Warren launched an investigation into 15 major annuity providers back in April. This came amid concerns about kickbacks the providers offered to brokers who peddled products to retirees.
The incentives offered to agents included things such as expensive vacations and gifts.
There are loopholes in the law that allows some advisers to steer customers into financial products for higher rewards, and Warren voiced about her concerns for these loopholes.
On Tuesday, Warren released a report, which said that research suggests that loopholes cost Americans billions of dollars every year. The amount was estimated at $17 billion per year.
Some executives in the industry, as well as trade groups, say incentives are allowed as a form of compensation. They also noted that companies need to comply with federal and state laws and rules that protect the interests of consumers.
Carl Wilkerson, the chief counsel of securities and litigation for industry group American Council of Life Insurer, said the report may raise unnecessary worries among retirees. Wilkerson added that the report misrepresents that regulatory framework that governs conduct in the sale of insurance products.
Warren’s report said when agents are offered kickbacks, and those kickbacks are hidden from customers, then there is an increased chance that consumers will be duped into buying bad products.
The report was issued as the Department of Labor is working on finalizing a new rule that would apply a fiduciary standard to investment advisers. The rule would require advisers to provide advice that is in their customers’ best interest.
The draft version of the rule would reduce the potency of non-cash incentives and commissions. This is because agents would have to showcase the best products to their clients and steer them to those products. The final version of the rule is expected to be issued in a few months.
Warren started to probe the sales practices of providers by sending them letters in April. None of the companies she probed were based in Massachusetts.
