As everyone involved in the retirement market space well knows, the Department of Labor’s April 6, 2016 fiduciary ruling threw the industry into some turmoil. The legislation requires anyone providing retirement investment advice to plans, plan fiduciaries and IRAs to ensure that their guidance is in the best interest of the client — and not motivated by compensation. To meet the DOL ruling requirements, financial firms must disclose information on fees, expenses and compensation on annuity contracts to their customers. The problem is that many financial Institutions are not easily able to ingest a multitude of fee and expense data from any number of carriers they do business with so they can make the necessary disclosures and comply with the ruling.

[Mary Anne Durall]
[Mary Anne Durall]

When it comes to DOL rule compliance, there is strength in numbers. Industry groups, carriers, financial institutions, distributors and solutions vendors have collaborated to create a standard industry solution for sharing information between carriers and distributors. The standard, based on the ACORD framework and DTCC’s insurance network, is essential to the industry going forward.

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Carriers can reap many benefits from using standard formats. For example, standardized data can save costs, boost service satisfaction, increase control and management of information. Here are three ways standardizing data not only facilitates compliance with the DOL fiduciary rule, but can also strengthen carrier-distributor relationships and make it easier for carriers and distributors to work together.

Standardizing data will make it easier for distributors and carriers to do business going forward.
Industry data comes in many forms, including marketing materials carriers and distributors produce, prospectuses, policy pages and fund fact sheets to name just a few. Through its disclosure process, the DOL is making it imperative for the industry to standardize that data, requiring that all the information contained in a prospectus, fund fact sheet or in a disclosure is presented in such a way that no matter where an investor looks for the data it matches.

The DOL is essentially forcing the standardization issue. While everybody can interpret that forced standardization in their own way and use different tools and processes to implement disclosures, and put their own marketing flair around it, the format the data is in will have to take on consistency. Otherwise, it will open organizations to different kinds of risk and exposure. If carriers use percentages in one place, basis points in another place and dollar value in a third, they’re going to eventually have to connect all of those and prove that they’re all correct. Standardization makes it possible to show data in the most common format for each item instead of multiple, disparate formats.

Data standardization is forcing the industry to look at our toolsets.
Another task that’s forcing the industry to take is to look at our toolsets and how we share information. An example of this process centers on commission schedules. We know carriers must have the ability to share information with distributors about the compensation they may receive based on the advice they give and who within their organization might receive compensation as part of that advice. Compensation schedules are complex containing thousands of data points, therefore, we need to possess the resources to provide a large amount of data to organizations downstream, from an insurance carrier to the distributors to help them determine by carrier what each of the rules in the compensation contains. So if not standardized, and if distributors receive something different from every single carrier it would be a challenge for them to try to figure out what they need for each company. A single industry wide format can resolve any confusion and allow for consistent reporting across all financial Institutions.

Data standardization takes the guesswork out of investors’ decisions.
If carriers all present data in the same, consistent format, it’s much easier for investors — and regulators — to understand the investment choices presented to investor. This allows for a more consistent presentation of the standards surrounding what is good investment advice for a single customer because they can see everything in one place and the same way across our industry

The April 2017 deadline for compliance with the DOL fiduciary rule is mere months away. But as many carriers and distributors are scrambling to ensure their systems are sufficient to handle the increased demands, the industry’s efforts to standardize data for facilitating data sharing are making their jobs a little easier — and offering benefits that extend well beyond mere compliance.

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