Another Annuity Trial.

[DHK]

Well, according to the dictionary, it IS an investment... but that doesn't mean it's a security.

A Fixed Index Annuity IS an investment... but it is not a security.

A certificate of deposit IS an investment... but not a security.

Anything bought for the intention of it to increase in value is an investment... but it is not necessarily a security.

 

[CALTCAgent]

You missed the biggie....They are calling the annuity an investment, I can just imagine what happens when an agent calls a fixed annuity an investment.

Good point. That is right. I was going to put that as well.

 

[Newby]

Well, according to the dictionary, it IS an investment... but that doesn't mean it's a security. A Fixed Index Annuity IS an investment... but it is not a security. A certificate of deposit IS an investment... but not a security. Anything bought for the intention of it to increase in value is an investment... but it is not necessarily a security.

Not in the financial world. If you call things investments that do not put the principal at market risk, you can lose your insurance license over it. I definitely wouldn't do that in California.

Investments take special licenses. Fixed products do not. A CD is not an investment. An indexed annuity is not an investment. You must have the principle at risk to call it an investment in the financial world.

 

[DHK]

The financial world and the REGULATORY world are two different things.

When you type in Annuity in a search engine, I get the following definitions:

1. money paid at regular intervals: an amount of money paid to somebody yearly or at some other regular interval
2. investment paying annual sum: an investment that pays the investor a set amount of money each year for a number of years, often the investor's lifetime
3. contract for annual payment: the right to receive or the obligation to pay an annuity

Per the CA DOI: Annuities What Seniors Need to Know

Other types of deferred annuities combine the characteristics of fixed and variable annuities. Annuities are sometimes sold as alternatives to investment vehicles such as certificates of deposit, money market accounts, mutual funds, etc. Each investment may affect your financial plan in a different way. You should consult with your investment and/or tax advisor before making any decisions on purchasing this product.

As long as you don't misrepresent what someone already has, such as this: Annuities What Seniors Need to Know

The sales agent will often misinform the senior about the existing investment, telling the senior that the investments or savings accounts carry a much higher risk than the annuity or other financial product the sales agent is are offering.

Oh and look at that:

Basis Points - The fees in your annuity; reflects a percentage of your investment.

Annuities ARE an investment... .but they are NOT necessarily a security... even according to the CA Department of Insurance.

 

[CALTCAgent]

By Steven A. Morelli
InsuranceNewsNet

A California judge threw out 29 felony charges and one misdemeanor against a former insurance agent who spent more than four months in jail awaiting trial in a case that some said could lead to criminalizing surrender charges.

Alan S. Lewis, who turned 51 while in jail, was accused of embezzlement, grand theft and burglary in the sale of annuities with surrender charges. The prosecutor said the $300,000 surrender charge incurred by 12 clients amounted to embezzlement and grand theft. He was also charged with burglary because he visited clients in their home. The charges were dismissed in a July 10 hearing, according to the county court clerk’s office.

The state Department of Insurance has been investigating Lewis for a least two years. The department has not returned phone calls to discuss what prompted the investigation. The county prosecutor’s office filed charges on Oct. 24, 2013, three days before the statute of limitations deadline.

Lewis had left the annuity business after the economic collapse in 2009 and moved to Tennessee. He grappled with severe depression that led him to live on the streets of Nashville for a year. Lewis had moved to Houston and was pulled over for speeding in late February, when he was arrested on the California warrant. He has been in jail in lieu of $600,000 bail ever since.

Lewis was initially charged with 36 felonies and faced 40 years in prison. A judge later dismissed some of the charges, leaving 29 felonies and a misdemeanor. Lewis rejected offers by the prosecution to settle the case, urging his public defender to take the case to court.

The deputy district attorney, Sheronda Edwards, had amassed hundreds of pages of documents detailing the annuity sales and submitted recorded interviews with the “victims.” Trial had been set for July 28 in the latest of several delays that Edwards was granted.

In the meantime, annuity industry advocates were dismayed over the potential precedent set by a conviction. Kim O’Brien, president and CEO of the National Association of Fixed Annuities (NAFA), said not only are agents at the risk of prison for selling annuities, the public would be deprived of products designed to protect their retirement.

“A determination by the court that selling an annuity with a surrender charge is tantamount to embezzlement or common theft – and if the sale occurs at the client’s home, with burglary – would have a chilling effect on the ability of consumers to have access to fixed annuities,” O’Brien said in a statement from the association of fixed index annuity companies.

The last trial delay was for the prosecutor to receive annuity contracts from three insurance companies. Nine insurance companies submitted contracts for annuities and other financial contracts, some companies sending more than one contract. The companies subpoenaed for documents were Allianz Life, Genworth Life, Lincoln National, Fidelity & Guaranty Life, American Equity, American General, North American, Athene and ING.

From 2002 to 2005, Lewis focused on fixed index annuity sales as he worked for Family First Insurance Services, based in Woodland Hills with 11 regional offices in California. In 2005, the California attorney general sued Family First for $110 million, alleging the firm used estate planning and living will advising to discover clients’ assets and then sell them annuities without fully informing them of the products’ drawbacks. The suit was settled in 2007 for $7.2 million and the closure of Family First.

The Riverside County district attorney’s case was assisted in part with resources from a state program established to prosecute life insurance and annuity agents. The county has received $371,000 from the state Life & Annuity Consumer Protection Program since 2006 to prosecute cases and warn the public about insurance “scams,” particularly annuities.

Steven A. Morelli is editor-in-chief for InsuranceNewsNet.

 

[Newby]

The financial world and the REGULATORY world are two different things. When you type in Annuity in a search engine, I get the following definitions: Per the CA DOI: Annuities What Seniors Need to Know As long as you don't misrepresent what someone already has, such as this: Annuities What Seniors Need to Know Oh and look at that: Annuities ARE an investment... .but they are NOT necessarily a security... even according to the CA Department of Insurance.

I don't think you can find a brochure or any company material for fixed or indexed annuities that has the word investment on it. I mean the real stuff. Not Google dictionaries.

 

[goillini52]

I don't think you can find a brochure or any company material for fixed or indexed annuities that has the word investment on it. I mean the real stuff. Not Google dictionaries.

I just looked through brochures from ANICO, Athene and Oxford along with Athene's app and the Buyer's Guide to Fixed Annuities. I found the word investment scattered through all of them, but they were referring to the investment the company was making on behalf of the client. I didn't find one time that the annuity was referred to as an investment from the client/buyer's point of view.

You are correct.

 

[Newby]

I just looked through brochures from ANICO, Athene and Oxford along with Athene's app and the Buyer's Guide to Fixed Annuities. I found the word investment scattered through all of them, but they were referring to the investment the company was making on behalf of the client. I didn't find one time that the annuity was referred to as an investment from the client/buyer's point of view. You are correct.

They will hang you with that word. It is banned if you don't have a securities license.

 

[carol369]

Just came across this thread. Very interesting about California. Are there other states going after agents?

I dealt with this in my Mother for several years & went to an Alzheimer's support group. I learned a lot about dealing with seniors & how to recognize the signs. Lost a few sales that way!

My question is: why don't insurance companies offer courses to help agents? Or is that too complicated?

 

[VolAgent]

Just came across this thread. Very interesting about California. Are there other states going after agents?

I dealt with this in my Mother for several years & went to an Alzheimer's support group. I learned a lot about dealing with seniors & how to recognize the signs. Lost a few sales that way!

My question is: why don't insurance companies offer courses to help agents? Or is that too complicated?

Then the companies would become liable. Agents are independent contractors, so they can shove that responsibility onto us. But if they start offering classes on it, then some of that liability comes back onto them. An agent didn't take the class, class was poorly taught, agent ignored the warning signs, etc.

Once the company takes on the responsibility of training agents in an area, it also takes the responsibility for their actions when they use or fail to use the training.