Obama’s Plan to Squeeze Pay, Incentive Trips, HRG Insurer Says

An Obama administration proposal designed to make sure that savers get the best advice on retirement products may squeeze pay for salespeople who pitch the offerings, Fidelity & Guaranty Life said.

“You could expect overall compensation, maybe in the long run, will come down,” Dennis Vigneau, chief financial officer of F&G, said Thursday at a conference hosted by Iowa insurance companies in Des Moines. People who sell the policies will “have to raise, certainly, their standards of disclosure.”

The U.S. Department of Labor has proposed a requirement that brokers and insurance agents put clients’ interests ahead of their own. Senator Elizabeth Warren, a Massachusetts Democrat, has said industry incentives such as cruises are leading brokers to give bad advice to their customers and called for more disclosure.

“There may not be incentive trips” under tighter U.S. rules, Vigneau said. “Although those sorts of trips aren’t really a big part of compensation, they do tend to grab the headlines.”

Warren sent a letter in April to life insurers including MetLife and Prudential Financial Inc., the two largest in the U.S., saying that awards like car leases and rings appear to be “kickbacks directed at annuity agents and brokers.”

Providers of retirement products have spent years fighting the effort to impose tighter standards.

MetLife Inc. Chief Executive Officer Steve Kandarian this month warned of possible disruption from the U.S. proposal, saying it would be like telling Chevrolet dealers to pitch Ford products. Stifel Financial Corp. CEO Ron Kruszewski said this week that the Obama administration’s plan is “almost unworkable.”

F&G, which is majority-owned by HRG Group Inc., is waiting for more clarity on the rule, according to Vigneau. He said he didn’t expect his company to be impacted in a unique way, compared with competitors.

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