July 19, 2006
Ms. Nancy M. Morris, Secretary
Re: File #SR-NASD-2004-183, Amendment #2
Dear Madam Secretary:
I would like to comment on NASD's proposed 2nd amendment to variable annuity sales and practice NASD Rule 2821. As a Registered Representative in the field I would like to suggest that the current supervisory and variable annuity sales practice rules are quite adequate to make sure that our clients are given the proper tools to make informed investment decisions.
Variable annuities offer a very unique and important function with today's baby boomers and older generation. Not only do they guarantee a minimum death benefit which is very important to many families, they also offer living benefit income guarantees which serve to assure our clients of lifetime income regardless of market performance.
The widespread abuses in our industry with regard to variable annuities are overstated and there will always be unprofessional and unethical representatives in our business and I believe that the NASD and SEC already have the proper rules and regulations in place to police these problems.
Please do not penalize the rest of our ethical and moral community because of these few unethical and immoral representatives. Under current practices, my clients are required to sign in approximately 10 places for variable annuity transaction. Additional disclosures would in my opinion be onerous and in my opinion, ineffective.
Most firms employ a checklist of important points relating to variable annuity sales practices which are reviewed with the potential client. These points clearly point out any of the negatives of variable annuities and in my opinion, are more than adequate in properly informing clients of both the advantages and disadvantages of variable annuities.
You're requiring a certain amount of investment experience for an investor to invest in a variable annuity can lead to clients missing out on the possible growth of principal. Part of the educational process in working with our clients is to inform them of how inflation will increase the amount of income they'll need at retirement. Prohibiting an investor from investing in a variable annuity because they don't have the proper "length of investment experience" unfairly penalizes that investor.
Prior to 2001, I read several articles relating to the fact that variable annuities' death benefits were worthless. Ask a widow or widower whose husband or wife's assets were invested in a variable annuity whether or not the death benefit they received (that preserved their retirement income) was worth the additional cost after suffering a 40% or 50% loss in the US markets. What other product is available to the investing public that gives them the potential for growth of principal yet assuring them of no less than lifetime income based on the monies they invest through living benefit variable annuities?
Yes the fees are higher than those of mutual funds but what mutual fund offers a death benefit guarantee as well as a lifetime income benefit guarantee?
Thank you for reviewing my comments.
I urge you not to make any changes to the excellent checks and balances already in place with regard to variable annuities sales and supervision.
Kevin A Govero, CLU
"An Investment Advisor Representative offering securities and Investment Advisory Services through Transamerica Financial Advisors, Inc. A Registered Broker/Dealer and Investment Advisor. Member NASD & SIPC."
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