February 14, 2011
August 30, 2010
Elizabeth M. Murphy
Securities and Exchange Commission
100 F Street NE
Washington, DC 20549-1090
Dear Ms. Murphy,
I have been an insurance agent in the State of Utah since 1981. Although none of the products I sell are regulated by FINRA or the SEC, I have been observing the ongoing discussion about the proposed "best interests" rule with some interest.
One of the concerns that I have about so much of the discussion that takes place in the press as well as in government is that we have a tendency to use terms with very different definitions interchangeably. For example, you read many articles in the business press about saving for retirement in a 401(k) plan when many 401(k) plans have no "savings" components-only investment accounts. Likewise, I read many comments about investing in through a life insurance contract when the two underlying concepts are entirely different. Investing assumes a certain degree of risk, including the possibility that the investment may be lost. Insurance is a risk management tool. As I have always understood it, someone buying an insurance policy wants some assurance that the company will be carefully managed so that claims may be paid when made.
With that in mind, I have real concerns that the proposed 'best interests' rule may apply standards used to govern investing to companies involved in an entirely different part of the financial universe, in short, comparing apples and oranges. When you consider the world of insurance, how precisely do you define "best interest"? Are you looking at the lowest cost of insurance per $1,000 of coverage? Do you define is as the company with the highest ratings? Do you define it as term insurance? Whole life? This discussion has been going on for a long time. Each side has its champions.
I know that the focus of your deliberations appears to cover variable products like variable annuities or variable universal life. I also know that you have been inundated with letters from NAIFA, the AALU and other organizations with an interest in the outcome of the debate. I would like to point out that the issue of "best interests" goes deeper than merely ensuring that an investment advisor renders suitable counsel. An insurance agent represents a company and in so doing has a fiduciary responsibility to that company, as well as to the client. Imposing a "one size fits all" standard to both the insurance and investment world would, I believe, do more harm than good. The worlds of investing and insurance are worlds unto themselves and are best served by regulations that address each industry's unique characteristics and concerns.
The Cambridge Financial Center
Salt Lake City, UT