From: Jim Cornwall [mailto:jim@executivebrokerage.com] 

Sent: Monday, July 20, 2015 4:20 PM

To: EBSA, E-ORI - EBSA

Subject: RIN 1210-AB32 

To Whom It May Concern:

I am submitting this e-mail of opposition to the DOL’s proposed uniform fiduciary standard as concerns 

fixed life insurance products, especially fixed annuities. To illustrate the harm this rule will bring to 

consumers please refer to the real world example cited below. This example compares the efficient, 

well regulated sales process currently in effect to the convoluted process that will result from the 

proposed DOL rule, a rule that will make it much more difficult for middle-class Americans to obtain 

advice in purchasing a product that should be a critical part of their retirement plan.

Current Sales Process: Suppose a potential customer is referred to one of our insurance agents to 

discuss the merits of a fixed annuity. That individual desires to put $50,000 in a financial vehicle that 

minimizes or eliminates the risk to principal. After completing a thorough suitability review, our agent 

determines that a fixed annuity paying 3.50% is best for the client who purchases the annuity. The 

person is happy because the money is safe, it is adequately liquid and is earning three times what a

bank CD would earn. The client is so pleased he/she refers several clients to our agent in the 

future. Total commissions paid to the agent and the Independent Marketing Organization distributing 

the product equal 4.0%, but this does not come from the customer; his/her account opens with $50,000 

on day one and the commissions are factored in to the equation when the insurance company 

determines the 3.50% rate. Result – he/she earns 3.50%.

Sales Process after the DOL Rule is implemented: The same potential customer does not become a 

client because he/she objects to several components of the fiduciary sales transaction. 1) A $2000 –

$3000 planning fee (the amount typically charged by most fee-only planners). (2) He/she simply wants 

to find a safe home for this $50,000, not a complete financial plan. (3)He/she does not want to pay an 

ongoing 1.0% – 3.0% fee to put this $50,000 "under management". Even if this person were to purchase 

the annuity and the upfront planning fee is waived, he/she pays, at a minimum, 1% per year for the life 

of the contract - which could very well be the client's lifetime - which very well could be a very long 

time. After four short years he/she is stuck paying higher fees for life (bear in mind, the commissions 

paid under the current model total 4.0% for the life of the contract). These higher fees hurt the client. 

Under the proposed standard the client has two options; purchase the annuity and earn 1% less each 

year for the life of the contract than could be earned under the present process or place the money in 

a bank vehicle and earn 1% instead of 3.50%.

The proposed commission disclosure is likely to cause the client to delay the annuity purchase due to 

the $2,000 price tag ($50,000 times 4% total commission) and remain at the bank earning 1% or less for 

a long period of time.

While commission disclosures seem like a great idea, they can work against the client if they prove to be 

the stumbling block to making a more profitable decision with one's money.

Other Concerns with the proposed rule:

Increased Liability for the agent and the insurance company. Experienced agents may retire early, 

deciding that an additional layer of regulation, cost and liability on top of the existing framework might 

tip the scale in favor of early retirement (the average age of professional insurance agent is in the midfifties). Insurance companies manufacturing the fixed annuity products may decide there's too much 
tail risk from class-action lawsuits and may exit the market entirely. It is already difficult for them to 

make profits in this low interest rate environment which has persisted for quite some time. Numerous 

carriers have left the market due to low profitability. This rule will make more carriers consider dropping 

out. How can an agent working for a career company (Northwestern Mutual, Mass Mutual, New York 

Life etc) possibly act as a fiduciary and claim to offer products from all sources when in reality they 

primarily sell product from their primary company? Result – fewer agents and fewer insurance 

companies offering product.

Increased Reporting Costs: Even the large RIA’s think the rule will be too costly to implement.

Dodd-Frank has mandated the SEC address this issue.

Treating upfront commissions as a “bad” thing is not accurate: In addition to harming the client 

directly with higher fees, forcing trail commissions on the existing, mostly upfront commission-based 

distribution channel will make it very difficult for new insurance agents to survive. A very small 

percentage of agents entering the field will succeed and make it a career under the current system – the 

percentage of agents who survive is approximately 5%. If upfront commissions are discouraged new 

agents will have a difficult time generating the revenue needed in the early years of their careers. A 

quick review of a mutual fund prospectus shows that A shares (commissions paid by the client upfront) 

are cheaper in the long run than C shares or B shares.

Finally, this proposed rule completely ignores the fact that commissions are already as low as they can 

possibly be. Insurance companies automatically pay the lowest possible commission on each transaction 

in order to maximize profits; If they could attract premium dollars for zero commission they would do 

so – it would be the ideal situation. The free market automatically ensures that commissions will be no 

higher than necessary to attract the desired premium. What makes a regulator think they are better 

suited to determine a "reasonable" commission than a marketplace which judges millions upon millions 

of transactions, one at a time, constantly making sure the commission is just enough to get the premium 

in the door?

I sincerely hope the DOL reconsiders implementation of this harmful rule. Advisors will not be able to 

afford meeting with clients who have less than $250,000. In the United Kingdom, a country specifically 

listed in the proposed rule as a "success story", the major insurance company Aviva now has an 

$800,000 minimum requirement to meet an advisor face-to-face. This rule will harm the middle class 

and an entire distribution system comprised of good intention, hard-working Americans.

Sincerely,

James A. Cornwall

Agency Manager

Executive Brokerage Services, Inc.

PO Box 15686

Pittsburgh, PA 15244-0686

(412) 747-7474 Ext. 128

jim@executivebrokerage.com