November 15, 2008

Subject: comment on File No. S7-14-08

Dear SEC Representative:

I am Certified Financial Planner professional and member of the Financial Planning Association. Like many other financial planners, I support the proposed rule regarding the regulation and oversight of indexed annuities and the companies and representatives that offer them to the public.

My experience includes ten years as a financial planner, registered representative, registered investment advisor, and life and health insurance agent. Throughout the thousands of meetings with clients and prospective clients, I have run across many horror stories of indexed annuities misrepresented and missold to the public. One story in particular involved a retired couple in their mid-seventies. They were propositioned at a "free lunch" to move all of their investments into indexed annuities. Upon reviewing these contracts, I discovered the product sold to them was a 12-year contract, withdrawals could not begin until the fifth year, and the only way to participate in "earnings" was to annuitize the contract. Incidentally, I also discovered the insurance agent that sold them these contracts was paid a 10% commission. Needless to say, the couple was surprised and shocked when they understood what they had purchased. Luckily, we were able to cancel their contracts during the free-look period so they did not have to pay a withdrawal penalty. Sadly, this is rarely the case and many people that own these contracts don't learn what they purchased until it is too late.

Clearly there is more oversight and regulation needed to protect our aging population that is particularly vulnerable to being misled into investing in products that are inappropriate. The insurance salesmen often sell these products as a risk-free way to invest in the stock market. Their aggressive tactics distort the benefits of an indexed annuity and do not adequately disclose the risks involved. State insurance commissioners do not have the enforcement resources available and I believe a Federal regulatory solution is essential to solving the troubling environment surrounding indexed annuities.

Thank you,

Josh Nelson, CFP
Financial Advisor

 

Loveland, CO