November 13, 2008
To Whom it May Concern:
I am Kevin Jarchow, MBA, a member of the Financial Planning Association. I support the proposed rule.
I am a 18 year veteran of the financial services industry having gained my Series 62 and 63 licenses in 1990. My Series 7 in 1992. I have been insurance licensed in the State of Michigan since 1994.
I deal with clients from all walks of life. From those who are seeking insurance products to protect their families and belongings to high net worth individuals seeking to pass legacy assets to their heirs. My firm seeks to provide the best possible solutions to any given client challenge.
Over the past five or six years or so, I have repeatedly witnessed clients who have been sold Equity Indexed Annuities that have extremely long surrender periods and extremely high surrender charges. One policy sold to a lady who later became a client of mine carried a 24 year surrender period with a 24 percent surrender charge each year for the first seven years. The lady at the time of purchase was 72 years of age.
I would like to say that this was an exception, but the situation has repeated itself on numerous occassions.
These Equity Indexed Annuities are sold by insurance agents who have not taken it upon themselves to become securities licensed. They use them as an alternative to investment securities and quite often, inspite of the paperwork, sell them to their clients as such.
Many agents recommend Equity Indexed Annuities as a single retirement planning solution. In fact, retirement planning is highly complex process. Correct retirement planning requires monitoring, re-evaluation and rebalancing.
It's unfortunate, but the sales of EIA is frequently more about the commission earned by the agent than it is about doing what is right for the client. Really, a $300,000 EIA sale should not have the potential to generate a $45,000 commission, while locking the client into the product for 24 years.
The SEC has an obligation to protect the target market of EIA from deceptive and misleading sales practices. The rule as stated is reasonable and balanced in it's approach. It should enhance state enforcement efforts.
It's my understanding that most state insurance commissioners do not possess adaquate resources to discover and remedy deceptive EIA sales practices. If the states are failing in their responsibilities, it is the duty of the SEC to act.
Equity Indexed Annuities should be regulated.
Do the right thing. Enact the rule.
Sincerely,
Kevin Jarchow