October 27, 2008
On the issue of regulating indexed annuities, I would like them regulated for the following reasons:
1. I am a Series 24 with 16 years industry experience and have had several clients approach me about indexed annuities -- they either got a mailing, or a call from an insurance agent. Believe me, they were more than confused and once I explained an indexed annuity to them, they wanted nothing to do with them. Any product that is that confusing needs to be regulated
2. Insurance agents sell indexed annuities as "no-fee investments." We all know there is no "free lunch." The insurance company makes their fee by capping returns. This looks a lot like smoke and mirrors to me. In an industry obsessed with fees, how did this one get past you guys?
3. Commissions and withdrawal charges -- Any product that is this complex that carries a 10% commission with a 10-year CDSC is bad for invetors. They are sold by agents who are only looking at commissions. Clients are focused on no fees and Market performance (which is capped by a formula). After a few years, the clients realize what they got was not what they wanted. They're stuck The only winner is the agent that sold the indexed annuity.
In short, Indexed annuities are sold as investment vehicles by non-registered individuals with no regulatory oversight. We must close this loophole. All annuities -- fixed, indexed, or variable are sold as investment products and should fall under the same regulatory guidelines -- Series 6 or 7.