For an insurance logician, the Department of Labor framework Retirement Insurance Rulein which future recommendations made to retirement savers are viewed almost exclusively through the lens of investment advice, is logically problematic.

The regulatory confusion of “wealth/financial” with “investment” dates back to 1987, and essentially disadvantages the insurance industry (liability minimization). It also hurts the wealth accumulation and retirement income optimization of American retirement savers, not all of whom will always want to be investors.

Among financial professionals, only investment advisers routinely sell investment advice, and only advisers can “sell” (receive compensation for) advice. IN this piece 2022, I explained in depth my belief that advisors sell advice (verbs), while agents and brokers sell products (nouns). No form of financial professional sells (noun) advice. Reg BI policies that can stand as financial or investment advisers, but there is no codified framework for what it means to be an “insurance adviser”, meaning anyone can claim to be an adviser insurance, regardless of credentials.

In 1987, the SEC defined to govern financial advice under the Investment Advisers Act of 1940 (“Act 40”). As a result, recurring advisory compensation is primarily based on AUA/AUM, which is the opposite of the insurance industry's value proposition (liability minimization). This warped reality results in suboptimal American retirement outcomes because an investment advisor acting in a fiduciary capacity may absolutely be a fiduciary in the realm of investment advice (meaning asset maximization subject to risk tolerance constraints ) while it is not at all a fiduciary in the field of wealth management. In reality, investments are a subset of finance/wealth. To govern financial advice, the broadest framework, under the narrowest objective, results in the adviser prioritizing short-term asset maximization rather than long-term wealth sustainability. Balancing short-term and long-term wealth priorities is critical to insurance's role in financial planning, which is a distinct discipline from investment counseling.

Insurance industry researcher Wade Pfau routinely teaches that tolerance for “the risk of running out of money and becoming a burden to my heirs” is not a question evaluated in a standard RTQ investment account. Many, though almost all, retail RIA investment advisory fiduciaries are also financial planners. Financial planners should consider liability minimization as part of wealth maximization, but financial planning regulated under Act 40 creates consumer confusion about the service they are paying for.

Investment advisers are responsible for the proper management of an investment mandate; they are not liable if the client's portfolio, managed in that term, lasts until the client's retirement. This is why investment advice is not the logically correct regulatory target for financial planning. An asset manager's GIPS-compliant performance metrics do not include reporting on cash flows into and out of the portfolio (such as for retirement income provision). Therefore, regardless of how often client portfolios may run out of money in retirement, AUM billing investment advisory fiduciaries are entitled to call themselves fiduciaries of their clients, who may imagine that their advisor is providing them with wealth management services when, in fact, the advisor only provides investment advisory services. This is why regulators need to distinguish financial advice from investment advice.

Convoluted conversations between industry and government about the difference between fiduciary and non-fiduciary behavior have clouded our view of what wealth management is, so we fail to ask the question, “Fiduciary of which field?” Investment management and wealth management are not synonymous. Wealth, by definition, means assets minus liabilities. But not all assets are investments. It is not even the case that all financial instruments are investments. For example, the DOL agrees that a term life insurance contract is not an investment. (This part of 2022 articulates my views on the difference between wealth and wealth management.)

Insurance, which, from the consumer's perspective, is the liability minimization industry, is a critical component of wealth management. Historically, the production and distribution of fixed insurance has been regulated by states as an area related to the means of minimizing liabilities, which it has seen as fundamentally different from the means of investment. But rRegulatory goals around insurance governance are changing before our eyes. It is therefore right that we now accept and adjust our regulatory framework to allow insurance to have its rightful place in this new world where government prefers advice (verb sales) over product sales (noun) as a delivery framework. wealth management distribution. .

Saving AND investing should not be arranged as synonyms. Some Americans, with some of their savings, may never want to enter the market. If it became possible in the future, they might want to save directly, perhaps through an “insurance advisor”, on the insurance vehicle income stream option within BlackRock's new LifePath strategies, or maybe in ALEX The incomeDC product design, or in any number of other ways to purchase credit toward the eventual purchase of a fixed income annuity, which historically is not viewed as an investment.

In one The comment letter I submitted to the DOL on 1/2/24suggested that, instead of forcing those not eligible by the SEC to self-identify as “investment advisers” to say that they “regularly sell investment advice,” it could supplement the scope of financial advice by codifying a of the three fiduciary advisory roles. suggested below, deriving financial planning from Law 40:

1. 1. 1. Retirement Income Advisor (income statement advisory. Codifying this identity would cause “advised income” to become an advisory billing framework that would be more likely to align with government priorities for ERISA assets rather than AUM as a billing framework)
      2. Wealth adviser (or financial adviser or financial planner not under Law 40) (net worth declaration advice); OR
      3. Insurance Advisor (advice on the right side of the balance sheet).

It is unreasonable that our regulatory framework fails to facilitate a service delivery organization with the supervision of qualified insurance experts providing insurance advice, which will differ from the sale of insurance products in the same way that investment advice differs from brokerage in financial services.

Our government has made it clear that its preferred framework for providing financial services is investment advice, which it clearly does not recognize as a separate discipline from financial advice. The framing, as such, ignores the value proposition of an industry that is a cornerstone of our nation's financial foundation. As noted by FINLANDAmericans need holistic financial advice that includes a combination of life insurance, investments and annuities, as quantified here by Ernst and Young. American Retirement Savers deserve financial service delivery frameworks that promote the optimization of their wealth, not simply one that maximizes their short-term investments. If the government wants all recommendations made in relation to retirement savings to be made by a fiduciary, then, in addition to investment advice, it should codify one of the fiduciary advisory identities that can contribute to lifetime wealth optimization, such as described above.

Michelle Richter Gordon is the founder of strategic consultancy MRG Advisors. Ms. Richter-Gordon believes that financial advisory services are asset-liability maximization services, not just asset maximization services, and she strongly believes that the DOL, as well as the SEC/FINRA, should reexamine financial, which is not synonymous of investments, regulatory framework of services accordingly.