November 13, 2008
As a Certified Financial Planner® for over twenty years and a member of the Financial Planning Association, I’m sending this email in support of the Commission’s adoption of Rule 151A because it places the interest of the consumer first.
My business is all referral business and one specific referral was a couple that rolled over a 40lk plan with a substantial amount in company stock with a low cost basis into an indexed annuity. The insurance agent calling himself a “retirement specialist” did not discuss with the couple the tax strategy of net unrealized appreciation (NUA) and the agent did not recommend that the couple discuss this strategy with their CPA. When making his recommendation for indexed annuities, he had only one meeting where he presented the index annuity as the “all in one” retirement solution and then “closed the sale” at the same meeting preventing the couple from reviewing his recommendation and asking others for input.
After the state of Minnesota investigated and questioned the sales practices of many insurance agents in promoting indexed annuities, the insurance commissioner required that several insurance companies send letters to individuals holding these indexed annuities. This couple received a letter from the insurance company stating that if inappropriate sales practices had been used by the agent when selling the indexed annuity, the couple may be eligible for a full redemption of the indexed annuity without penalties. When the couple contacted the insurance agent to ask him what he thought of this letter, his response to their inquiry was “Well if you redeem your annuity, I will get into trouble and will not be able sell them in the future.”
As a CFP, I would like the rules of conduct for working with consumers to be raised for all who make recommendations that will have an effect on financial lives. Based on my personal experience in working with this couple that believed that the insurance agent was qualified and that the insurance company would not allow inappropriate insurance products to be presented, I think that the adoption of Rule 151A will help send a message to all that those recommending products need to fully understand them and that consumers are provided sufficient information to make informed decisions.
Joan K. Rossi, CFP®