November 24, 2008
A response in regards to the above proposed ruling. I am now reviewing a case where one of my clients has purchased $140,000 of a 14 year surrender penalty annuity. The ages of my clients are 85 and 82 years old.
The annuity replaced 6 previous indexed annuities they purchased from the same agent around 5 years ago. In replacing the annuities, they paid high surrender penalties, which the clients said were "covered" by the 9% bonus the new policy paid. Obviously, the agent was not looking at the best interest of the clients as he sold them a similar type annuity but more then doubled there existing surrender periods. The beginning surrender penalty on the new annuity is 13.9%! The agent also told them they were guaranteed no less then 2%, but they didn't understand that the guarantee was on 88%, not 100% of their investment. The agent justified the replacement by telling the clients they "needed to consolidate there annuities to simplify things."
This is the kind of situation I am seeing happen in regards to these type of annuities. People just don't understand what they are getting into. There seems to be a lot of misleading sales practices going on, and the insurance industry doesn't seem to care or want to regulate these types of abuses.
J. Henry Livingston, CFP®