November 17, 2008
My name is Charlie Fitzgerald. I am a Certified Financial Planner licensee in Orlando Florida and have been practicing financial planning for 12 years. I am a member of the Financial Planning Association and support the new proposed rule.
I have one recent and notable experience with an individual who came to me after purchasing an Equity Index Annuity.
The individual purchased the Equity Index Annuity a few years ago and was experiencing serious buyer's remorse after he saw his dismal investment performance during up markets. The product was sold as an investment that had the potential for market returns with out the potential for market losses. This was a misnomer and obviously misleading. After he called back his agent with several questions he was surprized that the agent was unable to explain some of the more technical questions related to the product. The buyer was also disappointed to learn that he could not even view his account balance online the same way that he could view his 401(k) and IRA accounts online. Apparently there were a few misleading points that were made by the agent to the buyer. The product also had a bonus system that boosted his initial investment amount by a set percentage amount , but this in turn and understandably increased his potential surrender charges. Bottomline is that the buyer feels stuck in the investment as he is looking at thousands in surrender charges that he can't bring himself to pay. Although it would probably be better to bite the bullet and move on he is going to wait a while for surrender charges to decrease and eventually sell out and rollover to a regular IRA where we can build a more properly diversified portfolio with much better longterm return potential.
I noticed that in this situation the Equity Index annuity was being sold like a Variable Annuity with out the downside risk. In reality the downside risk was that the product didn't offer a real hedge over inflation when held over the long term. It only makes sense that these products be subject to the same regulations that variable annuities are.
Regards,
Charlie Fitzgerald, III, CFP