Impact of Wall Street Reform on Main Street Agents & Advisors February 2012

1. Impact of Wall Street Reform on Main Street Agents & Advisors February 2012

2. Who We Are For more than 120 years, NAIFA members in communities across the country have shared the common interest that insurance is the foundation of any sound financial plan.

3. What We Do • Educate clients about how to manage financial risks through the purchase of insurance products. • Build relationships with clients over many years and even decades. • Offer products and services that allow middle income consumers to have access to affordable insurance and retirement products and services.

4. Who We Serve

5. Who We Serve • www.naifa.org/ServingMainStreetInvestors • LIMRA surveys conducted October 2010 • Most NAIFA member clients are middle-market consumers with modest funds to invest.

6. Who We Serve NAIFA Members Serve Middle-Market Consumers: • 58% of clients earn less than $100,000 • Just 11% earn more than $250,000 a year

7. Consumers Surveyed Only 17% can afford to invest more than $250 or more a month

8. Consumers Surveyed 7 out of 10 do not want to pay a fee up front

9. Compensation NAIFA members are paid through sales commissions

10. In Other Words… NAIFA members are Main Street and serve Main Street

11. Why It Matters Now more than ever, individuals and small business owners rely on the advice NAIFA members provide regarding cost-savings measures and coverage options.

12. The Dodd-FrankWall Street Reform and Consumer Protection Act • Enacted July 21, 2010 • Reaction to financial crisis • Target: Wall Street • Collateral Damage: Main Street • Massive: • 533 required regulatory rulemakings • 60 studies • 93 reports

13. Federal Reforms in Dodd-Frank Significant Issues for NAIFA members: • SEC fiduciary standard for broker-dealers • Federal Insurance Office (FIO) • Financial Stability Oversight Council (FSOC) • Systemically Important Financial Institutions (SIFIs) • Federal Resolution Authority over Non-Banks

14. Federal Reforms in Dodd-Frank Other Major Reforms: • Consumer Financial Protection Bureau (CFPB) • Surplus Lines and Reinsurance Regulatory Reform (NRRA) • Banking and Securities Reforms: • Derivatives • Hedge Funds • Swaps • “Volcker Rule” • Corporate Governance Reforms

15. Fiduciary Standard - SEC Dodd-Frank Act Provisions • SEC study of suitability standard versus fiduciary standard was included in the final bill • Following the Study, if SEC moves forward with establishing a fiduciary duty for broker-dealers, the Act includes statutory protections for individuals to receive commissions and sell proprietary products.

16. Fiduciary Standard - SEC Post Dodd-Frank Challenges • SEC staff study released and recommends fiduciary standard for broker-dealers providing advice • Study fails to support its findings • Two SEC Commissioners agree with NAIFA’s concerns • NAIFA fears costs will rise and middle-market investors will be negatively impacted.

17. Dodd-Frank Act Implementation • Federal Insurance Office • Financial Stability Oversight Council

18. Federal Insurance Office (FIO) • Housed at the Department of Treasury • Director Michael McRaith – took office May 2011 • Federal Advisory Committee on Insurance (FACI)- 15 member panel named November 2011 • Modernization & Reform Study – report delayed but expected soon

19. Financial Stability Oversight Council (FSOC) • First Meeting October 2010 • Ten Voting Members • Secretary of the Treasury (chairs the Council) • Chairman, Federal Reserve • Comptroller of the Currency • Director, Consumer Financial Protection Bureau • Chairman, Securities and Exchange Commission • Chairman, Federal Deposit Insurance Corporation • Chairman, Commodities Futures Trading Commission • Director, Federal Housing Finance Agency • Chairman, National Credit Union Administration Board • An independent member with insurance expertise • Roy Woodall confirmed by Senate, September 2011

20. FSOC • Non Voting Members • Director, Office of Financial Research • Director, Federal Insurance Office • Michael McRaith took office May 2011 • A state insurance commissioner • Missouri Commissioner John Huff appointed September 2011 • A state banking supervisor • William S. Haraf, Commissioner of the California Department of Financial Institutions appointed September 2011 • A state securities commissioner • North Carolina Commissioner David Massey appointedSeptember 2011

21. Federal Grant Program • Provides states grants to protect seniors from being misled by meaningless designations and fraudulent marketing. • $500,000 Grant if states adopt requirements of the NAIC and the NASAA senior-specific designation models as well as the NAIC’s revised Suitability in Annuity Transactions Model Regulation. • States can apply for a lesser $100,000 grant if they adopt either the NASAA model law or the NAIC senior-specific designation model in addition to the annuity suitability model.

22. Senior-Specific Designations Model • Protects seniors by ensuring that they are not subject to misleading sales practices involving the use of improper credentials and professional designations. • 29 states have adopted the NAIC Model, which applies to the sale of insurance-related products. • 27 states have adopted the NASAA Model, which covers the sales of securities and other investment-oriented products. • NAIFA worked with the NAIC and NASAA and supports both models.

23. Annuity Suitability Model • Ensures annuities sold to a consumer are suitable, for that consumer’s needs and goods. • Requires insurer review of all recommended annuity transactions, and establishes general training and specific-product training for insurance producers. • 19 States have adopted the revised NAIC Model (2010 version); 7 States have proposals pending. • NAIFA was actively involved in the development of the revised model and supports its adoption in the states.

24. www.naifa.org