need, you can't solve a problem. If you can't solve a problem but you make a sale, how are you going to defend that? That was in their best interest. You don't know whether it was in their best interest or not. So if you get anything out of this, and this is, this is a thing that Chad and I have been harping on for months and years, the importance of fact finding, okay, not just so that you can see what you have to work with here, but so that you can determine if what you're doing is actually best for the client, then I want to encourage you to record their needs, okay? So not just asking the questions and mentally retaining it, having a fact finder, sheet of paper, recording this, creating a proposal of sorts, if you will, where you're actually putting down what their needs are, what their situation is, what their goals and their desires are, and how the solution that you have actually solves those in a way that is in their best interest, okay, record it, Only sell what's in their best interest. Walk away from opportunities to sell something that isn't in their best interest. So what does this mean? This means there is no carrier loyalty. This means there is no attempting to chase comp bumps or bonuses or trips, Right? If you make a sale on the basis of it pays you a little bit more, that would not be acting as a fiduciary. If you make a sale on the basis of it's contributing toward a future trip and it's not actually what's in the client's best interest. That's not acting as a fiduciary. This comes down to the IMO level. If you're working with an IMO that has you contracted for one carrier or two carriers or three or whatever it is. And you have to try to hit a production threshold to qualify for one of their programs or trips or whatever. And you only sell whatever they're offering because you're trying to get to that. And it's not actually in the client's best interest. That's not acting as a fiduciary. So you need to recognize that what you're doing is you're putting the client's interests ahead of your own. What is their interest? Their interest is in alignment with their retirement goals. So fact finding uncovers what their interest is and then the solution that you actually use and implement with them will either be in alignment with what's in their best interest or in alignment with what's in yours. And that's what the DOL is trying to mitigate. Agents doing things that are more in their best interest on the altar of their clients. Again, historically, most of you the way that Retirement Realized and Seven Figure Annuity Sales Podcast has been encouraging agents to do business for years now has been on the basis of what is best for the individual person across the computer screen or across the table. Regardless of what that does for you, do what is best for them. So if you've been following us, you've been incorporating our processes and techniques and all those kinds of things, you've probably been acting and operating as a fiduciary with all your clients regardless of any legal obligation to do so. So props to you. And then the last one here is work with a marketing organization that shares in the moral obligation to do what's best for your clients. Guys, I'm going to read to you a paragraph that is pulled straight out of the ruling in the section given for independent sales professionals, independent agents, however you want to define that you guys as independent agents would qualify or fall under this particular segment and they actually address IMOs and FMOs. And this is what it says. It says the amendments will not impose any conditions on insurance intermediaries such as independent marketing organization, IMO's, field marketing organizations or brokerage general agencies BGAs. These entities do not have supervisory obligations over independent insurance producers under state or federal law that are comparable to those of the other entities such as insurance companies, banks and broker dealers, nor do they have a history of exercising such supervision in practice. They are generally described as wholesaling and marketing organizations that are not tasked with ensuring compliance with regulatory standards. In addition, they are not subject to the sort of capital insolvency requirements imposed on state regulated insurance companies and Banks. What does this mean? This means that you as an agent are legally obligated under this rule to act as a fiduciary. Your IMO is not legally obligated to also act as a fiduciary for your clients. What does that mean for you? That means that if you are partnered up with a marketing organization that has their overrides or their bonus structure or their preferred carriers, whatever interests in mind, they're probably going to be pushing product on you as the best product in quotes or sell this product because of XYZ and they're trying to mass push this product rather than training agents well on how to do good fact finding, how to do good needs analysis, how to do good case design and product selection so that you can actually be sure that you are recommending what's best for the client. In other words, the IMO is not going to be the one that's on the hook if there's a compliance fault. You are so there. I would argue there's never been a time in the history of, you know, modern annuity insurance sales. We're working with a marketing organization that is morally aligned and has a feels a sense of moral fiduciary. Responsibility.

Is as important as it is now because your marketing organization isn't going to reap the repercussions of you selling something that isn't in your client's best interest.

That's just the way it's written. That's the way that it goes. So if that's the case, you need to do your due diligence with who you're working with. Don't be moved by organizations that are giving you extra components. Again, not fiduciary. Don't be moved by organizations that are trying to get you contracted with a couple carriers and then promote this big trip because, you know, whatever, whatever you write X amount of business with this carrier and this carrier and with us or whatever, and I will take you on this trip. Potentially not fiduciary. That's conflict of interest.

Don't be moved by marketing organizations that, that are pushing product down their agents throats in masses, okay? Trying to create opportunities for agents to sell certain products. Because again, not fiduciary. So your marketing organization's lack of moral compass.

Could lead to real issues for you as an agent. So I'm hopeful that this rule, even though it may not directly pertain to marketing organizations, has an effect on the way that marketing organizations do business. Because historically, marketing organizations have not always done things in a way that has their Agents, clients, best interest in mind. And that's a sad reality, but that is the reality nonetheless. One of the things that I have historically told agents is that as I work with agents, again with a marketing organization, Retirement Realized Financial, as I'm working with agents and helping them determine what products are we going to use, what kind of solutions are we going to implement, I've said it and I've done it. The order of consideration is client first, agent second, imo, third. Which means that our interests go last the second or the agents are after the clients and beneficiaries and all of the end consumers.

Potential people that are impacted by it. Okay? And yes, even beneficiaries would be included in that. Okay? So it's not even just client, it's client in all of their interests, agent second, IMO third. And the problem with that is that there are IMOs out there. Not the problem with that, but the problem with the industry sometimes is that there are IMOs out there that will make product recommendations to agents on the basis of the override that they get or on the basis of the commission that it pays the agent.

And that can be problematic if that product is not what's actually in the client's best interest. So I hope that this encourages you guys to seriously, seriously, seriously look at who are you writing business with and through, and how are they determining what's actually going to be best for your clients? One of the things that I've been extremely excited about lately with Retirement Realized Agents Academy and Retirement Realized Financial is these weekly mentorship calls that we've been doing. And they've been getting a ton of traction every single week. Either myself or Chad or our partner Jesse Black, or my boss and our president, Josh Delgado, and sometimes a mix of the four of us, we'll get on and do a weekly mentorship call where we're training agents for the first 20 or 30 minutes. We've got a specific topic we're training on, and then the last 20 or 30 minutes or so is all implementation and Q and A. Okay, well, this coming Friday, I'm going to be elaborating on and expounding on a webinar that Chad and I did a couple weeks ago where we broke down the fact finder. Right. We looked at the fact finder on this call a couple weeks ago. And now what I'm going to be talking about this coming Friday is what to do with that information once you've got it. Okay. How do you use that information practically to actually determine what's going to be best for your clients and is it in their best interest or is it not? How do you determine what is in their best interest and what isn't in their best interest? How do you then determine if the product you're going to position to them is actually prudent, loyal product advice? So if you want to be a part of that, I would highly recommend it. Reach out to me or go to agents.retirementrealize.com and get plugged into the Annuity Architects program. It's going to be a fantastic time and I hope to see you there. Guys, as always, this is a. Well, this is a breakdown of the dol. And again, don't panic. Don't be afraid. Keep doing what's in your client's best interest, okay? Keep good records. Do good fact finding. Everything's going to be all right. You don't need to. You don't need to panic. You don't need to fear. But you do need to take the rules seriously and you should be studying it and keeping your eyes on the lookout for any changes or litigation that comes in the coming weeks. So I hope this helps you guys. As always, happy selling.