November 14, 2008
PLEASE PLEASE!!!! REGULATE ALL INDEX ANNUITIES AS A SECURITY
I recently opened a branch office in California in a High Senior Citizen area (Palm Springs CA) and I am dismayed as to how Index Annuities are marketed and promoted
Listed below are situations I observed with people who called me to review their portfolios. I have most of these situations documented
1. The first person said she could make 36% a year because the monthly cap was 3%
2. Not one person understood participation or a cap rates.
3. One lady had a $8,000 penalty for 20 years on a $26,000 investment and was desperate to get her money out for health reason at year 5 which she understood she could. She did not understand that the restriction was she must take it out over 10 years at a low interest rate. Annuitize otherwise she paid the penalty for a cash redemption
4. No one understood how illiquid their account was.
5. One insurance agent even wrote a check to the client to cover her penalty on the 1035 exchange of her previous investment
6. No one knew how their rep was licensed and they thought they were financial planners (with just an insurance license??)
7. All believed they were invested directly in the index.
8. There was no office or address or oversight on the agents. And the phone number no longer worked.
9. They did not know where the agent was located.
10. One Ads quoted a rate of 8% as a CD and when they client visited the agent then switched to an Index Annuity
11. Suitability was abused as most of these seniors could easily need the money for healthcare or nursing home long before the penalty period or deferred sales charge period ended. For some this was the only savings they had. See # 3 and #4.
ALL WERE LURED INTO THIS INVESTMENT BECAUSE IT WAS STRESSED THAT "YOU WILL NEVER LOOSE MONEY". Which may have been true on paper but not true if the client needed their money and was much lower as to what the client could put in their pocket
I had only heard of these products in Oregon but Oregon has only approve a few index annuities. I have attended many classes on Index Annuities and I think they are misleading and very hard to understand and then to explain.
State Oversight: They are very hard to regulate between states and most Insurance regulators are not that knowledgeable of the reality of the index stock market. Especially since many national figures such as Susie Orman say investing in an index is the safer way to go.
Lately Law suits in California have made these agents go more underground.
Please make all investment products a security with oversight including Index Annuities and HEDGE FUNDS!
I have been licensed for 28 years and I cannot understand index annuities and all their restrictions. Mainly I Do not sell them because they are not liquid and do not meet the suitability requirements for my clients.
Eugenie Brewster CFP
REGULATE INVESTMENTS FOR AN ORDERLY MARKET AND WE ARE FAR FROM THAT MARKET NOW.