November 14, 2008
I’m writing in favor of the SEC requiring people who sell Index Based Annuities to be licensed as investment professionals.
I do so for the following reasons:
1. I’ve come across many investors who have been mislead to believe they can get the market’s growth in this kind of product and not have to put up with any volatility or downside risk.
2. It doesn’t seem right to allow people to sell this product when they are not required to show their comprehension of other investments that they are claiming that Index Based Annuities are better than.
3. The competency of many of the people selling this product is not sufficient for them to properly explain the disadvantages of this type of investment vs. others that can grow with the stock market.
4. The high commissions that are paid to people who sell this product have the tendency to make it very desirable as a product to sell, thus encouraging unscrupulous sales pitches to unsuspecting prospects.
5. The high commissions also indicate to me that these products are real profit makers for the companies that offer them, probably because so few people get much benefit out of putting their money in such a product over the long term (sure they enjoy them now but anyone in this kind of product must a higher long term rate of growth than they could get in a fixed annuity or CD. But fixed annuities and CDs go up every year that the stock market goes down so that is not an advantage of Index Based Annuities.
6. It doesn’t appear to me that State insurance departments are subjecting the advertising and discussion of this product to the same scrutiny that FINRA/SEC requires of advertising of other stock-market based investments.
My sense is that the large outpouring of opposition to changing these requirements that you have been receiving is coming from the large number of insurance professionals who want to be able to sell stock market-related investments but don’t want to get the education and accreditation that really is key to keeping this type of product from being sold to inappropriate clients or for inappropriate purposes. I can sell Index based annuities but haven’t found a client who would benefit from the slower likely growth of such products vs. the likely growth of some of the variable annuities that offer lifetime income or principal guarantee features.
Sincerely,
David Freeman-Woolpert
LPL Registered Principal/ Financial Planner
Altus Investment Group LLC, a Registered Investment Advisor