November 15, 2008
As both a licensed securities representative (series 7 and 63) and a licensed insurance agent, I have seen the carnage and felt my clients' pain from the past year's market melt-down...except for those clients who had purchased fixed index annuities 4 years ago, prior to my leaving independent practice to rejoin my old broker-dealer. Believe me when I say there is a lot of comfort in telliing a client that their investment in a fixed annuity is working "as promised." That is, their original principal is intact as well as the gains from 2004-2007. My other clients on the other hand, despite professional managment, diversification, asset allocation and portfolio rebalancing have suffered 30-40% plus losses in value ans have slid back to 2001 values. In othe words they not lost the money value they lost 6 years
While I agree that some sales people mis-sell their products it is not limited to fixed index annuities. Companies and reps alike have mispresented "risk" of securities to the detriment of thousands of clients. Another layer of forced bureuacratic enforcement is not needed. Insurance carriers and state insurance commissions already do a better job than FINRA. As long as full disclosure is given by the agent and understood by the clients, things should stay as is.
I would recommend an alternative approach. That is, have all agents and registered reps sign up for the ethics screening available from the national Ethics Bureau. Those whpo cannot pass this screening should not be licensed anyway. There are already some FMO's that underwrite the screening expense for their agents. Isn't it worth a try?
Sincerely submitted,
Phillip D. Calkins, CFP, MSFP