September 5, 2008
-I am deeply concerned about the action proposed by the SEC regarding Indexed Annuities.
I personally have 4 indexed annuities. I purchased them for safety of principle and the opportunity for potentially higher interest credits than a fixed annuity paying current interest rates.
I have been a licensed insurance agent in Ohio for the past 36 years. I have sold fixed annuities since the mid 70's and fixed indexed annuities since 1996 when Keyport introduced their first policy.
I have never been a registered representative primarily because, while I do not have any reservations about investing (risking)a % of my own money I have never felt comfortable about recommending investments to others. I have been very comfortable selling fixed indexed annuities because of the high degree of safety. They are a fixed products.
Both the design and sale of indexed annuities are highly regulated by state insurance departments and the companies that sell them. In recent months the companies I represent have added additional suitabilty requirements, agent training, more detailed disclosure statements and begun to step-up enforcement actions for non-compliance with sales practices requirements to help make sure the right product is being sold to the right person for the right reason.
The securities regulation will add little benefit to consumer protection. Many states have already adopted the NAIC Annuity Disclosure Model Regulation. Many, if not all, major indexed annuity companies conduct suitability reviews of all sales in all states. Suitability reviews required of brokers under FINRA rules would not add any meaningful protections over and above what is already being done.
The passage of this regulation will have a significant impact on my livelyhood. For the past 12 years I have felt comfortable recommending indexed annuities because, while the consumer is exposed to fluctuating levels of annual excess interest credits the consumer has no risk of loss of premium or prior credited interest (unless the policy is surrendered during the surrender period in which case a surrender charge may apply). In addition, the indexed product offers the consumer a strong minimum guarantee backed by the insurance company.
As one who has a significant % of our own retirement savings in indexed annuities for safety, it is difficult for me to see how the indexed annuity would be considered a security. The money I am willing to risk, does not go into an indexed annuity.
This is a valuable product for the consumer and by deliberately shrinking the sales force by 1000's and 1000's of non-registered insurance agents this regulation will severely diminish the availability of these products to the consumer. A statistic I have seen, is that 50% of Americans do not want any of their savings at risk. These individuals are not comfortable working with a securities representative. They probably never have and they don't want to going forward. They have a much better comfort zone with a licensed insurance agent for their "safe money."
Sincerely,
Bruce A. Roberts, LUTCF