November 17, 2008
To Whom It May Concern:
I am a member of NAIFA and have worked in the financial services industry for over 25 years. I currently have a Series 65 and insurance license. Because our client base is 55 and older, we spend multiple meetings to determine goals, risk tolerance and suitability of financial products. We have CPA’s and Estate attorneys in our group who commonly are part of an overall strategy for the client.
Currently 41 states have adopted the NAIC Suitability Model and the NAIC reports that .1% of all complaints filed with state insurance departments relate to fixed indexed annuities. Where is the research and data to support “widespread abuses”?
It appears that the need for 151A is based on antidotal evidence and broker-dealer lobbying efforts – rather than solid statistical research. Since you are open to antidotal evidence, please consider my own experience.
In the mid-eighties, I briefly worked with Lehman Brothers. During my recruitment, the branch manager stressed developing long term client relationships. The reality was cold calling names out of the phone book and pitching the same stock to every person.
These same abuses exist today. Last week a broker representative called me with a “hot tip – sure thing”. There was no discussion of suitability – only a lot of sales pressure to open an account and give him a try. These unethical tactics of brokers continue to this day. I suspect that client complaints to the SEC are more frequent than the tenth of one percent filed with Insurance Commissioners regarding fixed index annuities.
Brokers make their money on transactions and it is in their best interest to actively manage client portfolios. There is no way that they are going to tie up even a portion of client’s portfolio in 10 year financial product like a fixed index annuity. The reality is that in many cases, the self-interest of the broker-dealer is in conflict with client suitability.
Consumers have lost 30% to 40% of their portfolios this year – and their brokers are telling them be patient, stay put, and the market will bounce back. The self-serving objective appears to be keeping the portfolio under management rather than doing the right thing. It is not surprising that a recent study indicated that over 75% of all consumers are dissatisfied with their current broker.
The consumer will definitely suffer by restricting the availability of a sound financial product (FIA) during these particularly difficult and uncertain times. The vary nature of insurance is a long term client relationship and by passing 151A - you will restrict FIA sales to broker-dealer organizations who are a transaction-based business.
I don’t see how this is in the best interest of the Consumer?
I strongly encourage investing in a research study to provide data on what is happening now before passing 151A.
Thank you for your consideration,
Terry Fox
Terry Fox
Georgia Financial Group, LLC