AALU: Shifting from defense to offense on Capitol Hill

By Warren S. Hersch

May 02, 2016 at 08:38 AM

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The AALU has "real concerns" about the Department of Labor's finalized fiduciary rule because it will reduce consumer access to retirement products and investment advice.

Founded in 1957, the AALU is combating federal legislative and regulatory threats facing the industry by expanding and diversifying its membership ranks. The association is also looking to innovate: instituting a new membership tier, revisiting its brand and developing custom content to help recruit, retain and drive value to its members.

These were among the highlights of a wide-ranging discussion between LifeHealthPro Senior Editor Warren S. Hersch and Marc Cadin, AALU's senior vice president of government affairs, in advance of AALU's 2016 annual meeting, being held in Washington, D.C., May 1-3. The interview explored, among other topics, AALU's position on federal tax reform, federal and state initiatives of concern to the industry, and how the organization is evolving to meet its members' advocacy and professional development needs. The following are excerpts.

Hersch: How will this year's gathering differ from last year's? How might the conference's thematic focus be reflected in the session content?

Cadin: With more than 1,100 people, the 2016 annual meeting will be the largest attended conference in the last several years. We'll also have the largest number of first-timers — over 330. We're really excited about that.

A number of new events reflect on our theme in 2016. To start, we'll have our first-ever Diversity Summit. Fourteen companies from across the industry are sending diversity officers to share their lessons with members. They'll discuss their business environments and how to become a more inclusive organization, one that more accurately reflects what the country looks like.

Within the Diversity Summit, The American College will present a study on women in the industry. We also have planned a second annual "Women in Insurance Breakfast" featuring Jennifer Griffin, a Fox News national security correspondent and triple-negative breast cancer survivor.

Other speakers will be contributing to our innovative line-up this year including Dr. Craig Venter, who helped to decode the human genome and is now CEO of Human Longevity Inc. and the J. Craig Venter Institute. Also presenting are Nate Silver, a statistician and founder of FiveThirtyEight; and Frank Abagnale, a fraud expert who will explore developments in cyber security — a huge and growing issue for insurance and financial service professionals.

On the Main Stage, too, will be Gary Vaynerchuk, a serial entrepreneur and social media guru; Scott Clemons, an economist and chief investment strategist at Brown Brothers Harriman; and Jason Redman, a former Navy SEAL and founder of Combat Wounded Coalition.

See also: 10 critical tax issues for 2016

Hersch: In respect to federal tax policy, what are the immediate threats that AALU's legislative team members are most focused on in 2016?

Cadin (pictured at right): A top concern is the potential impact of tax reform on our industry. On this front we're aiming, as House Speaker Paul Ryan says, to move from being an opposition party to a proposition party: to help unite Congress behind substantive policy positions we can support and that give people a true choice. To that end, we're continuing the education process with members of Congress to ensure they're aware of the foundational pieces that will impact tax reform, assuming this happens in 2017.

As to 2016, we're also staying abreast of other proposals — including Treasury Department regulations respecting corporate tax inversion — that may effect our industry. One thing we've learned over the years is that the life insurance industry is not always well understood on Capitol Hill. So an ongoing educational process has to occur to protect the industry's products and consumers.

Hersch: To realize your advocacy goals, will you also need to beef up AALU's membership so as to have a greater presence on Capitol Hill?

Cadin: Yes. If you don't have a growing membership, it's very hard to be an effective advocacy group. So growth in our ranks is core to our strategy.

The good news is that we're on pace to have our best year ever with some 2,300 members, a 7 to 9 percent increase over's last year's total. Apart from our advocacy needs, the broadening of our membership has been driven in part by the professional development tools and resources.

Hersch: Turning to the Department of Labor's fiduciary rule, has the AALU's position evolved since the release of the finalized regulations? Does the association approve of certain changes to the last draft proposal? Which areas are of ongoing concern?

Cadin: Policymakers have perpetuated a false narrative about financial advisors generally and life insurance professionals specifically: that they're not working to serve consumers' interests — their best interests — every day.

We're still digesting the 1,000-plus pages of regulations, but based on our initial review, we continue to have real concerns about them.

To be fair, the final rule includes modifications we view as positive, such as the phased-in implementation. But other changes are for the worse, including an expansion of the types of annuity products that are subject to the BIC without any new data to justify the inclusion, as well as limitations being imposed on small businesses to provide retirement plans for their employers.

In terms of advocacy, we'll devote two sessions at this year's meeting to bringing members up to speed on the rule. We've engaged Drinker Biddle as counsel to assist in this effort, led by Brad Campbell, a former ERISA "top cop" at the DOL under President George W. Bush and a nationally-recognized retirement benefits expert. Drinker Biddle will provide a complete analysis of the rule's details and the practical implications for the life insurance industry in a report that we expect to deliver to our members shortly.

We've additionally created an implementation task force — including people from The American College, NAILBA [National Association of Independent Life Brokerage Agencies] and GAMA International [formerly the General Agents and Managers Association] to formulate a unified interpretation and message on the rule.

The bottom line is this: The final DOL rule reduces consumer choice and access to retirement solutions, increases costs and liability, and significantly disadvantages lifetime income products including life insurance and annuities.

We issued a statement in support of a House bill, the Congressional Review Act, a law that empowers Congress to review, by means of an expedited legislative process, new federal regulations and, by passage of a joint resolution, to overrule a regulation. We believe that significant changes to the retirement planning landscape should be made through the legislative process, not through the regulatory choices of a particular administration.

Hersch: What other federal or state issues are top of mind for the AALU this year?

Cadin: We do have concerns about the regulatory environment in general, including efforts by the SEC, FINRA and the Treasury Department to expand their oversight authority. We also have concerns about our friends in the carrier community, including capital reserve requirements placed on them and implications of being tagged as a non-bank SIFI [systematically important financial institution].

To be effective on the advocacy front, carriers and advisors need to come together through their respective associations — the ACLI [American Council of Life Insurers] and AALU — and speak with one voice. Otherwise, both communities will suffer.

Raising taxes on the carriers' products will result in increases in the prices of those products, making them less affordable to consumers, and thus a more difficult sell for agents and advisors. Likewise, the increasing regulation of carriers, including heightened capital reserves requirements that don't meet the reality tests, will limit their ability to provide products that our members sell.

At the state level, some states are contemplating setting up state-sponsored retirement plans that would compete directly with private sector solutions. These developments are also worrying, but they're not a core priority for us. NAIFA [National Association of Insurance and Financial Advisors] is really the only organization with resources at the state and local levels to deal with these legislative and regulatory threats.

Hersch: With a view to the coming presidential and congressional elections in November, has the AALU moderated its goals and objectives? What do you hope to accomplish this year or next?

Cadin: We haven't moderated our goals. We continue to focus on defending the integrity of our profession; and, to that end, pursuing three immediate objectives. These include: (1) Becoming more effective on Capitol Hill by continuing to engage our members in advocacy efforts; (2) getting all the industry stakeholders — insurers, wholesalers, agents and advisors — to speak with one voice on public policy issues; and (3) broadening our membership through new and innovative professional development initiatives.

Our ultimate goal is to go from playing defense to offense: to shift from guarding against legislative and regulatory threats to promoting policies that will get more insurance and annuities into the hands of people who need our products. This requires a change in mindset.

Hersch: Might this reorienting entail additional partnering with sister organizations?

Cadin: Yes. And, in fact, we're partnering with NAILBA to find ways to engage more of the brokerage community in the advocacy process. We're also having discussions with LIMRA, which is perhaps the best research organization serving the industry. We're also in discussions with other organizations.

More partnering definitely has to happen. By teaming, we can more effectively and efficiently allocate resources to achieve common aims and drive value to our respective members. That will ultimately strengthen the distribution channel and the products we sell consumers.

Hersch: Is the AALU revising advocacy and/or association growth strategies to better attain its aims? How is the association evolving to meet new legislative, regulatory and professional development challenges?

Cadin: There's no question that we have to revise our growth strategy. Organizations that don't innovate, evolve and drive value to consumers will go out of existence. So we're 100 percent committed to innovating to meet the new challenges of the day.

To be sure, we have to keep doing what's working. We have an active and growing membership that's engaged.

Our AALU Ambassadors — elite political leaders in the industry dedicated to building relationships and engaging policymakers to preserve, promote and protect the 75 million American families who depend on life insurance and annuity products — help our members efficiently and effectively plug into the political process, and communicate a clear and compelling message about their profession and what our products help consumers.

These members are life insurance-centric, advocacy-focused and aspirational. We have to continue to represent them; this is core to our mission.

Beyond this, we have a commitment from the AALU board and from senior leadership to pursue effective strategies that will help drive innovation. A component of this innovation is the broadening of our membership through the diversity initiatives we've talked about. We also have to broaden our brand. AALU has long been known as an exclusive group. We have to find ways to make it a more inclusive and welcoming organization.

And so we'll be announcing at the annual meeting a program that will be unveiled later this year called AALU Access. The initiative will provide potential members — targeting agents and advisors at earlier stages in their careers — an opportunity to engage in our organization and the annual meeting. To reduce the barrier to entry, we've instituted a membership tier at a lower price point. And we're encouraging folks within the industry to participate in AALU meetings earlier in their careers; we're grooming them to become future advocates for AALU and the industry.

We also have to do more with companies in ways that drive value. We continue to enjoy great relationships with our Issues Alliance Partners, whose support helps to keep dues down and to develop members' ambassador relationships.

We've entered into a partnership with Northwestern Mutual and are in active discussions other companies about the launch of a new product line called Federal Advocacy Services. The program aims to aggregate and distribute customized versions of content — presentations, evaluations of market trends, case studies, court cases — to a wider audience. That will help us better align our advocacy efforts with the needs of our members, broaden our membership base, and engage more advisors more efficiently and cost-effectively.

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