August 8, 2008
I have been in the insurance industry for 36 years. I retired from Met-Life in 1999 and have remained in the insurance industry since then. I have sold fixed, variable and fixed indexed annuities. When fixed indexed annuities first came out I had some reservations. After I discovered they were actually a 'fixed' annuity that 'participated' in an index
with no risk of loss, I found this plan to be appropriate for many of my clients. I had clients that lost money in a variable annuity due to market loss and clients that lost 'purchasing power' on a fixed annuity because the inflation rate was higher than the interest they earned.
I can't understand how the SEC could even consider having a fixed indexed annuity registered as a security. One thing all fixed annuities have in common is a GUARANTEED MINIMUM INTEREST RATE. Even if there was no gain on the indexed account for the full term of the annuity, the contractholder is not only guaranteed their deposit but also guaranteed the minimum guaranteed interest rate.
I seem to find it interesting that the NASD came out with their 05-50 letter right at a time when many people were moving money which was(at risk)in a variable annuity or securities. Also, if you look at the 'timing' of the 05-50 letter, it was right after many scandals came out regarding securities and investment companies.
This reminds me of a movie I saw years ago called wag the dog. In the movie the president of the united states was having an affair. His staff hired a movie producer to come up with an idea to have the bad publicity regarding the president diverted into another event which would be more interesting to readers. The movie producer actually fabricated a small war to divert the public's attention.
' IT WORKED"
It looks like to me the furor caused by the NASD with the 05-50 letter is also working. Today many people are focusing on reputable life insurance companies and reputable life insurance agents instead of the scandals regarding the securities industry.
I will admit there are agents who either don't understand a fixed indexed annuity, as there are also agents who don't understand a variable annuity or brokers who don't understand securities. The insurance companies I am contracted with have introduced rigorous training programs regarding fixed indexed annuities.
My hope is the SEC has an 'open mind' regarding this issue and makes an appropriate decision.
Sincerely, Richard N. Martin