November 13, 2008
To the SEC:
I am Martha Price, a Certified Financial Planner practitioner and a member of the Financial Planning Association. I have been in the industry for 27 years and have both a Series 7 and an insurance license. I definitely support the new rule to bring equity-indexed annuities under the supervision of the SEC. I have never seen as much misrepresentation and misunderstanding surrounding any product available to investors as I have with Equity Index Annuities. Not only are clients confused, but it seems that many insurance agents do not understand the product they are selling because they have no background in the stock markets. The large commissions offered on many of these products have "turned the heads" of many insurance agents so that they have given up their regular lines of business and now sell only these products. I have spoken to several agents who have no idea about the ups and downs of the indexes that underlie these annuity contracts and therefore do not understand how their clients can be adversely effected after investing.
Even though Colorado's Insurance Commission seems to be actively persuing abuse cases, they are woefully understaffed to handle the myriad of abuse. I have spoken to them many times to report an abuse and even though they are willing to do so, it very tough for them. Some agents with an insurance license, which is much easier to obtain than a securities license, are giving non-stop seminars at senior centers, therefore preying on the very people that may have a lessened capacity to understand these complicated products. The new rules about targeting seniors at the SEC could help curb this abuse.
One of my client's came in with the information on an equity-index annuity offered by Allianz and I searched for a surrender charge table on the information she provided me. It finally dawned on me that there was no table, because in very fine print it was disclosed that there was ALWAYS a surrender charge. It never went away, not even when her heirs inherited the policy, unless she or they annuitized! There was no way she could understand Cap Rates, Participation Rates, etc. All she heard was that her money was guaranteed somehow.
I can only hope that if the SEC can get these products under their control, they will be able to enforce reasonable rules to protect our elderly citizens.
Sincerely Submitted,
Martha Price, CFP
Raymond James Financial Services