September 2, 2008
I am writing to oppose proposed Rule 151A. After spending over 11 years as both an insurance and securities licensed individual we have helped 100's of clients safeguard thier nesteggs with both fixed and fixed indexed annuities.
The recent downturn in the markets highlight the value of fixed products. Indexed annuity holders have not lost a penny in retirement savings. Registering a product with no downside market risk as a security seems confusing and unneccessary. If a indexed annuity is deemed a security then what about traditional fixed annuities and whole life insurance? A portion of their returns are based upon the insurance companies general account which will have a portion of those assets invested in stocks or indexes. Why is only the index annuity being targeted?
In my experience critism of indexed annuites have been exaggerated by individuals who have not taken the time to understand how they work. Often critcs will sight long surrender charges and high commissions. They fail to mention that there are products with surrender charges as short as 1 year and commissions as low as 1%. Most often critics might find the worst indexed annuity they can find and then claim that all of them work the same way. Not all indexed annuities are created equal.
Indexed annuities are already heavily regulated by the states. SEC regulation would add an unnecessary layer of regulation. Added regulation would add additional costs to clients with no additional benefits. Abusive sales practices and those that practice them should be pursued and banned from activity in the financial services industry, but a few isolated cases does not mean that an entire industry should be required to work with a new set of regulations. Products that are already considered securities and already regulated by FINRA in many cases have much higher complaint ratios than indexed annuities currently enjoy. The states and the carriers have done tremendous work to fix any abuses in the industry. Taking the regulation away from the states is not necessary.
Thank you,
Matt Dicken