Variable annuities (VAs), a widely criticized retirement savings product, is coming back thanks to President Donald Trump and his administration, which is gearing up to get rid of tough rules put in place by the Obama Administration.
The Financial Times reported that VAs have faced many regulatory reforms that make brokers and financial advisers act in the best interest of their clients when selling them these products. However, with VA sales declining to their lowest level in two decades last year, the industry is getting relief in the form of Trump.
Citing industry executives and analysts, Financial Times reported that a standard drawn up by the Obama Administration will likely be rescinded.
Dave Yeske, managing director at San Francisco-based financial planning company Yeske Buie, said, “If you are required to put clients’ interests first, they [VAs] almost never make sense. There are financial representatives out there who will now go back to selling these products, which make more sense for their pocketbook than for their clients.”
According to the report, with the Trump Administration rescinding many of the reforms targeted at the financial industries, it has also set its sights on the regulations put forth on VAs. That has already resulted in sales leveling off, with sales declining 1 percent year over year in the final three months of 2017 and the first three months of this year. For this year, LIMRA is forecasting that sales of VAs could be up as much as 5 percent compared to a year ago. That would mark the first time in seven years.
Despite Republican plans to scale back on Dodd-Frank, its co-author is optimistic the legislation will survive. According to The Seattle Times, former Democratic Rep. Barney Frank of Massachusetts said, “It’s much better than where I thought we would be.”
Last month, the Senate passed legislation that would loosen the regulations placed on financial companies after the Great Recession, with the bill gaining bipartisan support. However, the new bill still leaves many regulations in place — it is seen as a compromise because it doesn’t roll back as much as Republicans and Wall Street banks originally wanted. Though Frank said he would have voted against both versions of the bill, he considers the Senate version an “affirmation” of most of Dodd-Frank.
“Given the choice, I can live with it,” Frank said.