October 11, 2008
Subject: S7-14-08 - Protect our Seniors October 11, 2008
Dear Sirs/Madame,
With over 31 years experience as a Financial Estate Planner I STRONGLY ENCOURAGE passing of your proposal to label "Index Annuities" as securities and require individuals representing them to be securities licensed, and subject to the same standards as "licensed" brokers.
I am amazed at the con games, lies, out-and-out fraud perpetrated against seniors solely as a result of the most dishonest annuity ever sold.
We have had several dozen seniors come to us asking us to help them with these complicated, expensive and substantially illiquid securities. The lies that are repeated over and over by seniors describing what the self proclaimed and unlicensed financial planner has told them are so incredible, yet the regulators that I work with on a regular basis tell me that they hear the same story over and over. We have not met a single senior who bought these who was ever shown the CDSCs, commissions (which we openly discuss), the fact that no IA index includes dividends which have accounted for about a quarter of the long term index average. More so none have ever understood, and were not explained about how all the hidden fees such as lack of dividends, super high surrender charges, averaging, caps, fees, margins and spreads have the effect of limiting these potential stock market returns to as little as 4-5% even in a year where the market itself may earn 20%, or even 30%, or more.
If these con artists were in the securities business, and licensed appropriately, they would have been out of business with their licenses striped years ago – instead their numbers are growing like a cancer within the senior communities.
I am an expert witness in complaints and lawsuits against these lowlife insurance agents who are selling 80 year old widows (their prime targets) annuities with up to and most commonly 17% to 20% surrender charges lasting 16 to 20 years. Amazingly, not a single investor who has come to us for explanation has ever been shown these confiscatory CDSCs by the nice young man, or woman that sold them this despicable annuity.
I have been actively working with regulators who are very interested is shutting down all sorts of deceptive and illegal sales activities by Index Annuity salespeople. Unfortunately regulators primarily in Florida and other states while being extremely interested, understand the problem, and want to do something cannot because, since most of these con artists, either never having been properly licensed as a financial planner, or even as registered rep, only maintain an insurance license. For this reason, even while they masquerade as financial planners, and freely discuss a seniors stocks, bond, variable annuities, mutual funds, REITs and other securities do not come under jurisdiction of the regulators who actually care about the problem.
I have had several discussions with Joe Borg who whole heartedly agrees.
After four years of helping bail out seniors who have been ripped of by IA salespeople, contacting and working with regulators who care, but cant do anything, I have recently been contacted by the Florida insurance regulators who are now, also extremely interested in what these con artists are doing to Florida seniors
As a licensed insurance professional, I am solicited by insurance companies offering incredible commissions as high as four times that of variable annuities. Not much is said in these advertisements about how good they are for the client.
Any asset that purports to use STOCK MARKET returns as the basis of its returns IS a security.
State insurance departments have done an abysmal job of regulating and filtering out bad annuities. How could any insurance department EVER allow any annuity be sold to 70 and 80 year olds, with surrender charges of up to 20% that last as long as twenty years, knowing that they are sold as an investment in the major stock markets – but supposedly with no risk
Many of the insurance agents selling these products are not securities licensed, in many cases because they lost those licenses over bad or unethical business practices. Not surprising they carry over these same unethical practices into their Index Annuity sales as well.
A significant problem lies in the fact that few, if any, salespeople selling IAs even understand what they are selling and the damages they have caused. Several of my good friends and business partner who used to sell IAs and heard me speak around the country about how bad they are have now told me that they agree. One told a study group that I presented to that they need to heed my warnings and that he lost his single biggest client, his best friend, golf partner, neighbor and will be lucky if he doesnt get sued over what he thought was a good Index Annuity (if there is such a thing). Similar stories have been repeated time and time again by well meaning financial advisors who just didnt get it.
We see the damage that is done by these unqualified salespeople. We see the result when nothing, short of taking a significant loss, can be done to provide a senior with much needed funds to live on, meet a health emergency, or to assist family.
Please discourage high commission, long surrender fee index annuities by moving them into the realm of the securities professionals and a higher level of investor protection.
Scott L. Olson, Principal
First Financial Resources of Melbourne
Atlantic Financial Advisors
Melbourne, Florida and across the U.S.