Are Baby Boomers Doing More For Insurance Regulations Than They Ever Did For World Peace?
Annuities in all their forms are the hottest retirement savings ticket in town. And the securities and insurance regulators have decided there needs to be some "comparable rules" for annuity sales whether they are fixed, variable, or equity indexed. What does this mean exactly? Are the state insurance regulations and its regulators going to start looking and acting like the NASD?
On May 5, 2006, the Minnesota Department of Commerce and the NASD co-hosted a roundtable in Washington D.C. to begin the discussion. I was impressed with the industry turnout and the willingness by all to debate the issues. And those issues were: Should there be comparable regulatory standards for supervision of insurance brokers/agents, suitability, advertising, sales force training and disclosure requirements? The NASD Chairman and Minnesota Commerce Commissioner think it was "the general consensus of the more than 20 securities and insurance regulators and industry executives who participated that investors purchasing fixed, variable or equity indexed annuities should be comparably protected, regardless of which regulatory regime covers the particular product they buy." Joint Statement of NASD Chairman and CEO Robert Glauber, Minnesota Commerce Commissioner Glenn Wilson Regarding Success of Annuity Roundtable, NASD News Release, May 16, 2006.
What could this mean for the insurance industry? After a detailed discussion of the industry growth and features of the various annuity products, it became clear that given the complexity of the various annuity products available, some consistency may be necessary in areas such as the training of the sales force and marketing of the products. Right now, for example, there isn't a core training curriculum applicable to all the states for the sales force. It is unclear how the independent marketing organizations, which provide a lot of the annuity marketing materials for insurance agents, are supervised and who is reviewing the advertising materials. Disclosure requirements are inconsistent. Because the insurance and securities industries take different approaches to consumer protection - insurance regulation takes a more transactional approach, while securities regulation is much more focused on suitability and supervision - there are regulatory gaps. For the insurance industry, this may mean more stringent state training requirements for the sales force, suitability reviews by insurance companies, and stricter supervision of marketing organizations.
The NASD and the Minnesota Department of Commerce are forming working groups to compare the regulatory standards, so stay tuned....changes are on the horizon.
The Problem as I see it.
How does the NASD feel about Variable Annuities? THE REGULATORY VIEWPOINT 2006
[ Elisse B. Walter, senior executive vice president of regulatory policy and programs at the NASD, says that her organization isn't against Variable Annuities themselves."Our concern is not whether the product is good or bad, but how it is being sold and whether it is appropriate to the people to whom it is being sold,"she says.]
Let's look at this above statement
This above position taken by the NASD is what continues the problems with the Variable Annuity industry because there is no official position taken on suitability and in it's marketing of living benefits to the seniors/retirees that are led to purchase a risk product with a false sense of safety conveyed that somehow their money is really not at risk.
But if the NASD is convinced that their Variable Annuity no longer presents itself as a risk,within the market risk products now because of all the added new enhanced living benefit guarantees? Then maybe they should petition the SEC to have it reviewed as a non-risk product regulated by the NASD.
After all any product that uses the word guaranteed as many times as in the Variable Annuity Presentation sale certainly must not be of any risk to any consumer.
I disagree with the above NASD statement and their broad position that it's not a question of whether the product is good or bad? What is considered real compliance with the National Association of Securities Dealers? Only that their products offered are OK ?
IT'S NOT GOOD AS CURRENTLY DESIGNED PEOPLE ARE MISLED BY THE USE OF THE WORD GUARANTEED IN A RISK PRODUCT...{ It's not the product but how it's being sold and to whom } Is this for real? Is this then being Compliant ?
It's a product by current design that in itself mis-leads.The word guaranteed is a word that should never be allowed to be expressed with a risk product. It conveys some type of assurance that's it's OK for you to buy this product and if this that or any other thing occurs you will be all right ! ! !
These problems will never go away because of this "misuse of the meaning guaranteed in a risk product." Is this suitability? Is this being compliant? Is this a commingle of product designs and definitions?
Does the NASD rules send out mixed signals? Are they now a regulator of ambitiousness? Are their rules an exercise in contradictions? Why all the problems? Is this type of risk confusion that they allowed in the Variable Annuity now reached a point beyond their regulatory control?
This extra fee layer that you can buy back part of your loss/risk should not be allowed to be used in any same/similar manner as the word is used in a real guaranteed from loss product. The only real guarantee is that you will have to pay fees...
It tends to convey total safety from any real market loss when in reality there is none and then again tries to change this risk product the Variable Annuity by design and definition into a thing that it's not.
Real product risk should be highlighted not hidden in design that can create this false sense of safety for a product that has direct exposure to the market and it's real potential of loss for any purchaser let alone a senior or retiree.
Unacceptable meaning in product design definition is the real issue folks.
Once again the recent March 2006 decision expressed by the NASD that it's OK for you to exchange you Variable Annuity for another because of better living benefits. Is this their idea of being in Compliance?
Then they get upset with product being offered that by design avoid principal loss and risk attack them as competition when in reality they are the ones who have decided to allow a [ commingle of two different product worlds ]{guaranteed from loss products vs risk products with so called "living benefits"} & actually wonder why all so many complaint's still abound.[ Jump Ball vs Ping Pong Ball ] The Index Annuity vs the Variable Annuity.
The NASD refers to a Index Annuity as a "jump ball product" this is a term that should have applied to their"new Variable Annuity with living benefits" allowing to make a risk product into something it is not....a pretend to jump from risk to no risk with a introduction of the the word guaranteed in a risk product.
I'm really not sure the NASD does understand any real product difference.
Their boss had said Index Annuities are just too complicated to understand ! so based on these type of comments they just not might understand any real product difference between a true guaranteed "from loss product compared to the Variable Annuity with living benefits?"It could be rethinking time for the Annuity basics for the higher ranks instead of attack misdirect and then attack some more.
The accreditation method of Index Annuities is not the real issue as the NASD would like you to believe although it does have many methods to reflect your potential for gain without risk to principal. It's not so difficult or confusing that almost 27 billion a year are marketed within this safe product.
These different accreditation methods offer great selection choices for the consumer.This is what's known also as fair market competition between one product or Annuity carrier with another.Just as in any case not all of the safe Index Annuity products are suitable for each and every clients needs.This is why the Index Annuity is offered in different accreditation methods and also different time spans of involvement.
It should not to be the issue as the NASD describes that the the two products are similar in risk etc. A Index Annuity is considered a"safe money product" where a Variable Annuity is considered a" risk product" both by design and definition trying to create confusion in this area is a NASD tactic only.
The Variable Annuity has direct exposure to market risks where as the Index Annuity uses market performance as a external guide only an without direct exposure to the markets and your principal is not a risk.
The NASD representative your Variable Annuity writer dodges a suitability bullet by marketing the Living Benefits in bulk to their consumer then takes a position that because of the guaranteed living benefits all suitability issues have been resolved is this safe thinking? for the senior and retired concerns?
The NASD as well as the SEC is happy to go along with this BS.. up until of course the next "major complaint unfolds" then it's time to be fined..... only in America. Complaints and fines will continue Variable Annuity products do mislead and it's not in how they are sold and to whom, but what it's claims it will do and doesn't ! after all, is not sales perception everything.
Greed to capture the fixed rate{real guaranteed market}is now what's caused all these problems to begin with and false benefit guarantees that have been allowed to be fee forced on the Public in a risk product.
Living benefits are a"misrepresentation in risk reality"created to increase fees and misleading guarantees that allow the misuse of the word guaranteed that serves only to create an illusion that you are not in a risk product at all.
Guaranteed Minimum Withdrawal Benefits GMWB Guaranteed Minimum Income Benefit GMIB.Guaranteed Minimum Accumulation Benefit GMAB Guaranteed Minimum Death Benefits GMDB. I could go on and on. These fee based riders are designed to increase the cost of risk products yet "pound into the buyer is the word guaranteed" leaving them then think that by the conclusion of the sale process"their money is not really at any risk at all" but actually is guaranteed from any market loss.
Now they have convinced the SEC to join them in "witch hunts" starting in Florida to go after anyone giving "seminars to Seniors" I guess looking for more fine money they really can't be taking a position the retired are better off in a risk products for all their retirement money or can they?
The NASD has to clean up it's own act starting with this guaranteed Variable Annuity nonsense first and the SEC should be on their case also instead of looking at those who are trying to protect seniors/ retired from product that create false issues.
Why is there still so many complaints/ fines is it because of the guarantees that don't? and why do they call these living benefits when death is required to collect on sum? If this were my retirement money I'm not so sure I would like to die or wait the remainder of my life to get back just what was put in..
If any regulatory agency deserves to be fined it's the NASD for allowing this to continue.The annuity industry flounders on any clear cut rules for senior and retiree safety allowing State regulators to be set off on their own style of interpretation of what's to be safe and considered suitable or not etc.
Do they want to keep [ all retirement dollars at risk in retirement? ] I don't think this type thinking really meets the Principles and Code of Ethical Market Conduct ?
State regulators can not really regulate security products already a tilt in fairness has been created against the fixed/index annuity industry.
Once it allowed this word "guaranteed" to be bounced around the room in a Variable Annuity presentation without prejudice and any avoidance as much as any ping pong ball knowing all too well that any misuse of this word in any sale presentation for any risk product is all to easy to lead into the many misunderstandings that can be created for any age bracket.
This should not be allowed to happen when dealing with any ones retirement savings.
The"living benefits"might have saved the Variable Annuity industry but at what cost?
Never has any product generated so much national public distrust it really abounds but the NASD taken in a fortune in fines. They have allowed this problem to continue and are the only ones who can resolve it. Take away the NASD ability to profit from fines and objectivity might return to the issues at hand.
Does the Variable Annuity Industry today reflect National Distrust? 464,000 pages in just one browser below but it's the Index Annuity that they want to take the heat! Why is that..........
Has any risk product generated so much in fines for the NASD?? Do you think the misuse of the word & meaning for guaranteed product has created this problem?? At the rate the "NASD fines everyone" you would thing that they only have total idiots to market this risk product amazing.
I don't believe that at all but what is very obvious the NASD has found a good thing with Variable Annuities in more ways then one. Some how the words regulating and or orchestrating have seem to create these not so impressive results that have been achieved here. [ 464,000 pages of complaint issues ] on just one browser not a record I would like to hang my hat on.....The question who is really paying for these remarkable results has to be asked?
Variable Annuity Complaints Results 1 - 10 of about 464,000 for Variable Annuity Complaints. (0.16 seconds) http://www.google.com/search?hl=en&lr=&q=Variable+Annuity+Complaints&btnG=Search
http://info.sen.ca.gov/pub/bill/sen/sb_0151-0200/sb_192_cfa_20060627_092311_asm_comm.html
NASD Should You Exchange Your Variable Annuity?
(Updated March 2, 2006) is this for real?
There are various reasons why a variable annuity contract holder may want to exchange an existing variable annuity contract.
Many annuity contracts now offer premium - sometimes called bonus - credits toward the value of your contract, of a specified percentage ranging from 1-5% for each purchase payment you make.
Also, in recent years, there have been new developments in annuity features, especially in variable annuities, that are valid reasons to consider an exchange. The number of investment options has increased. Less expensive variable annuity contracts have been created. Death and living benefits have been enhanced. Also, with the growth in the stock market in the 1990s, many insurance contract holders have wanted to take part in that growth.These are all valid reasons for considering exchanging one insurance contract for another.
A New Problem is now unfolding.....
Please review the following news release from the NASD below... What the NASD does to control it's own membership is it's own business, but I want the public to see what they are doing to control the Index Annuity as a safe product and it's effects for seniors and the retired.
Once again they look at the IndexAnnuity as serious competition and are fearful of
this product and it's position in the market place and have issued the following guide line and rules for it's membership.Index Annuity design and safety standards that are built into protect principal loss are now a real issue.
The NASD does not control all of the Annuity Industry nor the products that are non-registered with them etc. but they do control it's membership that fall under both the NASD rules as well the Insurance Industry regulation and rules by choice. Not everyone wants to be part of the NASD etc.
Risk vs Non-Risk and who approves this suitability issue......for any client?
Are there more problems in the wings? Let's not forget "Suitability" Issues have long been the cause of the problems with the Variable Annuity product and industry and not the Index Annuity product Industry. So who is going to be reviewing these issues on the clients behalf? Based on what "suitability" criteria? Is it really going to be risk against non risk? Safety of principal vs product that by design that does not have any?
Since the NASD still has not taken a formal position with the senior market and any effect the Variable Annuities have played with their problems as a public position as the SEC has done, it should be very interesting as to how they think they can resolve the many issues of suitability that occur between the Variable Annuity and the Index Annuity client base.
The question remains by whose authority does the NASD plan to oversee the non registered Index Annuity a safe product and how they are supplied and by whom to the Senior Market? A market that's suppose to be overseen by the Insurance Industry and the many great organizations already in place to do just that. Suitability complaints/fines have been many with the Variable Annuity Industry not the Index Annuity Industry, so once again we ask the NASD if you can not keep your own backyard clean... why are you concerned about jumping the fence into someone else's back yard?
News Release
FOR RELEASE:
CONTACTS:
Monday, August 8, 2005 Nancy Condon (202) 728-8379Herb Perone (202) 728-8464
NASD Issues Guidance Regarding Equity Indexed Annuity Sales
Concerns About Marketing, Supervision and Investor Protection Cited
Washington, D.C. — Expressing concerns about marketing, supervision, disclosure and investor protection issues, NASD today issued formal guidance to registered firms selling equity indexed annuities (EIAs).
EIAs are complex financial instruments in which the issuer, usually an insurance company, guarantees a stated interest rate and some protection from loss of principal, and provides an opportunity to earn additional interest based on the performance of a securities market index. Some EIAs are registered with the Securities and Exchange Commission (SEC) as securities. Many are not, based on a determination that they are insurance products that qualify for exemption under the Securities Act of 1933. The question of whether a particular EIA is an insurance product or a security is complicated, depends upon the particular facts and circumstances concerning the instrument offered or sold, and is determined on a case-by-case basis.
Notice to Members 05-50 does not take a position on whether a particular EIA is a security. Nevertheless, this uncertainty over whether a particular unregistered EIA may be a security complicates a broker-dealer's supervisory responsibilities. If an EIA is an insurance product, then a firm would have to treat sales of the EIA by its brokers as an outside business activity. If the EIA is a security, the firm would have to supervise the sale as a private security transaction. Because of this uncertainty, some firms require their brokers to obtain specific approval to sell unregistered EIAs. Still other firms maintain a list of approved EIAs and prohibit the sale of all others.
NASD's Notice says that firms should:
Consider maintaining a list of acceptable unregistered EIAs and prohibiting their brokers from selling any other unregistered EIA without the firm's written confirmation that the sale is acceptable.
Consider whether additional supervisory procedures would help protect the firm's customers. For example, a firm could require that all sales of unregistered EIAs are processed through the firm, meaning the firm must supervise the marketing material, suitability analysis and other sales practices in the same way it supervises the sale of securities through the firm.
Provide brokers selling any unregistered EIA through the firm with the proper training to ensure they understand the EIA's features and the extent to which the EIA meets the needs of a particular customer.
The Notice also reminds firms that under any circumstances, NASD suitability rules apply to any recommendation that a customer liquidate or surrender a registered security for the purpose of purchasing an unregistered EIA.
NOW MY SPIN ON THIS NONSENSE
My registered representative had placed me into a Index Annuity not of my choosing because He or She said the NASD or the NASD organization they are with said ZYX Index Annuity was not acceptable for my needs based on what suitability thinking? ARE MORE FINES IN THE WINGS? Is a new kind of law suite now forthcoming? Will the Insurance Industry now be looking to fine the NASD?
The NASD has now decided what Index Annuity products will be suitable to it's customers and what ones will not be. Wow suitability but no choice now I can sleep at night. Anyone who buys a Index Annuity offered under the above guidelines will have had a very limited choice of what's available in the marketplace and this does restrict suitability choice as well.
Running the risk also by the right product not being offered for the client needs and will be also runing the risk of a limited choices compared to more choice. This is suitability?? Remember it's the client in the Index Annuity sale who makes all the final decisions based on all the information provided along with many choices for companies products growth selections etc.
It's true their principal will be protected but also their opportunity for gain might equally be limited by not offering a complete choice selection this could reflect on the value and market place growth offered by Index Annuity as a product choice but with allowable gain per the clients final decision based on choice and not the agents decision being limited by one product or one company or one growth selection etc.Limited choice means there is also limited suitability. A concern for Seniors yet to be addressed by the NASD.
You see what makes a Index Annuity Broker of such value to this client is not only all product and company selections but also all the market choices between the growth selections and the bonus selections that are available in the market place at large and offering this selection to their clients needs as choices with the client making all the final decisions etc. I think this is a point the NASD has still yet to understand...............
Folks these problems are just begining and will only get worse as the NASD tries to control what Index Annuity is suitabile for what client through the limited choice enforcement process. You see the limited mentality of only being allowed to be licensed with one Broker for one company or product is not acceptable thinking as a guideline for the average Index Annuity agent but of course the NASD does not think in these terms.....
Here it goes again Folks the NASD will be trying to squeeze you into the same old size shoe nine whether it fits or not. They have finally made a decision on what is suitable...for you......happy now?Suitability as seen through the eyes of the NASD & soon to be available by it's rep's.
I am curious as to why the NASD thinks all Index Annuity carriers offer the same product choices in growth selections within different Index variations. These product choices can be a important decision feature for the public. I wonder who will receive the NASD acceptance and who will not and if they can't get access to certain companies or products will that mean they are no good for their clients or customers? You know not suitable.........
And what does this mean? The Notice also reminds firms that under any circumstances, NASD suitability rules apply to any recommendation that a customer liquidate or surrender a "registered security" for the purpose of purchasing an unregistered EIA.
If there has been no position taken by the NASD for Seniors Retired Risk and/Suitability. Where is the common sense position to bleed risk away from those who are no longer working and can't afford future loss. Their retirement money must last as long as they do? This August 8th News Release certainly has cleared up many of the concerns I have had about the NASD and their suitability decisions with the Index Annuity.....
How About You........I can't believe this low regard the NASD has placed on the Index Annuity.