NAIC Model Laws, Regulations, Guidelines and Other Resources—January 2011
ADVERTISEMENTS OF LIFE INSURANCE AND ANNUITIES MODEL REGULATION
Proceeding Citations
All references are to the Proceedings of the NAIC
© 2011 National Association of Insurance Commissioners PC-570-7
Section 5N (cont.)
The task force heard a recommendation to delete or modify the requirement that persons using the term “financial planner” or
other similar nomenclature be engaged in that business. The response from regulators was that insurance producers
advertised their services and expertise in the areas of financial planning or counseling when in fact no such expertise or
experience actually existed. These assertions subjected the insured to misrepresentation and fraud in the handling of his
financial affairs. The task force said that some middle ground must be found where the insured was protected from
misleading and deceiving representations of “unqualified” professional financial or investment planners and felt that the
NAIC process presented the best forum to define what this middle ground should be. Until such time, it was suggested that
the text of remain intact. 1987 Proc. II 135.
An industry advisory committee noted that the draft model seemed to prohibit the use of terms such as “financial planner,”
unless “complete financial planning advice” were given regarding all of the following services: investments, insurance, real
estate, tax matters and trust and estate matters. The committee said that many qualified individuals, with and without
professional designations, offered advice to their clients concerning some, but not all of the above services. Furthermore,
many “financial planners” served as the coordinator or leader of a team of professional experts, all of whom had their own
field of expertise to contribute to the overall planning process. These professionals should not be prevented from using
“financial planner” or similar terms to describe the services that they offerered. The group noted that the Securities and
Exchange Commission and the North American Securities Administrators Association (NASAA) have not defined “financial
planner,” “financial consultant” or “financial counselor.” Because of the myriad services provided, they apparently have
concluded that the terms defy definition. But they have focused on the term “investment adviser.” If a financial planner,
consultant or counselor holds himself out to provide investment advisory services, then registration under the Investment
Advisers Act of 1940 would be required. The state security administrators have developed substantially similar regulation
through NASAA’s model bill, the Uniform Securities Act of 1956, as amended. The committee urged the task force to agree
that this constituted adequate regulation of financial planners, consultants and counselors or, if competence standards were
subsequently deemed necessary by the NAIC, they should be established by model statute, not advertising rules. 1987 Proc.
II 137.
This subsection continued to generate discussion as the model was being amended in 1999. The working group compared this
language to the Life Disclosure Model Regulation. The chair said he thought the language in the Life Disclosure Model
Regulation was stronger than that included in this model draft, and he expressed a preference for that language. He noted that
the authority to adopt this regulation came from the Unfair Trade Practices Act and asked if regulators could draft a
regulation that is broader. Another regulator said he would argue that the language suggested by the chair adds precision to
the vague language of the Unfair Trade Practices Act. 1999 Proc. 3
rd
Quarter 800.
Near the end of the 1999 drafting effort, the working group again was asked to consider the use of financial planner
designations. A representative from a standards group said that he agreed that a financial planner designation should not
imply that someone was offering financial planning services if he or she was only selling insurance. He said his
organization’s concern was that a person with a properly obtained designation should not be precluded from using it on his
stationary or business cards. Another interested party expressed concern that three different models talked about financial
planners and each chose a different approach. He pointed out that the Unfair Trade Practices Act language was different from
that in the advertising model and from that in the Life Disclosure Model Regulation. He said there were ambiguities created
by three different approaches. He suggested taking out the provision in this model and relying on the Unfair Trade Practices
Act. The chair noted that the group drafting changes to the Life Disclosure Model Regulation inserted the same language
being considered for the advertising model. He said the Unfair Trade Practices Act created more of a problem because, in his
opinion, the drafting note contradicted the provision. The working group agreed to add the text to Subsection N. 1999 Proc.
4
th
Quarter 899-900.
When the revised model was presented to the parent committee for adoption, an interested party again raised concern about
this provision. He said that some of the members of his organization were not in the business of giving financial advice but
did so periodically. He noted that the word “only” in Section 5N could be confusing if the person mostly sold insurance but
occasionally provided financial planning services. The parent committee chair said that she did not agree with that
interpretation and said that if a person did some financial planning, he did not “only” sell insurance. She suggested deleting