Advisor: DOL Rollover Fee Disclosure Plan Would Hurt Annuities

An investment advisor who is skeptical about annuities predicts that the Labor Department’s rollover fee disclosure proposal will hurt annuity sales.

John Nowicki, president of LCM Capital Management, a Chicago-based registered investment advisor, welcomed DOL efforts to have financial professionals create comprehensive rollover assessments when helping clients who are thinking of moving assets out of 401(k) plans or individual retirement accounts.

“I’ve been in this business for 36 years,” Nowicki said. “I have never sold an annuity to a client, even though I am licensed to. The reason: I could not find someone foolish enough to say, ‘Hey, John, this is a great investment’ after I explain all of the fees, surrender charges, tax implications and nuances of an annuity.”

What it means: Some advisors have warmed up to annuities, but others continue to be unimpressed. Those advisors will be part of the annuity sales standards conversation.

The background: The DOL’s fiduciary rule update proposal would set new disclosure requirements for retirement professionals helping clients with 401(k) plan asset rollovers.

If a life insurance agent wanted to recommend an annuity, the agent would have to show the annuity alongside alternatives, including the option of leaving the assets in the 401(k) plan.

The comparison would have to give the costs associated with each option.

Advisor’s perspective: At LCM Capital, Nowicki has focused on cutting clients’ fees and taxes.