During Principal Financial Group Inc.'s first-quarter earnings call, Chairman, President and CEO Daniel Houston said he had concerns that a fiduciary rule finalized by the US Department of Labor this week would stifle consumer access to important financial tools.
Houston said he is "encouraged" that the Labor Department has included language in the rule that "confirms and protects the importance of financial education within workplace retirement plans," agreeing that giving educational support to people saving for retirement helps boost good behavior around saving.
"Having said that, we remain concerned it will have an unintended consequence of limiting consumer access to meaningful financial tools and advice on top of creating significant compliance costs for firms," Houston said.
Principal Financial is a leader in retirement sales, which grew 6% year over year in the first quarter for the company. That growth included at least $750 million in pension risk transfer sales for the first quarter, and the insurer completed about $2.9 billion pension risk transfer sales in 2023.
Houston also noted that the pipeline for retirement sales "remains strong." Christopher Littlefield, president of Retirement and Income Solutions, shared that the industry expects pension risk transfer sales to fall between $30 billion and $40 billion for the year.
Principal is expected to complete approximately $2.5 billion to $3 billion in pension risk transfer sales this year, with the majority of sales to come toward the end of the year, Littlefield said.
The Labor Department's final fiduciary rule, announced April 23, impacts how retirement products are sold by updating the definition of an investment advice fiduciary under the Employee Retirement Income Security Act. The updated definition will be effective Sept. 23 and applies whenever financial services providers who are compensated give investment advice to retirement plan participants, account owners and plan officials responsible for administering plans and managing assets.
The Labor Department received plenty of pushback while making this rule, particularly from insurance industry trade groups, many of which suggested the rule should be completely scrapped, as well as state insurance regulators.
In a press release published after the rule was finalized, the National Association of Insurance Commissioners (NAIC) expressed dissatisfaction with it, noting that there was "virtually no coordination with state insurance regulators" and said it had been rushed through the rulemaking process.
"We continue to have significant concerns about the potential impact of the Department of Labor's (DOL) final fiduciary rule on access and choice for American retirees to certain life insurance and annuity products," the NAIC said. "The final rule ... also discounts the work of 45 states and counting to enhance consumer protections for these products by adopting the NAIC's Suitability in Annuity Transactions Model Regulation."
The Labor Department defended its rule in a release saying that it "aligns" with President Joe Biden's goals of protecting retirement investors and putting money back in the pockets of working-class people.
"This rule protects the retirement investors from improper investment recommendations and harmful conflicts of interest," acting Secretary of Labor Julie Su said in the release. "Retirement investors can now trust that their investment advice provider is working in their best interest and helping to make unbiased decisions."