What is "Suitability?"

[nylife11023]

You'll notice that 'Growth' was not in there at all. I know, that doesn't stop some peddlers from promoting it as a "be all and end all" product... but I can't control other agent's actions. My job is to provide clarity where there was confusion.

So when you sit with a client and you tell them that they are to write you a large check for a very complex financial contract that you know they don't totally understand, and that they may get zero return on if your advice to them is wrong and that is financial vehicle where they could possibly lose money on via early surrender they understand that this is an insurance product and not anything that resembles an investment?

If you can do that such that the average person with an average knowledge of finance understands they they are NOT investing their money, then you must be good... really very, very good. Surveys have shown that to the average person an annuity 'looks' like an investment and not insurance.

In law there is a doctrine that if it walks like a duck and quacks like a duck... it is a duck.

In my opinion, it is not usually a good idea to correlate what is morally right and ethically correct, much less even legal, with many of the products sold by the financial sector... indexed annuities specifically.

----------

You seem to think you more than you really do as well.

Is that English? Exactly how are you trying to insult me this time?

 

[DHK]

So when you sit with a client and you tell them that they are to write you a large check for a very complex financial contract that you know they don't totally understand, and that they may get zero return on if your advice to them is wrong and that is financial vehicle where they could possibly lose money on via early surrender they understand that this is an insurance product and not anything that resembles an investment?

Well, I can quote Van Mueller: "We can either make a big mistake or a little mistake. I could guess what the economy is going to do and put together an investment portfolio to take advantage of it. But the downside, is that we can lose 30%-50% in a given year if I'm wrong. OR... we can make a little mistake and put the money in a contract that guarantees your principal from the downside, but your upside may be limited to about 5%. Would you prefer the big mistake or the little mistake?"

If you can do that such that the average person with an average knowledge of finance understands they they are NOT investing their money, then you must be good... really very, very good. Surveys have shown that to the average person an annuity 'looks' like an investment and not insurance.

Anyone that makes annuities look like an "investment" (or to be more precise - securities) is not touting the principal protection enough. Investments have risk to principal while fixed indexed annuities do not.

In law there is a doctrine that if it walks like a duck and quacks like a duck... it is a duck.

In my opinion, it is not usually a good idea to correlate what is morally right and ethically correct, much less even legal, with many of the products sold by the financial sector... indexed annuities specifically.

Variable annuity sales have their own issues too. Try this little video from one of our newer posters - The Annuity Academy:



"Mutual funds with the option to annuitize"??? I've called variable annuities "mutual funds with insurance" - at least that was a little more accurate at the time than that.

Oh, and that's not the only kinds of misrepresentations that have ever happened. Here are some more epic fails in giving financial advice:




Annuities are much easier to 'call out' because of how complex they are, the commissions they pay, and the lack of training by the vast majority of agents to explain them properly.

Because of the commissions and the low barrier of entry to selling these products, it can make it RIPE for potential abuses - but that doesn't mean the product shouldn't be sold or that it needs further regulation.

Although I do seem to recall an idea by John Olsen where he recommended the idea of an "Indexed Products" license - similar to a variable contracts license, but either advanced training or additional registration for selling indexed insurance products. It was an interesting idea in theory.

BTW, if you study the right people - John Olsen, Tom Hegna, Curtis Cloke, and the Insurance Pro Shop, they'll teach you how to properly position and sell fixed indexed annuities the RIGHT way - without client confusion.

 

[walthamny]

I have learned many thing from John Olsen over the years. In this environment, it would be hard to pass a common sense Indexed Products license. There are just too many chiefs. Most whole life sellers hate it because it takes business away from them. Brokerage world hates it, they just want to talk about the hot stock pick. CFP world hates it, it is insurance related, too much information to process. Liberals hate it, because they see the cruises offered to big sellers so it must be bad product. Most CPA's hate it because they see fees and Suzie Orman, told them all fees are bad. Fee Only advisors hate them because they are jealous of the money I make selling them.