July 8, 2008
Fixed indexed annuities are NOT securities. This is a charade promoted by FINRA and its members, a trade association wanting to share commissions on products that they do not, and should not, have oversight over. ANY product can be sold in an unsuitable manner, that does NOT make that product a security. Let's talk about real estate for a minute... is there a guarantee on its sale that says "if you hold on to this property for 5 years, it is guaranteed to be worth at least what you paid for it"? NO. So should it be a security? NO. Most fixed indexed annuities that I know of, and ALL of them that I sell, guarantee that if held till end of term (5 years, 7 years, 10 years), the worst case is that the value will be equal to what the client put in PLUS 1.5% to 3% per year. That's the MINIMUM guarantee. We hope that the interest earned (that's right, "interest earned") is much higher than that because it is based on the change in an index that hopefully will go up more than the guarantee. But if it does not, the client has not lost principal, and has access to the full value at that time. The comment that I read that really ticked me off was from a stock broker/registered principal who said he was different than most brokers because he had an "insurance background", and he had seen several brokers who gave up their securities registration but continued to sell insurance. AND, "without exception" they continued to sell the worst products out there just to get the high commission. Sounds to me like he ran, and may still run, with the "wrong crowd". I gave up my securities registration a couple years ago, after almost 20 years, because my broker dealer told me they were going to start requiring that I only sell FIXED INDEXED ANNUITIES through them, and therefore start splitting commission with them. To me, that was just the "camel's nose under the tent", and there would be no way to keep them from later saying "ALL products you sell must be through us". I am all for product suitability, client education, broker education, and selling with integrity. But after 34 years in this business, I know when someone is making a grab for power. I urge the SEC to act responsibly and NOT label Fixed Indexed Annuities as securities.