November 14, 2008

Subject: Index Annuities s7-14-08

I would like to express my concern over the above issue. Index annuities are widely considered the most abusive product sold to the financially challenged. This, by the way, includes 95% of the investing public and a higher proportion of the elderly. As an example, I have a client who was suckered into one of these products with no mention of caps on index growth, exclusion of dividends and interest from the index, or participation rate. After five years, he had made virtually nothing over the minimum (despite a good market) and he still had a 13% surrender charge to get out of it. No surrender charge was mentioned except to say that "this is a long-term investment".

Further, in Illinois, there seem to be no resources for enforcement on insurance complaints. I have a client who has had a complaint over an egregious practice sitting in wait for over two years now. Alas, as with all things Illinois, corruption can never be far from mind and this has to be a consideration as well.

As with virtually all financial products, the more the customer makes, the less the supplier makes and the more the customer makes, the less the supplier makes. The fact that these products offer such high commissions should indicate to all but the blind that they are not good for the consumer but they are great for insurance peddlers. The question is, "Who's interests will be protected?" By the way, I wonder what possible legitimate reason the insurance industry could have in objecting to SEC supervision. The real reason, of course, is that disclosure and accountability hurt revenue. js

John Sullivan
CFP(tm), ChFC, CLU, AIF(tm), CDFA(tm)