November 15, 2008

Subject: Equity-Indexed Annuity Rule

I am writing as a professional investment advisor in support of the Equity-Indexed Annuity Rule. I am also licensed as a Certified Financial Planner professional and a member of the Financial Planning Association.

In my practice I have had numerous clients who have been sold annuities that were inappropriate for their needs. Several have been approached with a "hard sell" for equity indexed annuities with promises of gaining the benefits of guaranteed payouts and appreciation of assets. The insurance companies and their sale people are unwilling to tell the prospects of the risks.

I actually had a client who was "assisted" in creating a charitable trust to avoid taxes, then invested the proceeds of the stock sale in such an annuity. The end result was the client/trustee/beneficiary seriously over-drawing the trust and going bankrupt in the process. And this was the client's only asset to fund retirement!

These policies are most often marketed to people who are retiring and taking lump sums from their employers or rolling over 401k accounts. These annuity products seldom are the right answer for a client who is investing to fund a retirement for the long term. The clients are seldom told the truth about the benefits and the loss of liquidity, surrender charges and other costs are seldom made clear. The regulations are complied with by simply offering a printed page with the details buried in the fine print. These products clearly are not the right solution for all retirement needs, and the sales force aggressively pursues the senior client in an inappropriate way.

Insurance companies have not shown a willingness to enforce compliance rules or unable to do so because of the size of sales force. Compounding the problem, many states have not adopted standards of suitability that, if enforced, would protect vulnerable clients. No state has the compliance force necessary to protect its residents from what has become a predatory practice.

Please resist the pressure of the insurance companies, whose only interest is in their business. The recent melt-down in financial markets should have made it clear to the SEC that the state regulators of insurance companies are unequipped to deal with such matters and that these companies have no fiduciary responsibility for the policy-holder. Federal regulation is essential. If the practice were fair and the product right, the insurance companies would not object for a moment.

John Power, CFP(R)
Principal
Power Plans