Equity Indexed Annuities: Are they the real deal or junk products?

[xrac]

Selling fixed indexed annuities may be a thing of the past unless you have a securities license if the feds have their way:

SEC OKs proposed annuity rule

SEC OKs proposed annuity rule - InvestmentNews

 

[Crabcake Johnny]

and the downside would be.....

 

[xrac]

and the downside would be.....

Obviously you don't sell them and neither have I but the downside I could see would be:

1)Fewer offerings to solve clients situations. Some places they are appropriate, needed, or desired.
2)Loss of products for agents who depend upon them for a lions share of their business.
3)Federal intrusion deeper into the whole financial/insurance business. The next area to come under greater federal regulation will be RIA's.
4)Necessity of bending over for the feds and coming under the jurisdiction of broker dealers and a lot of the unnecessary compliance. Results are more paperwork, more effort, loss productivity, and higher costs.
5)Loss of commission to the B/D's who will then take a big cut of the business.

Whether you embrace or disregard FIA make no mistake that this move is about control and money, not protecting the public. Remember that FINRA is about the B/D's keeping their cut of the pie.

 

[Crabcake Johnny]

If I was an agent who depended on them for a lion's share of by business I guess I'd get licensed.

 

[Winter_123]

Obviously you don't sell them and neither have I but the downside I could see would be:

Whether you embrace or disregard FIA make no mistake that this move is about control and money, not protecting the public. Remember that FINRA is about the B/D's keeping their cut of the pie.

In part. Realistically, there are a lot of consumer complaints and fraud in this area and a lot of outrage related to predatory practices hitting on seniors. Regulators have a lot of pressure from the public and senior advocacy groups to fix it. It is not all backroom b/d maneuvering even if that is a component.

Winter

 

[Crabcake Johnny]

Although there are deep problems with a small percentage of agents in all areas of insurance, it's magnified when seniors are the target.

We have decided, as a society, that we are going to offer seniors an extra layer of protection. For example, in many states crimes against seniors carry stiffer penalties.

We see CMS going nuts with MA plans and the life insurance industry had all the warning signs that unless they initiated more internal controls regarding annuity sales someone else would take control for them.

The insurance industry, as a whole (from what I've seen) has been mainly about "just write the damned deal." That can play out in other areas....it's not going to play out in the senior market.

I do not see the ethical agents being harmed by this. In fact, the opposite would be true. Annuities are picking up some bad press which has to make them more difficult to sell.

Get rid of the bad apples, grab a securities license and those agents will earn even more money.

 

[bluemarlin08]

I totally agree with Winter. The large issuers of this product shot their selves in the foot letting their agents present the product the way it was presented to many clients as an alternative to investing in equities without the risk, this brought the feds in. Good riddance in my opinion, "All hat and no saddle" as Chris use to sing.

 

[padthaiforlunch]

Under the proposal, insurance companies issuing these annuities would not have to file financial statements with the SEC if they were regulated as annuities under state law.

 

[JMO Fan]

EIA = Security

If the rule were adopted, the SEC would treat an annuity as a security if its performance were linked to the performance of a security, group of securities or securities index, and if “the amounts payable by the insurer [were] more likely than not to exceed the amounts guaranteed under the contract,” officials said today at an SEC meeting.
If adopted as written, the proposed rule would apply to indexed annuities starting 12 months after a final rule was published in the Federal Register, officials said. Staffers at the meeting argued that the change in definition could offer consumers the benefits of protection by federal suitability and antifraud laws.
The commission started the meeting by playing a portion of an NBC Dateline segment that looked into indexed annuity sales practices. ...Atkins also asked about the proposal provision that would define some indexed annuities as securities but might let some indexed annuities continue to be regulated under state insurance laws.
“Will that create investor confusion?” Atkins asked.
In related news, the SEC also has proposed a change in regulations that would exempt about 24 indexed annuity issuers from the current Securities Exchange Act of 1934 filing requirements.
To qualify for the exemption, an indexed annuity issuer would have to file annual statements and be monitored by its home state insurance regulator.
The insurer also would have to take steps to keep the annuities from trading on any kind of exchange or electronic trading system, staffers said...

National Underwriter Life & Health
Rule not final, but might not preclude states and/or disgruntled consumers from suing.

 

[Charpress]

I became securities licensed because I saw the handwriting on the wall (among other reasons).

But let's not forget, the real power behind this is not in any sense an attempt to protect seniors or anyone else. It is the brokerage industry that is suffering hard times and seeing a huge move away from their industry to the insurance industry. As always, the money is the motivation and the rest is just the excuse to get rid of some competition.