July 18, 2008
Has the SEC lost all commons sense?
Last time I checked all Fixed Indexed Annuities were not subject to market losses.
News flash to the SEC. The principal is GUARANTEED
A securities product is something you invest in knowing full well that you could lose some or all of your money. Is it really that hard to figure this out? If you can lose your principal it is a securities if you cant it is something else i.e. bank product or an insurance product.
If you cant lose your principal in a Fixed Indexed Annuity how on earth can it be classified as a securities product?
Dont tell me that the interest rate might be higher next year, so what my bank account interest might also be higher next year is that going to regulated by you also?
Doesnt the SEC have enough problems already trying to regulate variable annuities, mutual funds and stocks? Do they really feel that they can do a better job than the States?
Lets compare. No one has lost any money in Fixed Indexed Annuities if held until maturity, even if they die, become disabled or a diagnosed with a terminal illness they get all of their money back. Does that happen with a mutual fund?
SEC regulated funds and variable annuities have lost billions of investor dollars how many investors have lost money in a Fixed Indexed Annuity? NONE
If this regulation were to take affect who would benefit?
A. Consumers
B. Insurance Agents
C. FMOs
D. Insurance Companies
E. FINRA and the Broker Dealers
Answer E.
The consumers would suffer with higher costs that result in lower returns. They would have less choice because not all Broker Dealers will offer all product choices. They would lose the added backing of the State Guarantee Associations.
The insurance agent would lose not being able to offer this product, many dont want to offer securities to their clients because of the higher E/O fees and their clients want safe products not securities that can lose principal. Those that choose to get securities licensed would receive less commission because of the Broker Dealer override. They would be restricted to offer very few products to their clients.
Most Broker Dealers wont sign a selling agreement with all of the Fixed Indexed Providers. The agent would be severely limited in what he could sell. As it now stands an agent can go to any FMO and sign contracts to sell any product. Not all FMOs offer every product and the agent needs to have several relationships with many FMOs to be able to offer the best product for the client's needs. This would NOT happen if the BDs become involved. The Broker will not have the flexibility to shop nationwide for the best product for the consumer.
The FMOs would pretty much go out of business. Many people would lose their jobs not to mention the value of those FMOs will be reduced substantially. FMOs would be forced to become BDs.
The insurance companies would suffer by not being able to bring product to market timely and with lower costs. The added regulation would certainly raise their costs to the products. This will hurt the consumer resulting in lower returns.
The only one that will benefit if this proposal is passed is the BD community and FINRA. They will have a windfall profit center. Who wouldnt want 15 to 50% of all the current FIA premiums, not to mention the sweet over-rides? They stand to make billions of dollars all at the expense of the agent, insurance company, FMOs and the consumers.
In the end the consumer will suffer the most with a much watered down product, fewer choices, higher fees, lower returns and loss of State guarantees. I would not be surprised, if this passes, that FIA's become nothing more than a VA's. After all can you offer a securities product with a guarantee that you cant lose your principal? I have never seen one and I suspect that FIA's would cease to exist in their current form.
Please reconsider who is really benefiting if this takes affect? It isnt the consumer.