Subject: File No. S7-14-08
From: Joe Cool

July 14, 2008

Let's end this Charade right now.

This whole thing is about MONEY. The Broker Dealers are losing money, the insurance companies are making money. Billions of dollars have left the BDs for good reasons.

People are tired of Brokers losing their money.

This has nothing to do with suitability.

Let's get down to basics.

Fixed Annuities, including Fixed Indexed Annuities are suitable for anyone that does not want to lose money, does not need to withdraw more than 10% per year and has a 3, 5, 7, 10 year time horizon.

If you want to lose money buy a variable annuity, stock, bond, mutual fund or any other securities.

If you want safety buy a FIA if you want potential losses buy a securities.

As far as time horizons no one should be buying securities if they can't leave their money in the account for at least 10 years. Does that mean all seniors are not suitable for securities?

There have been plenty of times when the stock market moves sideways and does not make any money for 10 to 20 years or longer. Look at the returns for this decade 2000 to 2008. Look at 1906 to 1924, 1929 to 1954, 1966 to 1982.

As someone ages they should have less money in securities not more.

Securities are not suitable for MOST seniors. Only those that can afford losses should stay in securities. If they lose 40%, they must earn 67% just to break even. How many years does it take to break even? Some seniors don't have the time to make back their losses.

That is why Brokers are being sued and their E/0 insurance is a LOT more than for insurance agents E/0.

No one likes to lose money. FIA provide a nice fit for SOME people who want SAFETY and the potential for a higher than average interest rates.

I am licensed to sell both securities and insurance products and I can tell you right now there is a LOT more abuse in selling securities than in selling insurance products.

Look at all of your brokers that you oversee how many lawsuits presently? How many complaints against insurance agents?

If you really want to protect consumers you should STOP calling Variable Annuities "Annuities". It causes confusion to the consumer and misleads them into thinking that their product is insured.

You should protect consumers from unscrupulous and unsuitable sales practice and further confusion. How about proposing this rule 151b?

From this time forth ALL Annuities MUST guarantee principal and interest back to the client at the end of the contract along with a minimum guaranteed interest of 1 to 3%. Since Annuities are purchased PRIMARILY for their secure nature all Variable "Annuities" MUST STOP using the name "Annuity" in their sales material and presentations, either written or oral.

The term "Annuity" can ONLY be used for SAFE, SECURE, FIXED ANNUITIES backed by the general assets of the issuing company. They can ONLY be sold by licensed insurance Agents.

This Rule is necessary to protect consumers from LOSSES and CONFUSION. Millions of investors in so called Variable "Annuities" have lost millions of dollars, FACT.
How many people have lost money in FIA's if held until maturity NONE.

Many of these people who have lost money are Seniors who have been mislead into thinking that their VA was some how protected from LOSS because of the term "Annuity" and "Guaranteed Withdrawal Benefit". Some are so confused that they think that their VA is earning 7% per year regardless of what happens to the market. Some brokers have even stooped to in home visits and dinner seminars to lure the unsuspecting Seniors into buying unsuitable securities.

The brokerage firms that continue to sell these products MUST from this time forward make full and fair DISCLOSURE that a VA is NOT a Guaranteed "Annuity" and the CLIENT owns SECURITIES and NO RETURN IS GUARANTEED. They must now call it a Variable "Investment" Contract or VIC and must cease from using the term "Annuity" thereby reducing confusion to the general population.

They must also fully disclose that a VA now called a VIC usually charges 3 to 5% for internal costs per year, has a 7 year surrender fee, and disclose that the investor could GET BETTER RETURNS with the SAME markets risks using a NO LOAD ETF FUND.

If you buy a VA/VIC and the market drops 20% and you want out the first year that combined with a deferred sales load of 7% means that the consumer loses 27%.

If they owned a FIA, even if they had all of their money linked to an index and the market drops 20% and they want out of a 7 year contract they would only lose the 7% not 27%.

Lets compare FIA commissions to a managed account that charges 1 to 2% per year. Over 10 years that is 10 to 20% sales load. What about an A share fund charging 5.75% upfront sales load? The investor must earn 6.1% just to break even the first year. Lets add up the costs if they buy an A share fund 5.75% upfront, 12b1 fees each year of .25%, annual expense fees from the fund of about 1.5% per year. Over ten years the fees are often OVER 20%, Now who is kidding whom? The average 10 year FIA only pays 8% commission. Lets see a consumer paying 8% or over 20% you do the math who is PAYING more?

Lets be REALLY honest MOST SEC regulated mutual funds dont even beat the SP 500. An investor who wants the RISK of owning securities would be BETTER off firing his broker and buying a NO LOAD index fund that charges NO sales load and has annual expenses of only .10 per year, that is only ten basis points per year over ten years only 1% total. And the individual investor would BEAT MOST professional money managers/brokers why doesnt the SEC publicize that?

Your argument about consumers making more than a minimal interest rate is lame at best. I have NEVER had a client complain about making more money, but I have seen them complain about LOSING money in securities.

So who is to gain if your proposal goes through? Answer the broker dealers and FINRA. The consumer loses big time. Got to wonder about your real motivation here?