Posted on 02/29/2016 1:00:57 PM PST by safetysign
Mergers may increase even more among brokerage firms due to the Labor Department's proposed fiduciary rule
A second major insurance company has decided to exit the brokerage business this year as MetLife Inc. announced Monday it is selling its U.S. adviser unit to Massachusetts Mutual Life Insurance Co.
The sale includes the firm's Premier Client Group, consisting of about 4,000 advisers across the U.S. who sell insurance, annuities and other investment products such as mutual funds, plus its broker-dealer MetLife Securities Inc., according to the company's announcement.
Metlife is shedding the unit as brokerage firms face higher compliance costs tied to the Labor Department's proposed fiduciary rule requiring advisers to act in the best interest of their clients when providing investment services for retirement accounts.
Last month, American International Group Inc.'s CEO Peter Hancock cited the Department of Labor's proposed fiduciary rule as part of its decision to sell its broker-dealer unit to private-equity firm Lightyear Capital and Canadian pension manager PSP Investments.
It can be challenging for insurers to turn wealth management services stemming from securities sales into a lucrative revenue stream, according to Ron Edde, co-founder and CEO of recruitment firm Millennium Career Advisors.
“I think they found it was a lot harder to make money in that space than they thought it would,” said Mr. Edde, who's based in San Diego, Calif. It's difficult recruiting “top talent to an insurance first, securities second, type of firm.”
Advisers at insurers tend toward mid-market clients, while traditional brokers employed by wirehouses and independent brokerage firms typically focus on higher net worth clients and don't view insurance products as core to their financial advice, according to Mr. Edde.
A wave of merger is activity is expected to continue because of the new DOL fiduciary rule, which is currently being reviewed by the Office of Management and Budget.
Economies of scale gained through an acquisition can help bring down related costs for firms choosing to keep their brokerage business.
“We're going to need to make the investment in compliance and back office,” Michael Fanning, executive vice president of Mass Mutual's U.S. Insurance Group, said in a phone interview. He said that the deal with MetLife will allow it to spread regulatory costs out over 9,600 advisers versus about 5,600 currently, Mr. Fanning said.
“Clearly this gives us scale,” he said, adding that the fiduciary rule is expected to prompt a “tremendous amount of merger activity.”
NUKE THE UNCONSTITUTIONAL AND DESTRUCTIVE DEPT OF LABOR!!!!!
DOL has run amuck - thanks Obama.
I wouldn’t deal with an investment adviser who didn’t have a fiduciary responsibility to me. There are too many advisors whose recommendations are based on what product has the highest commission.
Agreed. Why deal with someone who isn’t looking out for your interests?
Yes, forcing brokers to have a fiduciary duty to their clients is going to really disrupt the business. I learned the hard way many years ago from Merrill Lynch that your broker will screw you if you let them have the chance. A lesson I’ve never forgotten, and a brokerage house I’ve not used since.
This would not be happening absent the malicious acts of too many people on Wall Street.
All you need to do is read Forbes and buy what they suggest from a brokerage account at Fidelity or TD Ameritrade.
You are likely better off buying a solid mutual fund then depending on a broker any way.
The devil is in the details, not the title, which is just a form of propaganda. There are major liability issues, disclosure requirements, and red tape.
Vanguard is top notch as well.
Decide on an asset allocation for your retirement portfolio.
Buy a diversified portfolio of low cost index funds.
Rebalance when portfolio gets away from your desired allocation.
Enjoy the fact that you are not putting a brokers kids through college.
Disclaimer: Opinions posted on Free Republic are those of the individual posters and do not necessarily represent the opinion of Free Republic or its management. All materials posted herein are protected by copyright law and the exemption for fair use of copyrighted works.