July 22, 2008
As backgroung, I am licensed series 7, 24, 63, 65, life, health, and variable annuity and have been in the business 23 years. I am firmly opposed to insurance being classified as a security. In my opinion, this is an attempt by the securities industry through pressure from member firms to stop the flow of investment dollars from leaving brokerage firms and prevent associated persons from doing business away from the BD that they don't get a piece of. By classifying Indexed Annuities as a security all products offered by member firms must be approved. The Broker Dealers will do with these products the exact same thing they do with securities products and not approve any annuity that doesn't pay the firm soft dollars, provide marketing dollars, or purchase their options from their investment bank. The BDs have no interest in doing what is right for the customer unless they are getting a cut. Insurance has a guarantee that the client won't lose money and will receive a minimum return if held till maturity. The position that the excess over the guarantee constitutes a risk that should be regulated by the securities industry is absurd. The increased regulation will increase the cost of the product thereby lowering the return to the client. If the securities industry is going to regulate the insurance industry I guess you'll start giving guarantees on security products.
Paul G. Little, CFP