CHICAGO — A panel of three industry executives reported differing experiences working under tightened regulatory regimes abroad.
Much of the focus was on the Retail Distribution Review that went into effect in the United Kingdom in 2013. It is most similar to the Department of Labor fiduciary rule slated to begin taking effect April 10, 2017.
The panel spoke Monday during the LIMRA 2016 Annual Conference.
Advisor compensation is a target of both rules. Liz McKenzie, chief operating officer of Wesleyan Assurance Society, said her company struggled most with those changes. In particular, the company changed bonus payments to its advisors from monthly to annually.
“They absolutely hated it,” she said. “The single biggest problem we had.”
Wesleyan finally settled on a quarterly bonus, but kept its rolling annual bonus, McKenzie said, adding that the company lost some advisors. Bonuses were capped at 100 percent of salary. Overall, Wesleyan adapted better than most, she emphasized, because the company embraced the new rules from day one.
“We decided to jump right in and treat it as an opportunity rather than a threat,” McKenzie said.
Founded in 1841, Wesleyan offers a variety of banking and financial services and is one of the largest such companies in the U.K. The company put quality standards in place six months before RDR took effect, McKenzie said.
Over the past 12 years, at least six countries have imposed substantial regulatory reform similar to the DOL fiduciary rules. Richard De Sousa, managing director for Europe and Americas for ReMark International, is not a fan of the regulatory push.
“I dont think it’s had a real benefit,” he said. “In terms of more complex products, in my personal opinion, it’s had a negative effect.”
New regulations have resulted in a declining agent force, and those agents who remain are highly focused on high-net-worth clients, De Sousa said. For some, the rules are not a deterrence, he added.
“Agents are creative,” he said. “They find ways to sell in a different manner.”
While the U.K. market has settled, hurdles will remain going forward, McKenzie said. About one-quarter of advisors exited the industry, she said, although recent advisor numbers are “rising.”
“Being profitable is still the big challenge driving us all,” she said. “It is an issue that the mass market isn’t getting advice anymore. In the longer term, the challenges will still be there.”
InsuranceNewsNet Senior Editor John Hilton has covered business and other beats in more than 20 years of daily journalism. John may be reached at firstname.lastname@example.org.
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