New Fiduciary Rules to Impact Your Financial Planning and Life Insurance

New Rules Certain to Impact Your Financial Planning and Life Insurance Strategy

Should you buy life insurance to bolster or provide for your retirement savings? Recent news from the Department of Labor about a fiduciary rule scheduled to take effect on June 9 will impact your financial planning, so the simple answer is likely “yes.”

Labor Secretary Alexander Acosta says that, while the Trump administration used an executive order to delay the rule, it’s now back on the table and could be implemented.

Acosta wrote an op-ed piece in the Wall Street Journal to announce that implementation of the fiduciary rule – delayed from April 10 – is unlikely to be extended beyond the June date. Acosta added that his agency plans to gather additional public comment they’ll use to reassess the rule. The changes were ordered by President Donald Trump in February. The DOL says that review may well lead to a complete overhaul of the regulation as it stands now.

The proposed regulatory changes have led brokers and investment advisors to re-evaluated their thinking and advice on which products they plan to recommend to clients.

One upshot of the review is that it has led many firms to make changes to their models toward recommending life insurance products as key retirement-planning cornerstones.

There are two primary types of life insurance: term life and whole life insurance.

Term life insurance is used to provide coverage over a specific time period and has a specific premium set according to factors such as the age and health of the insured. Because it only insures against death (and mainly doesn’t accumulate additional value), it’s primary purpose is to protect dependents financially in the case of a policyholder’s premature death.

Whole or Permanent life insurance also includes a death benefit, but a separate component also builds up cash value. Variable life insurance policies are those in which the cash value is invested in sub-accounts selected by the purchaser. Indexed life insurance policies include a provision which allows cash value to grow based on a preset “index.”

Life insurance should become a keystone to financial planning if the buyer has dependents who rely on them financially, and should untimely death occur, that policy will ensure that your loved ones are provided for. It also covers outstanding debts and costs associated with a death and a funeral.

Most experts say consumers are largely unaware of the ongoing battle because the complexity of the rule prevents them from digging deep enough.

“The consumer doesn’t understand the minutiae about the debate,” says David Roberts, the director of fiduciary and investment compliance for Unified Trust. “Why does it take 400 pages of federal code to explain the right thing to do? They don’t know who to believe, so they throw up their hands.”

And it only promises to get more complex with time. The DOL under President Trump’s direction will likely overhaul the fiduciary rule later this year.

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