November 13, 2008
Securities and Exchange Rules Committee:
My name is Judy Hagar. I have been a practicing Certified Financial Planner since 1984 in San Diego, California, a member of the Financial Planning Association and currently serve on the San Diego Chapter Board as Chair of the Public Awareness/Public Relations Committee.
I STRONGLY SUPPORT THE PROPOSED EQUITY-INDEXED ANNUITY RULE..
During my years of practice I have seen many abuses, but none quite so egregious as the indiscriminate sale of indexed annuities by insurance agents and others to seniors. I have seen low quality annuities (B Rated companies or worse) with confusing and incomplete disclosure proposed and sold to individuals who thought they were getting guaranteed income and then came to find out that they were locked into a product whose income was cut off when the market dropped. Back-end penalties of as much as 15%, and as long as 20 years, mean the unsuspecting individual cannot move their account without huge losses.
I currently have a 75 year-old client who is in need of income, waiting another 5 years before she can access her money. A CD would have paid her more with less risk. In fact, she may not live to be able to use her money.
My clients have come to me via e-mail, on the phone, and in person, asking me about a product their insurance agent presented to them, saying they could get stock market returns, guaranteed income and no risk.
This product is popular among agents, most likely due to very high commissions. It has proliferated in our community and there are not only seminars and dinners where it is presented, but is promoted by radio talk show hosts in our area. I believe the rule is a reasonable approach, that the elderly need this protection, that these products are sold by salespeople, not advisors, and that consumers are mislead and confused and lied to.
While there may be justified cases where an index annuity fits into a financial plan as part of the allocation, in most cases that I have witnessed, the agent has proposed that all retirement assets be consolidated into an index annuity. This is clearly dangerous to the unsuspecting senior as it subjects them to illiquidity, business risk, interest rate risk, and market risk all in one product.
Sincerely,
Judy C. Hagar, CFP®
Registered Principal, AIG Financial Advisors, Inc.
Wolters, Hagar & Pratt Financial Planning, Inc.