Subject: File No. S7-14-08
From: Sandy Lashbrook
Affiliation: MBA, LTCP, and Member of NAFA

September 10, 2008

I am a health and life insurance licensed agent. I have successfully utilized indexed annuities from a number of companies over the past several years to help my clients protect some of their retirement savings from losses due to market volatility and losses, and to those clients, I am a hero. The terms of the products were clearly explained, including the surrender-charge free withdrawals, and each client determined whether an indexed annuity was or was not suitable for themselves after reviewing all the facts. These clients did not need 100% access to all of their retirement dollars throughout their retirement years—they intended this portion of their retirement savings be withdrawn from a little at a time, stretched over a long period of time, so their money would last as long as they did.

Many pre-retirees and retirees are more concerned with the preservation of their principal than they are with 100% access or growth/interest. This is what many securities-only people dont seem to get. The overwhelming reason I continue to recommend these products to particular clients is their desire to prevent their retirement dollars from declining (due to stock market declines) because they fear they might otherwise outlive their money. I have heard this fear repeated hundreds of times. There is no securities product which can give them this level of comfort. They are willing to sacrifice free access for security.

If indexed annuities become securities products, they will not be as frequently offered to clients as they are now, because the securities industry in general treats them with disdain. It will not increase competition as the SECs proposed ruling document claims, rather it will decrease availability of an important product for many consumers. Nor will it increase the suitability of the sale—there are just as many if not more inscrutable securities brokers as there are insurance agents, witnessed by the millions of dollars in fines levied each year on the securities industry, and the thousands of stories which are never heard by regulators. All the regulation and oversight in the world hasnt helped in the securities industry The SEC and FINRA would do best by taking care of their own house first, before deciding they can handle additional turf. I cant tell you how many times a client with a variable annuity insists that they cant lose money because theres a 5% growth guarantee every year, or that all they pay in fees is the annual $35 administrative fee. Why dont we hear more about those cases? Why dont you tackle those problems? Do you think clients receive adequate disclosure by receiving a 300 page prospectus and voluminous pages of contracts with fees, conflicts of interest, and other terms theoretically disclosed, that takes a college professor to decipher? They dont. And when these clients are harmed and lose large portions of their life savings (as they are now experiencing), what is their alternative, arbitration? What a joke. The securities industry seems to be saying, So what if you lose 40% of your life savings, at least its 100% accessible Unless its in a variable annuity, of course then they get to potentially lose money AND potentially pay surrender fees.

The SECs lack of understanding, bias, and refusal to see the facts is evidenced by its document referencing the Dateline piece on indexed annuities. Forget about the thousands of articles describing the fines and penalties brought down on brokerage houses over the past five years—lets focus on the few consumers who have had to pay surrender fees on indexed annuities and the inappropriateness of those sales What craziness is this? I guess the thought is that maybe it will draw attention away from the fact that right now in this country there are millions of seniors inappropriately and unsuitably losing their life savings because they trusted their broker But, once again, at least the remnants of their savings are 100% accessible, right?

I feel no need to reiterate the dozens of great arguments brought forth by my colleagues in these pages. They are accurate, well-written, and astoundingly persuasive—they should be plenty to make any truly unbiased, logically-thinking SEC rethink its proposed rule, just on the face of the overwhelming evidence presented. And if not, they will most certainly be favorably weighed by any Judge. However, its apparent that presenting logic and facts at this point with the SEC isnt working. Lets all play nice and get along, and resolve these turf wars echoed by some of the leading Insurance Commissioners isnt working either (but cudos for trying.) But weve made changes, we have suitability and replacement procedures in place now, echoed by the insurance industry isnt working either. Why? Because those were never the real underlying issues in the first place, and we all know it. If they were, the SEC wouldnt have come out with such a preposterous proposed rule in the first place. The issue is that securities brokers are tired of seeing their clients (as America ages) transfer more and more of their money out from under their control to a nice, safe, indexed annuity sold by an insurance agent, of all people The nerve Everyone knows that everyone should have all of their money in the stock market Besides, these brokers lament, once moved, we cant make any more commissions—hey, we know what will fix that, lets make them securities Not that well sell them, of course, but at least those pesky insurance agents will be stopped

Forgive my frankness and blunt assessment, but Im tired of the rhetoric and endless logical discussions trying to show the SEC where it is erring. The SEC KNOWS where it is erring, and its bulldozing ahead ruthlessly anyway. The result will be 100,000+ mad insurance agents, 1,000,000+ mad consumers when they truly get wind of what this proposed rule will do (after being educated by their insurance agents), and a couple dozen or so mad insurance companies with deep pockets who will sit still no longer. If the SEC thought the insurance industry was just a sleeping giant, wait until we finally wake up.

Sandy Lashbrook, MBA, LTCP, Member of NAFA
Health and Life Insurance licensed
sandy@akseniors.com