July 30, 2008
COMMENTS ATTACHED.
You are not serious? Annuities and index annuties specifically are a security becasue? The convoluted logic of this approach is this:
Investment products have potential for loss of principal.
Surrender charges applied to an annuity create potential for loss of principal.
Therefore: Annuities are investments.
Come onSurrender charges are penalties if the client doesn't leave the funds alone. Annuties weren't desgined for "day trading" like in the investment world. They are long term savings vehicles designed for accumulation followed by some sort of distribution either through an income stream or a lump sum.
Of course, the fallacy here is that with an investment product the investor has no control over the potential loss of principal. They must accept the risk of what the product does or does not return. However, with the annuity it is the action of the purchaser, not the market, that determines if there is a loss of principal. If the purchaser of the annuity never surrenders the annuity there will never be a loss of principal. You also overlooked the fact that all annuity surrender charges systematically decline and ultimately disappear. In fact, with most annuities in as short as three years, even if the policy is surrendered, there is no loss of principal.
So a few years ago, when the SEC determined that index annuties were fixed annuties and not a security....did you make a HUGE mistake? Nothing has changed the products basic guarantees...what has changed?
Misrepresenting a product should be punished and an agent ought to loose his/her license for doing so. Our industry has the Insruance Commissioners doing so. You don't see them pointing the finger at brokers do you or telling you how to run your industry, do you? I trust that you can and will take care of the wrong doers in the securities industry. We can deter wrongdoers, but there always have been and will be those people, in my industry, in your industry, in any industry...but that can't be how we represent our industries as a whole, is it?
You can't be that naive. Let me assure you, that our industry is not that naive nor is the consumer. I remember in 2001 and 2002 helping clients who were harrassed by thier brokers to "hold on"....for how long? There is a time to accumulate and then there is a time to protect what you have...and for seniors the time is immenent. None of my clients have lost a dime in their fixed index annuties.
Mara