Publications
Publications
- December 2022
- Review of Financial Studies
Conflicting Interests and the Effect of Fiduciary Duty: Evidence from Variable Annuities
By: Mark Egan, Shan Ge and Johnny Tang
Abstract
We examine the variable annuity market to study conflicts of interest and the effect of fiduciary duty in brokerage markets. Insurers typically pay brokers higher commissions for selling more expensive annuities. Our results indicate that sales are four times as sensitive to brokers' interests as to investors'. To limit conflicts of interest, the Department of Labor proposed a rule in 2016 holding brokers to a fiduciary standard. We find that after the proposal, sales of high-expense products fell by 52% as sales became more sensitive to expenses. Based on our structural estimates, investor welfare improved overall.
Keywords
Variable Annuity; Brokers; Fiduciary Duty; Finance; Investment; Insurance; Conflict of Interests; Financial Services Industry; Insurance Industry; United States
Citation
Egan, Mark, Shan Ge, and Johnny Tang. "Conflicting Interests and the Effect of Fiduciary Duty: Evidence from Variable Annuities." Review of Financial Studies 35, no. 12 (December 2022): 5334–5386.