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

[sman]

I'm not sure if risk has anything to do with whether or not something is an investment. There are CDs, bonds and notes that are near zero risk yet they are investments.

The question isn't whether or not an EIA is an investment, it is. The question is whether or not it's a security and should it fall under the governance of the SEC and NASD. I say no. It has a guarantee which no security does. The closest a security comes to a guarantee are the high watermark mutual funds. And the only reason they have this guarantee is because they purchase INSURANCE to guarantee it.

It makes no difference to me whether or not an EIA is categorized as as security. I have my securities license. I just hate to get a haircut on the business (not that I do a ton of annuity business). The issue, IMHO, is the abuses of the product by ill-informed agents. In addition, the securities industry has seen a ton of business leave to EIA's. That means they are making less money. So of course they are going to push for oversight. Again, just my humble opinion.

 

[Crabcake Johnny]

I think the real problem is insurance agents are taking on the role of investment advisers.

I'm expected to sit down with a 65 year old couple and assess their financial situation? How would I go about that with no formal training except for my annuity marketing company painting all investments as "risky and horrible."

The agent is out there on the appointment to basically bash everything; equity investments, CDs, etc... in order to close the annuity sale. Just how would that untrained agent dissect their financial portfolio in order to make a recommendation?

The unbelievable ethical problem is how much to recommend? How much of that $750,000 should that couple move into an annuity? The agent gets more money the larger the annuity. Why would they recommend a $50,000 annuity when they could recommend $250,000? That's like putting a hungry mouse near a block of cheese and saying "just take a small bite."

 

[senior-advisor-indiana]

I cant believe I need a securities license to tell someone a FIA or a CD is safer than securities. I should lose my license

 

[joshril]

You're selling investment safety, not annuity benefits. That makes it a security. Yes, you need a securities license. (In my state, the state securities office will ask the DOI to pull your insurance license for touting EIAs over other investments--and it will be done.)

What a lunatic!! No offense, but your post makes no sense. And you clearly aren't very familiar with indexed annuities. The client shares no risk with the insurane company in the investment into the indexes. And I find it hard to believe that state DOIs will revoke a license because you tell someone a product with a guaranteed rate of return is a safer investment than a securities product. CD's, savings accounts, all fixed annuities... Come now... Do you even hold a securities license??

 

[senior-advisor-indiana]

I don't think he knows what we are talking about. Must of had a few too many drinks

 

[joshril]

I think the real problem is insurance agents are taking on the role of investment advisers.

I'm expected to sit down with a 65 year old couple and assess their financial situation? How would I go about that with no formal training except for my annuity marketing company painting all investments as "risky and horrible."

The agent is out there on the appointment to basically bash everything; equity investments, CDs, etc... in order to close the annuity sale. Just how would that untrained agent dissect their financial portfolio in order to make a recommendation?

The unbelievable ethical problem is how much to recommend? How much of that $750,000 should that couple move into an annuity? The agent gets more money the larger the annuity. Why would they recommend a $50,000 annuity when they could recommend $250,000? That's like putting a hungry mouse near a block of cheese and saying "just take a small bite."

I agree with John on all of this, but you could have the same argument about fixed annuities that aren't indexed. I am a firm believer with doing what is in the client's best interest, but making indexed annuities a securities product will not fix the problem. The mice that have securities licenses are just as hungry! I worked with securities for almost 2 years and sold securities as well as fixed products, and there were ethical dilemas with registered reps just like there were with insurance only reps... I believe there are always going to be bad apples and inexperienced agents.. Hell.. health agents that aren't experienced can cause just as much damage and we all know how many of those guys are running around!

Getting back to the original question about whether or not EIAs are good products or just crap... the answer is yes! There are great EIAs that meet a need and others I wouldn't recommend to my worst enemy. It all depends upon the client's circumstance and what they are trying to accomplish.

 

[senior-advisor-indiana]

well put and good point.

 

[senior-advisor-indiana]

By the way, I am calling my state's securities office tomorrow to get these unethical banks shut down. They have been touting that there CD's are safer than securities. I know those tellers and loan officiers don't have thier securities licnese..........BUSTED!!!

 

[joshril]

By the way, I am calling my state's securities office tomorrow to get these unethical banks shut down. They have been touting that there CD's are safer than securities. I know those tellers and loan officiers don't have thier securities licnese..........BUSTED!!!

ROLFLMFAO

 

[James]

Insurance, Banking and Securities have always had obvious problems within the family of the Industry. Yet what the NASD and SEC is now attempting to do is beyond the pale of common sense. I mean let's look at the Merrill Rule, do we need to go any further? Now though you have the CFP Organization and their desire to become more powerful even at the cost of other Financial Destinations, notable ones at that while they are out their begging for their SRO.

A EIA is a Fix Annuity, no matter how twisted the logic of claiming them as a Security. If they win then all Insurance Products of any Cash Value including WL (since the investment portion is often touted) and the HSA will become a Security Product.