November 14, 2008
I am a member of the FPA and I support the proposed rule to allow the SEC to have oversight of indexed annuities.
Having been in the insurance/financial planning industry since 1973, my past 10 years has been focused on risk management, life insurance and annuity analysis, and fiduciary responsibilities in life and annuity planning. I also author numerous insurance CE courses.
I oppose the current climate of regulatory oversight and believe that the SEC has a mandated responsibility of oversight of indexed annuities for the following reasons:
1) The products are sold to the consumer as a way to invest while guaranteeing principal (as well as providing a guaranteed minimum interest rate). I have yet to find a consumer who understands the contract or that only a percentage of their principal is guaranteed, or that the minimum interest rate is paid on only a portion of their premium.
2) I have found very few agents who understand the complexities of these contracts.
3) Any credible CE course (required to maintain a license) has 30% or more of it's content devoted to discussion on equity related issues; stock market, indexes, calls and options, etc. This should speak volumes to the fact that the product has an equity relationship.
4) There are no required suitability guidelines or documents required for sale of this product, allowing agents and planners to sell it to whomever they please, regardless of age and financial standing.
5) I am consistently involved with aged people (70 to late 80's) who have been sold these contracts and have not been made aware of the liquidity issues. In many cases, the advisor has shifted most of the client's portfolio to these contracts, created problems when money is needed, and additional tax consequence on withdrawal to meet those needs.
6) Marketing efforts are designed to mislead, with presentations totally void of full disclosure.
7) Class action litigation and state fines against companies undermine the abuse in the sales of these contracts.
8) Most Broker-Dealers have not placed these products under their compliance oversight responsibility.
9) The rule is a reasonable approach to filing in the gaps that exist between the various states requirements, or lack thereof, for consistency of regulatory responsibility and recourse.
In all my years in this profession, I do not recall a product that has been so complex, so misleading, and some damaging to the consumer. There is no other recourse then that of taking a proactive position to protect the consumer.
In closing, have some agents come off the street and try to sell you this product, or better yet, take the time to understand how it works, and see if you can sell it (with full disclosure on all of it's working parts).
Thank you,
Joseph W. Maczuga
Joseph W. Maczuga
Licensed Insurance Counselor (LIC)
Certified Fee Insurance Specialist (CFIS)
Troy, Michigan