Source of funds - Series 65

[JJ2713]

How do you deal with the source of funds situation that may or may not be an issue if you don't have your series 65 license?

For example, placing IRA money into an index annuity (with/without income rider). SPIAs/DIAs are exempt from the DOL rule (pretty sure).

Or even if you just give advice on investing.

If one of the tools in your tool box is annuities, then you have to discuss source of funds, their qualified money, etc. How do you deal with this and stay compliant?

 

[DHK]

There is NO such thing as a "source of funds" rule... per se.

Here's the critical question: Are you recommending someone sell their securities to buy an annuity? Or are you just proposing an alternative?

If you say "I recommend you liquidate your portfolio and buy this annuity"... you have a problem. If you WANT to be able to say that, you need a Series 65 and RIA registration (or broker/dealer registration - ugh).

If you say "I have an alternative to your portfolio. I cannot give you advice on your portfolio specifically, but I can share with you what thousands of other people are doing as a safe-money alternative. Let me show you how it works."... that's far more compliant.

Stay away from making any buying, holding, selling, or analysis of portfolios. My website and my marketing clearly say this "in the fine print". You can present alternatives all day long and let them make a decision based on that.

Now, if they ask "How much of my portfolio should I put in this?" or "What should I liquidate to fund this?"... you can't answer those questions pertaining to their portfolio.

But if you're talking about guaranteed income and/or principal protections, you can say:
"As much as you want protected from the downside of the market."
or
"If you want to guarantee $4,000 per month in income, then you need to fund this with $xxx,xxx to guarantee that income."

But you can't tell them how much to liquidate or what to liquidate from the portfolio.

 

[Allen Trent]

SPIAs/DIAs are exempt from the DOL rule (pretty sure).

DOL rule went away a few months ago unless something new came up that I am not aware of

 

[IsaacA]

DOL rule went away a few months ago unless something new came up that I am not aware of

You're right no DOL

 

[VolAgent]

Last I saw, Arkansas had a state law/rule about this. Was it overturned, do any other states have a law or rule?

 

[DHK]

It's not overturned. It's misunderstood and misrepresented.

Source Of Funds; A Source Of Pain

 

[Stephen]

Last I saw, Arkansas had a state law/rule about this. Was it overturned, do any other states have a law or rule?

I had an investigator from the Arkansas Insurance Department secret shop me at a seminar that I hosted shortly after the bulletin was posted. After the workshop ended she interviewed me and told me very directly that if an agent moves money from a security into an insurance product then that agent is considered to have given securites advice.

There is a new regime in place now, and I have since gotten securities licensed ,so the current commissioner may interpret things differently. I'm not sure.

 

[JJ2713]

I had an investigator from the Arkansas Insurance Department secret shop me at a seminar that I hosted shortly after the bulletin was posted. After the workshop ended she interviewed me and told me very directly that if an agent moves from from a security into an insurance product then that agent is considered to have given securites advice.

There is a new regime in place now, and I have since gotten securities licensed ,so the current commissioner may interpret things differently. I'm not sure.

There is NO such thing as a "source of funds" rule... per se.

Here's the critical question: Are you recommending someone sell their securities to buy an annuity? Or are you just proposing an alternative?

If you say "I recommend you liquidate your portfolio and buy this annuity"... you have a problem. If you WANT to be able to say that, you need a Series 65 and RIA registration (or broker/dealer registration - ugh).

If you say "I have an alternative to your portfolio. I cannot give you advice on your portfolio specifically, but I can share with you what thousands of other people are doing as a safe-money alternative. Let me show you how it works."... that's far more compliant.

Stay away from making any buying, holding, selling, or analysis of portfolios. My website and my marketing clearly say this "in the fine print". You can present alternatives all day long and let them make a decision based on that.

Now, if they ask "How much of my portfolio should I put in this?" or "What should I liquidate to fund this?"... you can't answer those questions pertaining to their portfolio.

But if you're talking about guaranteed income and/or principal protections, you can say:
"As much as you want protected from the downside of the market."
or
"If you want to guarantee $4,000 per month in income, then you need to fund this with $xxx,xxx to guarantee that income."

But you can't tell them how much to liquidate or what to liquidate from the portfolio.

That's what I was thinking.

Just seems safer to be 65 licensed and set up your own RIA or join an RIA, even if you're not going to do any money management for a fee. There are companies that can set up your RIA for you. It's a few thousand, but well worth it.

Seems much easier this way in order to talk about investments, moving money from a security to annuity, etc.

Some IMOs have set up their own RIAs and have told their insurance agents to join it for this very reason.

 

[VolAgent]

I had an investigator from the Arkansas Insurance Department secret shop me at a seminar that I hosted shortly after the bulletin was posted. After the workshop ended she interviewed me and told me very directly that if an agent moves from from a security into an insurance product then that agent is considered to have given securites advice.

There is a new regime in place now, and I have since gotten securities licensed ,so the current commissioner may interpret things differently. I'm not sure.

I glanced at the link that DHK shared. While the author may be correct, it isn't really something I would want to test in Arkansas. All it takes is the wrong regulator and you're in a world of trouble.

 

[DHK]

I may be right... but they're the ones who are interpreting and enforcing the insurance laws. And I agree with avoiding trouble in the first place - so know your state.