Encourage clients to comment on 151A

[indaville]

Now that the market has dropped the value of a good FIA has been proven. The SEC has re-opened the comment window and I think having clients comment would go a long way in getting the SEC/FINRA/Congress realize FIA's are fixed products.

We are going to be asking clients that have experienced a 0% decline so far this year to comment on the idea of further SEC regulation.

This proposed rule has the potential to negatively impact all of us regardless of which side of the FIA debate you might be on.

Matt

 

[djs]

Re: Encourage clients to comment on 151A!!!

Tie this together for me, how does the SEC/FINRA/Congress change the fact that these are fixed products?

I understand how they affect you, but how does it affect the product? What exactly is the client going to comment on?

Also, why does it negatively impact all of us? I haven't followed this discussion, other than to know it's going on.

Dan

 

[dannysdad]

Re: Encourage clients to comment on 151A!!!

As it becomes more apparent that many insurance agents don't even understand FIA's, I'm getting a lot more comfortable with their use being regulated.

 

[indaville]

Re: Encourage clients to comment on 151A!!!

Tie this together for me, how does the SEC/FINRA/Congress change the fact that these are fixed products?

I understand how they affect you, but how does it affect the product? What exactly is the client going to comment on?

Also, why does it negatively impact all of us? I haven't followed this discussion, other than to know it's going on.

Dan

The SEC has proposed a rule to make FIA's a security. FINRA wants them to be securities so they can pick up lost revenue. Congress gives the SEC their authority.

The client can comment on how over the past year even though the markets are down 30-40% they have not lost a dime. Why then should they be regulated as a security?

It impacts every licensed agent because this is step in the direction of more federal regulation of our practices. FINRA hopes to one day regulate all or most insurance and financial products. FINRA involved is bad for all of us.

Matt

 

[JMO Fan]

Re: Encourage clients to comment on 151A!!!

Just curious -- while FIAs have been crediting 0%, what have SPDAs been getting?

 

[indaville]

Re: Encourage clients to comment on 151A!!!

Just curious -- while FIAs have been crediting 0%, what have SPDAs been getting?

I am not sure. What did the SPDAs return when the FIA returned 20% plus percent for some years?

Matt

 

[dannysdad]

Re: Encourage clients to comment on 151A!!!

I am not sure. What did the SPDAs return when the FIA returned 20% plus percent for some years?

Matt

That can't be answered because FIA's have never "returned 20% plus for some years."

 

[JMO Fan]

Re: Encourage clients to comment on 151A!!!

The focus on investment returns is interesting. It's the clearest indication that FIAs are securities.

 

[indaville]

Re: Encourage clients to comment on 151A!!!

That can't be answered because FIA's have never "returned 20% plus for some years."

In some years FIA's owners have earned 20+%. Not every year but when it happens it helps outset years like this year.

Matt
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The focus on investment returns is interesting. It's the clearest indication that FIAs are securities.

Interesting comment. Does focusing on the interest rate of one fixed rate annuity versus another fixed rate annuity mean that both annuities should then become securities? If the SEC/FINRA get their way that will be next.

Matt

 

[JMO Fan]

Re: Encourage clients to comment on 151A!!!

Does focusing on the interest rate of one fixed rate annuity versus another fixed rate annuity mean that both annuities should then become securities? If the SEC/FINRA get their way that will be next.

Matt

It might surprise some, but comparing interest rates instead of annuity payouts, emphasizing investment returns instead of the insurance aspect, puts products outside of the existing safe harbor, Rule 151. Long ago, part of my job was reviewing marketing material for a major annuity carrier. My primary task was to send the material to the Legal department if the emphasis on interest rates/investment returns was more than 50% of the pitch in the brochure, who would then get the marketing folks to revise to emphasize the insurance aspects, to avoid violating Rule 151.

This basic standard seems to have been forgotten by most annuity sellers. Consider the black eye that AIG got by investing in CDS's, and that the SEC is considered by many to be the negligent regulator. Do you think the SEC will let itself be accused of missing the boat on FIAs?

Many seem to think that pointing out the SEC's past failings will bolster the case against Rule 151A. I think it's the opposite. Finalizing the rule will make the SEC look a lot better to their most valuable constituents: FINRA, broker/dealers, and NASAA.