August 25, 2008
To start, we should differentiate between what an Indexed Insurance Policy is and what it appears to be. Clearly, In form, these plans are traditional insurance plans.
The planner's goal is to help their friends manage the inflation risk. Since it appears a majority of the increase in value of the market is related to inflation, indexing an insurance plan's accumulation value to a market index can help the upside. It isn't clear that there is a downside.
The planner's goal is to help their clients and, "Do no harm". That being said, requiring an insurance agent to become a RR with the added level of mgt. burden seems an over reach which is potentially abusive.
After all, the insurance agent does not possess the power of an RR, i.e., the IA does not take possession of the client's assets, has no binding authority, is not a principal, etc.
We believe the SEC wants to add value and improve the results. In that regard, our interests are parallel.
However, the existing system is over engineered for the IA if the SEC demands an IA (a non-principal) submit to regulation (as it they are principals) in order to retail plans for which they only have the legal status of an agent.
Now, if FINRA would create a more limited form of Introducing Broker Dealer (a LIBD), which limited the powers of the LIBD to that of a state regulated IA (that is, no binding authority, not a principal, utilizing the bonding, CE, compliance and other standards established by the regulating states, etc.) change may be possible.
Have a good day.