September 9, 2008
September 9, 2008
SEC Headquarters
100 F Street, NE
Washington, DC 20549
To whom it may concern:
As someone who has worked in the independent agent market for nearly 30 years I would like to offer my comments on the proposed rule 151a by the SEC.
Please consider the following:
Indexed interest crediting strategies offered by indexed annuities are an alternative FIXED interest crediting method to lower yielding, traditional fixed annuity design. The intent is to give the consumer better control and the chance at earning a better rate of return than they might earn in a traditional savings vehicle. That does not and has never meant that they will earn more.
The idea of investment risk most normally refers to loss of principal. Investment risk parameters were never intended to guarantee a certain return year in and year out. In fact, it is the guaranteed return that indexed annuities offer that most consumers are attracted to. A savings vehicle that has the potential to go up (reward) but absolutely protects them from loss of any principal (risk) by insuring that risk.
Since their inception, variable annuities were designed to provide market returns with no living guarantees combined with a life insurance wrapper to provide death benefit guarantees. Conversely, fixed/indexed annuities are designed to provide living guarantees which equals the amount their beneficiaries received at their death. In other words, these products by virtue of their design are direct opposites of each other. With these two products competing for market share the lines of their differences have gotten blurred. Variable annuities are offering expensive riders to provide living guarantees to compete with fixed contracts and fixed contracts have attempted to find alternative interest crediting methods (indexing) to compete with periodic bull markets and a continuously low interest rate environment. The blurring of these lines and the intense competition for market share is at the heart and soul of this entire issue. We are all smart enough to know it is most certainly not about consumer protection.
Dating back to Reg. 0550, the SEC and the NASD (FINRA) continues to foster the blurring of these lines in an attempt to provide market advantage to the securities industry. The fact is that FINRA is a trade association exerting inappropriate influence over the SEC, an entity that is supposed to be in place to protect consumers, not promote a particular segment of the financial services industry.
The securities regulation will add little benefit to consumer protection. Abusive sales practices with respect to ALL products must stop. The SEC and State Insurance Departments alike need to remain focused on that issue. But one would be ignorant at best to think that the abuses will stop by simply registering a product that is clearly an insurance product.
As the demographic of American savers increases, the value proposition of registered securities diminishes. As millions of Americans approach retirement, it is perfectly reasonable for those same people to become more conservative with their resources and choose safe money options like a Fixed Indexed Annuity. The SEC and FINRA (NASD) are proposing this regulation not to protect American Consumers but rather, their own self interests.
Please reject this proposed rule 151a for the benefit of millions of Americans desiring a safe and guaranteed option for their money. And let us all work together to improve the image of our industry where the abusive practices of a few combined with media hype continue to taint the important value our industry provides to the US economy and its citizens.
Sincerely,
Michelle R. Olmstead, President
molmstead@highmarkfinancial.com