Equitable Holdings Inc. is "well-positioned" to deal with whatever comes as a result of the US Department of Labor's proposed fiduciary rule, a top executive said.
The Labor Department's proposed fiduciary rule would impact how retirement products are sold by updating the definition of an investment advice fiduciary under the Employee Retirement Income Security Act. It would also lower what the Labor Department calls "junk fees" that customers pay when buying retirement products.
While still waiting to see exactly what the Labor Department's final rule entails, Equitable CFO Robin Raju told S&P Global Market Intelligence that the regulation is not expected to have a "material" impact on the life insurer.
"We're supportive of regulation that puts the customer first," Raju said in an interview. "We're supportive of that type of regulation."
Registered products
Equitable is "unique" in that the majority of its sales are through registered products, Raju said. To register a product with the SEC, companies must submit various disclosures regarding the product and the company standing behind it.
Raju noted that registered products already comply with several best interest regulations such as the SEC's Regulation Best Interest, the National Association of Insurance Commissioners' (NAIC) Annuity Suitability "Best Interest" model regulation and the DOL's Prohibited Transaction Exemption 2020–02.
Equitable has already put significant time and resources into building out systems to comply with these already existing best-interest regulations, Raju said.
Raju added that he expects most of the impact from the Labor Department rule will fall on fixed products that are not registered.
According to data produced by LIMRA, estimates for full-year 2023 sales of registered index-linked annuities (RILAs) and traditional variable annuities, which are also registered, stood at $98.8 billion.
Sales of total fixed annuities for full-year 2023 are much larger and amount to an estimated $286.2 billion, according to LIMRA.
This is "one of the best times to be in the annuity business," Raju said, especially due to the current higher interest rate environment.
"We're pretty bullish on the overall annuity market," Raju said. "Demographics are there and offerings are competitive and returns are good for shareholders."
Opposition, support
Insurance industry trade groups and state regulators have been vocal in their opposition to the Labor Department's proposed fiduciary rule.
These trade groups, such as the American Council of Life Insurers, argue that current regulations are more than adequate to protect consumers from potential conflicted advice when buying retirement products.
Opposing voices have also suggested that the Labor Department's proposed rule would restrict consumer access to retirement products and that unnecessary "junk fees," which were mentioned by President Joe Biden in remarks he made in October 2023, do not exist.
In a comment letter submitted by the NAIC, the regulatory body said it disagreed with Biden's remarks, which painted state consumer protections related to sales of annuities as being "inadequate" and allowing "misaligned incentives."
"The rationale and justification for the DOL's work should stand on its own as complementary to robust state efforts and should not mischaracterize differences in regulatory philosophy as an absence of regulatory competence or efficacy in this space," the NAIC said in its letter.
Meanwhile, supporters of the Labor Department's proposed rule claim the industry's arguments are unfounded.
For example, the Consumer Federation of America said in a comment letter submitted to the Labor Department that there are numerous "loopholes" that exist under current regulations enabling investment professionals and firms to "evade their fiduciary duty."
"Despite industry opponents' claims to the contrary, the [SEC] and the [NAIC] have not solved the problem of conflicted retirement investment advice," the letter reads. "The Department is the only agency that can comprehensively address this problem."
The proposed rule was also under fire at a January hearing of the House Financial Services Subcommittee on Capital Markets where both sides of the political aisle scrutinized the rule. Republican members urged the Labor Department to throw out the proposal, while Democrats suggested that improvements should be made.
