November 17, 2008
Dear sirs:
I am a Certified Financial Planner Professional and have been in the planning business for 23 years. I am an active member of the Financial Planning Assoc. (FPA) I am a securities principal and a licensed insurance agent.
I am writing in support of your rule to help curb abusive sales practices. I have studied index annuities and find them to be a variation on fixed annuities that determine investor accumulation rates from a mathematical relationship with an index. The concern comes from the high level of confusion about how rates are calculated and how well investors understand this process. Sales practices often lure investors with a first year bonus.
In my practice this year, I have seen elderly clients sold index annuities that the investor fails to understand the accumulation calculations, is lured by the first year bonus, fails to understand the lack of liquidity, is unaware of 10 year surrender fees. To my horror, these 1035 transfers or IRA transfers from annuity to annuity occur without using the Reg. 60 process that is for investor protection. Where is the oversite process when insurance law and ethical practice procedures fail?
In conclusion:
1 The rule is a reasonable and balanced approach to enhancing state enforcement efforts
2 The vulnerable aging population needs additional protection from aggressive sales agents
3 Consumers are often mislead regarding the benefits of an indexed annuity
4 Liquidity risks, surrender charges, and other suitability factors are not always clearly disclosed or understood
5 Not all states have adopted suitability standards for annuity sales, nor do most insurance commissioners have adequate enforcement resources available
6 Some agents misrepresent themselves as offering a single retirement solution when in fact retirement planning is generally a complex planning process
Thomas Huisgen, CFP®
Certified Financial Planner Professional
Linsco/Private Ledger