More Regulatory Focus on Annuity Sales to Seniors
Raymond James shouldn't feel too alone, as regulatory probes focusing on annuity sales to seniors have been far reaching in this area. Take the recent hefty fine of ICC by the Massachusetts Securities Division, or the Minnesota Department of Commerce's recent lawsuit against Allianz (both relating to annuity sales to seniors), to name a few.
What should firms pay attention to in this area? Well, in Raymond James' case, the regulators were particularly unimpressed by Raymond James' supervision -- or lack thereof -- of its producing branch managers who approved their own transactions, opened and accepted new accounts, and reviewed their own correspondence. "This flawed supervisory system created a situation where the unsuitable sales of variable annuities and risky mutual funds to elderly and risk-averse customers went undetected," said James S. Shorris, NASD's Head of Enforcement.
A "cookie cutter" sales style should also be avoided. Take Donna Vogt, a Raymond James producing branch manager who worked out of her home office in Wisconsin. The NASD was so focused on her "homogeneous" sales practices that it elected to permanently ban her from the industry. Vogt, who maintained hundreds of client accounts largely for retirement age and older adults, sold her customers the same variable annuities and mutual funds regardless of age, financial status, investment experience and objectives.
A common regulatory focus for all three firms -- Raymond James, ICC, and Allianz -- is the concern that seniors are over-concentrated in a product and have limited access to funds due to annuity surrender charges.
While few things in life are certain, I'm betting we'll see a lot more activity here.
