More Agents Get Nailed For Selling Annuities

[JFBAgent]

I'm asking this as an honest question - not trying to be smug at all but can you reference where anyone lost their savings in any of the banks that went under over the FDIC limits?

Yes,

8,700 former account holders of IndyMac Bank that were above the limit at the time. Until...Congress stepped in and retroactively gave them more coverage...(must have been campaign donors)...

I was just talking to my brother in Colorado. One of the little banks in the last month that the FDIC cannot find a purchaser for has something like 28 folks that are going to lose money.
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This story pertains to a guy who:

A) worked for Bankers (they have a certain "reputation" already)
B) claimed to have licenses he didn't
C) had power of attorney forms on his clients
D) was compensating non-securities licensed folks
E) had already recieved a cease and desist order from the SEC
F) ignored suitability, needs, and individual situations - running all 180 accounts through the same mill.

The fact that he was selling annuities was almost incidental. Could just as easily have been CD's, loans, or cold pizza.

 

[0b1kanobee]

Look.......this is just bogus nonsense back and forth pitter patter.
The day the FDIC doesn't pay up then everyone is in trouble.

The real issue here is, are the banks paying you enough money on your money to outperform inflation? What creditor protection does the bank offer? Has anyone ever been taken to the cleaners because they didn't have creditor protection with their money in the bank? What if you die and Probate comes into play? Anybody that knows anything about annuities could go on and on about this.

FDIC limits and whether they fail or not have nothing to do with an annuity or retirement. Should people have access to money in a bank, sure most of the time.

If I doing annuities for the comp, I wouldn't be with the two companies I do most business with. Their comp sucks but their products are good.

 

[JFBAgent]

Great points!

...BTW I was just stirring the pot a bit I guess. The government is not going to let either banks or insurance companies fail. Without both of them, there isn't a monetary system left.

 

[budfox7]

Licensing does NOT mean training.

Licensing does mean LIABILITY.

Licensing does mean regulatory compliance depending on the licensing acquired.

Just because I'm no longer registered as a registered rep doesn't mean that I don't have the "training". However, there's no loophole for those who are no longer licensed, yet have the training.

It looks like I'm going to have to form my RIA firm in the near future.

Why would you let your licenses lasped ?
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I think everybody that offer annuities need to be securities license in some capacity.

1) even if rule 151a is ever passed you are covered and dont have to fret or not, hopefully it will stay the way it is.

2) you can charge for financial advice if you are 65,66. More money for your practice and wealther clients still want thier TD Ameritrade , Scottrade and would rather pay you a fee to help them with advice

3) If you sell an annuity 9/10 its coming from the market.

4) You make great money on Ashares as well as wrap accounts!

5) You are doing your client right by offering a holistic finanical advice. 529, 401k, Life, IRA, Annuities , REITS,MLP,LLP, Bonds, ETFs and Equities and Covered Calls. When I sit down with a client, I am making money no matter WHO they are.

 

[DHK]

Why would you let your licenses lasped ?

Compliance & FINRA. It's horrible. You can't seem to wipe your own a** without getting permission to do things. And even if you submit your stuff to compliance, it can take WEEKS to get approval! I now have freedom in my marketing - as long as I don't mention company names or specific products... or put anything stupid in writing.
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I think everybody that offer annuities need to be securities license in some capacity.

I think that everyone offering annuities needs to have proper TRAINING in some capacity.

1) even if rule 151a is ever passed you are covered and dont have to fret or not, hopefully it will stay the way it is.

We'll see what the future brings. Who knows?

2) you can charge for financial advice if you are 65,66. More money for your practice and wealther clients still want thier TD Ameritrade , Scottrade and would rather pay you a fee to help them with advice

Wealthy clients are where all the competition is. I'd rather help 25 families to improve their situation a small bit than to try to focus on getting 1 "wealthy" client.

So... you help people pick individual securities to trade elsewhere? I wouldn't do that... even if I was a CFA. No, I'd only be working on a risk-based portfolio model with strategic & tactical asset allocation strategies. No individual securities to be traded elsewhere. I won't be blamed for someone else's screw up! I don't help "screw-it-yourself'ers"!

Charging a fee isn't to make money. Charging a fee is to pay for your fiduciary duty. It can be a huge liability to be a fiduciary and to hold yourself out as one.

3) If you sell an annuity 9/10 its coming from the market.

Admittedly, I don't sell many annuities.

4) You make great money on Ashares as well as wrap accounts!

A-shares suck. In fact, it doesn't pay you (as well) to sell higher amounts for A-share mutual funds - particularly over $250k. Well, that would be better for a wrap/managed money type prospect anyway. They only seem to pay well for the smaller dollar amounts. And even then, your firm takes a big haircut of the GDC.

Young families shouldn't be investing. They should be saving for emergencies and opportunities. They don't need more risk compounding every year.

5) You are doing your client right by offering a holistic finanical advice. 529, 401k, Life, IRA, Annuities , REITS,MLP,LLP, Bonds, ETFs and Equities and Covered Calls. When I sit down with a client, I am making money no matter WHO they are.

I have chosen a different business model. I'm a life insurance agent. That's who I am and that's what I do. I don't have the TIME to become an expert in all those areas. Nor do I want my clients to think of firing me when the market downturns.

However, if I specialize in life insurance... my life is simpler. Working with my clients is simpler. I get to focus completely on building a clientele and selling solutions that WORK... instead of paying attention to the stock market day in and day out.

I can offer a "holistic" approach without doing everything myself. I can refer the client to another advisor regarding other areas they may have questions. I can still give my opinion. I will not be making any securities purchasing recommendations or registered product recommendations... but I know pleny of local people who can and will.

Jack of all trades...

Just because you CAN do something... doesn't mean it should be done.

Do a search on the forum. This topic has been talked about at length.

 

[Norwayguy]

1) even if rule 151a is ever passed you are covered and dont have to fret or not, hopefully it will stay the way it is.

151a is dead. Congress has determined that Fixed Indexed Annuities are the purview of the States DOI and Not FINRA or the SEC.

My Securities Registration is currently inactive, why did I let it go inactive is Compliance and freedom to operate my business as I decide as opposed to how my B/D and their Compliance dept determine I can operate my business.

Yes you can make good money selling A shares or Wrap accounts and doing as you say holistic financial planning...I've just decided to move my business back to a pure insurance base.
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I'm asking this as an honest question - not trying to be smug at all but can you reference where anyone lost their savings in any of the banks that went under over the FDIC limits?

And to play a bit of devil's advocate; if an agent were to go over the risk of losing money over the FDIC guarantee, I'm sure they would also go over the potential risks of an annuity if the carrier went under.

John I know your asking an honest question. I have discussed this in another thread I've been updating about Bank Failures...I've been keeping an eye on this stuff because its pretty scary. Normally when a bank fails the FDIC finds a buyer and that buyer and the FDIC come to an agreement and depositers over the 250K cap are protected, however when the FDIC does not find a buyer those over the FDIC cap have no protection. Whats scary is the amount of times when the FDIC does not find a buyer seems to be increasing...It was 10 times in 2010 and twice so far in January 2011 out of 17 failings.

FirsTier Bank of Colorado Fails – Depositors Facing Losses | Problem Bank List

FirsTier Bank of Colorado Fails – Depositors Facing Losses

By Craig Stahl on January 28th, 2011

January 28, 2010 – Large depositors at failed FirsTier Bank of Colorado are shocked to learn that they potentially face the loss of all deposits held in excess of the FDIC deposit insurance limits. This is the second time in two weeks that the FDIC was unable to find a purchaser for a failed bank, thereby leaving large depositors exposed to losses.

Typically, when the FDIC sells a failed bank to another institution, the acquiring bank will assume all of the deposits of the failed bank, including those over the FDIC insurance limits.

Depositors with balances above the FDIC insurance limit are subject to a full loss of all uninsured deposits. This "lottery aspect" of deposit insurance leaves large depositors in a failed bank out of luck and subject to full loss on uninsured deposits.
The odds of losing money in a failed bank may be higher than most people realize. During 2010, there were 8 payoffs by the FDIC for failed banks that the FDIC could not sell. The 8 payoffs represented over 5% of all bank failures during 2010. During 2009, ten banks failed that could not be sold by the FDIC.

 

[VolAgent]

And to make it more fun...

I sat through my audit yesterday. I told the guy I was thinking about dropping my license and he told me he wished he had a dollar for everytime he heard that.

Also, he use to be a senior compliance director at a small boutique firm until the economy went south. He was just laughing at some of the things my compliance had approved. He advised me to make sure I had their approval in writing. Even he was laughing at all the silly little things compliance officers spend their day doing.

I told him I had heard that compliance makes sense once you realize it isn't to protect the consumer, but the B/D from getting sued. He just gave me a sad look as he nodded.

So John, if you think FINRA and compliance is there to protect consumers, you're sadly mistaken. The Series 6 and 63 tests aren't much harder than the life test, and do little more to properly teach you about the products.

 

[crimsontideagent]

Regarding the "source of funds" discussion... Had a talk today with a real pro about this and he brought this up... "why are life and insurance agents targeted ? "

What about the guy at the car dealership that says "you can take that cd money and get this car or your mutual fund" - Does he need a 65.

What about the personal banker that says you need this cd instead of those stocks? 65?

Real Estate agent who advises to buy that investment property versus the mutual funds, etc...?

you get the drift...

Disclaimer: I had never thought of it this way, I hope Rick over at TGP doesn't mind me sharing - this is HIS take... credit to you.

If you haven't been to TGP - you are missing out.

 

[scagnt83]

Regarding the "source of funds" discussion... Had a talk today with a real pro about this and he brought this up... "why are life and insurance agents targeted ? "

What about the guy at the car dealership that says "you can take that cd money and get this car or your mutual fund" - Does he need a 65.

What about the personal banker that says you need this cd instead of those stocks? 65?

Real Estate agent who advises to buy that investment property versus the mutual funds, etc...?

you get the drift...

Disclaimer: I had never thought of it this way, I hope Rick over at TGP doesn't mind me sharing - this is HIS take... credit to you.

If you haven't been to TGP - you are missing out.

According to some state statutes, a real estate agent who "advises" aka: actively markets & recommends to the client to liquidate securities for something else, would not have the authority to do so.
Especially when you bring the term "need to" into the equation as you did above.

How would a real estate agent know the tax implications of liquidating securities? So how could he know if its a suitable recommendation or not?

At least the people at the bank could potentially have the resources to gauge suitability.


But if a client comes to you after making a decision on their own to liquidate their securities, and on their own wants to put their money into the product you offer its a different story.

 

[pcwest]

My suitability forms are air tight. Most clients tell me they do not want risk anymore. I guess I should record the appointment on a webcam and email it to the SEC for their approval before sending it to the insurance company for their approval.

Here we go again!