November 17, 2008

Subject: Proposed Rule 151a File No. S7-14-08

I firmly and without question oppose the proposed 151a restrictions on the sale of Fixed Index Annuities. In years past I have been a registered representative with a series 6 and 63 brokers license when I worked for a large corporation. At that time I was primarily servicing their existing clients who held mutual fund positions. I have since changed my career to work in the insurance industry and have for the last four years worked independently as an insurance broker. During that time I have been advising clients on the purchase of various financial products focusing on life insurance and fixed annuities. I chose to relinquish my securities licenses primarily because I did not like the idea of my recommendations putting my clients’ life savings at risk of loss. When I became an independent agent, I considered once again becoming a registered representative, but chose not to because of the burdensome and expensive requirements and oversight, especially in light of the fact that I would not be recommending products with risk of loss.

I fully understand and agree with the need for regulation. It is possible that there have been instances of abuse in the selling of indexed annuity products; however there are laws and enforcement available to address these issues through the state departments of insurance. What we are dealing with is a guaranteed product which cannot result in the loss of the clients principal. The entire purpose of the securities license is to deal with agents/brokers who are recommending products which may result in the loss of their clients monies. The proposed requirement is an egregious overstepping of government akin to requiring all handgun owners to be deputized in order to purchase, carry or own a gun. It is simply far overreaching in it’s application.

If this proposal were to be made law, I and a number of my colleagues would simply stop offering this product rather than submit to the requirements especially burdensome to a small or independent agency. The real victims in this scenario are the people entering retirement who are not being informed of this incredible vehicle for the safe growth of their life savings. The fact is, registered brokers do not promote fixed index annuities. They would much rather put far too much of their clients assets at risk of loss and then "churn" through a variety of mutual funds that generate more commissions for themselves than potential profit for the client.

I have never once in my career of over seven years as an insurance agent had one single complaint regarding my recommendations. All of my clients this year were absolutely thrilled to hear from me at the time of their annual review. Almost without exception they got returns of 0% this year in their fixed index annuities, and were thrilled for it. Their other assets, which were at risk in the market, lost value to the tune of 20-80% based on what they have shown me. Although the fixed index annuity can be a complicated product, and does require in depth consideration and explanation, it is simple in it’s concept… potential gains in good years, no risk of loss in down years. This is not something which would require a securities registered representative.

I just did a review with a 62 year old divorce’ who in August 2008 had an IRA (at the time valued at over $600,000) invested 66% in "equities" 30% in various "bonds" and 4% in money market. In my opinion this was far to heavy a percentage at risk, especially for a woman who is not an experienced investor. Although I’m not registered and could not give her direct advise on the choices that her Wachovia broker had made for her (by the way, she didn’t know what any of them were). I simply read off the statement the name of the "equity" of which there were about 20 different positions. They were all invested in either mortgage companies, property management companies or home improvement companies. I could not give her any direct advice on these positions, but having simply read them to her in the first week of October she realized her position for loss and said that she would be taking action to move to more conservative positions. I have not yet done any business with her, but having simply presented the concept of the fixed indexed annuity and letting her know which insurance companies I represent I believe I will soon. Her statement was, "why wouldn’t my broker have recommended something like this to me, at least I wouldn’t be in this position of loosing my life savings."

The answer is simple. Registered brokers sell registered products that give them ongoing commissions. Insurance agents sell guaranteed products which give them ongoing commissions. The fact is that with the surging growth of retirees, most of which are not "market savvy investors" we need to responsibly present them with safe options. The short answer is that there are excellent, moral and law abiding insurance agents eager to offer this product. If you as legislators feel that we need to increase agent training, do so. If you feel that we need more definition around our marketing, do so through the commissioners of insurance. Do not pass proposition 151a. In this volatile economy, you would be doing a disservice to millions of retirees.

Sincerely,

Neil K. Craig
Insurance Broker