DTCC Connection

Sep 13, 2016 • DTCC Connection

New "Insurance Profile" Service to Support DOL Fiduciary Rule Compliance

New automated service will facilitate data exchange between insurance carriers and distributors.

By Robin Choudhury


IRS Profile ServiceThe U.S. Department of Labor’s (DOL) forthcoming fiduciary rule will impose a host of new compliance mandates on the annuities industry. To help mitigate these compliance burdens, DTCC Insurance & Retirement Services (I&RS) will be introducing DTCC Insurance Profile, an automated service to facilitate data exchange between insurance carriers and distributors.

The DOL Fiduciary Rule

The new regulation, published by the DOL in April 2016, has fueled tremendous concern in the financial services industry. Developed to protect investors by helping ensure the retirement-savings advice they receive is in their best interest, the rule casts a wide net. It generally defines all professionals providing investment advice in the retirement-services market as “fiduciaries” who are required to avoid investment-related advice that could create conflicts of interest. By informing clients of all investment-related fees and expenses, and avoiding such conflicts (with certain exceptions), the new rule aims to ensure advisors put clients’ interests ahead of their own.

Although the final ruling was less stringent than feared, it is expected to impose billions of dollars in upfront and ongoing compliance costs, according to Investor’s Business Daily. Furthermore, compliance potentially requires added administrative processes which could entail extensive labor-intensive paperwork.

An I&RS Solution Created With - and For - Our Clients and Industry Colleagues

DTCC has been collaborating with firms to help make compliance with these mandates easier.

“As soon as the DOL issued its preliminary rule in 2015, we reached out to our clients and industry colleagues to understand how the new rule would affect their compliance-reporting needs and start mapping out ways we could meet them,” said Jeanann Smith, director and head of DTCC I&RS product management. “Because I&RS services connect carriers, distributors and third-party providers, we are well positioned to deliver an industry-wide solution for the rule’s new reporting requirements.”

Over the past several months I&RS led an industry task force group to identify and address the numerous operational challenges the new regulation will bring. The task force, including several I&RS clients and other industry stakeholders, has defined requirements for a standardized way to exchange fee, expense and commission schedule data to satisfy the DOL disclosure requirements.

With these specifications in hand, I&RS formulated a design for Insurance Profile, the new service that will provide access to data related to:

  • Direct expenses (e.g., management fees, surrender charge rates, commission schedules)
  • Indirect expenses (e.g., third-party payments, revenue sharing, marketing allowances)

DTCC is on track to deliver Insurance Profile via its National Securities Clearing Corporation (NSCC) subsidiary prior to the regulation’s effective date in April 2017.

Streamlining the Exchange of Expense Data

Once launched in early 2017, Insurance Profile will enable annuity distributors to access expense data at the contract, feature/rider and fund (subaccount) levels from I&RS’ secure, centralized hub – eliminating the need to search for and pull information from individual carrier partners. Carriers will submit and maintain the required data centrally, and distributors will retrieve it via a data file or through DTCC’s web portal. The data provided will leverage and implement standard ACORD messages.

Besides launching Insurance Profile, I&RS will be enhancing its Positions and Valuations (POV), Commissions (COM) and Financial Activity Reporting (FAR) services to support DOL reporting requirements related to the Best Interest Contract Exemption (BICE). The planned enhancements will be described as part of DTCC’s enhancement release process early in 2017.

DTCC’s Mutual Fund Services business line is also planning a number of product enhancements to help ease compliance to the fiduciary rule across mutual fund and other collective pool investment types.

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