November 14, 2008
Dear Sirs/ Madams:
I am a FPA member in good standing, as well an OSJ with a major regional independent broker dealer, FSC Securities Corporation. I have been in the financial service industry for over 22 years. My undergraduate degree is a BS in business with a financial service’s major. I have been a CFP® since 1991, attained my Master of Science Financial Services from the American College in 2006, and completed the AIF® certification last year.
I am writing this letter as our industry faces a decision when it comes to equity index annuities. With the recent protracted decline in equity markets of the world the individual investor is worn out, and "ripe" for the fraudulent sales practices, and claims of guarantees of aggressive sales agents. The current proposed rule S&-14-08 is a reasonable and balanced approach in enhancing state enforcement efforts to protect the consumer. I have not sold one equity index annuity, as I have not found an appropriate set of circumstance for their use. They contain, to name a few problems, liquidity risks, long surrender charges and are often misrepresented by agents offering a single retirement solution when in fact retirement planning is generally a complex planning process, in addition not all states have adopted suitability standards for annuity sales, nor do most insurance commissioners have adequate enforcement resources available.
I recently had a client referred to me from well respected law firm whose father was convinced to purchased an equity index annuity at age 78, and subsequently died a few years later. The heirs faced a $50,000 deferred sales charge which was not waived upon their father death. I have attached the word document e-mail of the outcome of me recommendations. The names have been removed.
We all experienced over the recent month’s tremendous stock market declines, which in part are driven due to lack of oversight and transparency of complex financial products. My case in point is it necessary to protect the consumer, and I truly believe, especially in the wake of recent market declines, the SEC must take a leading role in the oversight of equity index annuities.
Sincerely,
David A. Smith
David A. Smith, CFP® MSFS AIF®
Smith, Griesmeyer & Moses LLC