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NOT being securities licensed may limit your ability to sell annuities in the future. From what I understand, pending legislation may require a securities license if the funds you are moving are currently in something requiring a license to sell. I'm not 100% on this, but I remember reading that somewhere. I will look for article.
 
That's in reference to "Source of Funds" advice. That's probably why this advisor was an RIA - to advise people regarding their current holdings and make recommendations.

You must ensure that you always act under a fiduciary standard when an RIA. With Series 6 or 7, you simply need to not make unsuitable recommendations.
 
"...You must ensure that you always act under a fiduciary standard when an RIA. With Series 6 or 7, you simply need to not make unsuitable recommendations..."

Well put. If you read the actual C&D It appears that part of his seminar presentation was spent making the distinction between "Broker" and "Advisor"

When I read the actual C&D it became obvious to me that someone had coordinated a "case" against this guy. It's not likely that six seperate people, over the course of a year, each complained to the same authority and with the same complaint. My guess is that it was someone whose business he replaced.
 
Looking over the C&D, I don't think you could argue he even met the standard of suitability for a 6 or 7, or even just a plain ol' insurance agent. He just made it easy for Missouri by getting his 65 and subjecting himself to the fiduciary standard.
 
Also, before anyone gets too worried, note this:

"Instead, his investors were allegedly harmed by being sold products which tied up their money for long periods of time, when other cheaper, less-restrictive products would have better served their investment goals.

The order also alleges that Mitchell committed securities fraud by failing to disclose material information to investors and by providing untrue information to investors."

Seems to me that there's a lot less liability if you just show prospects all of their available choices.

After that, note that they're also after this guy for providing untrue information. The article doesn't elaborate but it's possible that he was misrepresenting the return or saying things like "don't worry, you're money's not locked up and you can get it anytime you want."
 
Also, before anyone gets too worried, note this:

"Instead, his investors were allegedly harmed by being sold products which tied up their money for long periods of time, when other cheaper, less-restrictive products would have better served their investment goals.

The order also alleges that Mitchell committed securities fraud by failing to disclose material information to investors and by providing untrue information to investors."

Seems to me that there's a lot less liability if you just show prospects all of their available choices.

After that, note that they're also after this guy for providing untrue information. The article doesn't elaborate but it's possible that he was misrepresenting the return or saying things like "don't worry, you're money's not locked up and you can get it anytime you want."

Also, he was selling FIAs, but putting the money in the fixed account. Yes, sometimes you get a better rate in the fixed account on a FIA versus a fixed annuity, but it is a huge red flag. A big reason this is done is because the FIA pays better commission than a fixed annuity. There are some RRs that do it with variable annuities too. Person really wants a fixed rate of return, but the VA pays better commissions. Boom, person just bought a VA and put all the money in the fixed account.

Finally, he may not have documented his recommendations enough. Admittedly, the C&D is only going to tell what the Commissioner wants it to say, but I'd say he did more than enough to deserve any punishment.
 
this can't be good.....

3 Questions about Annuities That NAA Agents Should Answer

September 3, 2010 nationalagentsalliance2010 Leave a comment
Annuities can intimidate some insurance agents; it’s not part of insurance sales 101, but it can be a great add-on to your sale, as well as helping protect your client’s retirement assets. The best thing to do is to study up on the basics and understand how an annuity will satisfy your NAA client’s needs concerning a savings plan.
But let’s start with the basics first…
What is an Annuity?

An annuity retirement product that allows you to save for your future on an tax-deferred basis and then allows you to choose a payout option that best meets your need for income when you retire—lump sum, income for life, or income for a certain period of time.
What are the Types of Annuities?

Below are the most common types of annuities that you should be familiar with.
  • Fixed Annuity -An annuity contract in which the premiums you pay are credited with a fixed rate of return by the life insurance company, and the company guarantees a fixed payout every month.
  • Deferred Annuity - A contract in which annuity payouts begin at a future date.
The above annuities are those that can be sold with a standard life license.
At NAA, we understand how important annuities can be in adding extra value to a client’s policy, as well as extra sales for you. Our resident annuity sales guru, John Kight talks about three crucial questions that you must answer to make the sale and protect your clients’ accounts for many years to come.
“Is my money safe?”

Question number one asks you to prove that the client’s accounts are in a safe place. Because annuities are not often discussed as a primary means of savings, many people don’t know the answer to this question. Here’s the answer:
Annuities are as safe as banks, but there are further advantages than banks. Recently several banks insured by the Federal Deposit Insurance Corporation (FDIC) have gone bankrupt, however stayed in business. Because all reputable banks must file with FDIC and make a payment into the system, this allowed them to ensure a certain amount of money
Just as banks are supported by the Federal Reserve System, insurance companies run under the Legal Reserve System. Each state has a State Insurance Department that requires Insurance companies operating in their state to file reports proving they have money to cover policies with their clients. Insurance is a highly regulated industry.
The bottom line is annuities are 100% safe, dating back to the Roman soldiers. No one’s ever lost money with annuities.
“Can I get my money if I need It?”

Annuities are not 100% “liquid”, meaning they cannot withdraw money at any time and at any amount. However, in order to ensure stability and safety of their savings, this may be a worthy exchange. Make sure that your client has the amount of liquidity you’re providing is enough. It’s called “being suitable,” and it is part of being a responsible mortgage protection specialist.
“Can your NAA client compromise with access to about 10% free withdrawal every year? Can you qualify that by 10 percent access is enough for them?”
If the answer is yes for both you and your client, an annuity may be a good idea.
“Am I going to get a fair return?”

People want a floor with no ceiling: 100% upside potential with no downside risk. The biggest thing that annuities have going for them is the great amount of growth with minimal interference from tax deductions.
Annuities offer the strongest guarantees on principal and interest. Unlike a 401k, no matter how volatile the market is, your annuity will stay at the original principal amount you invested, unless withdrawals are taken. It can only go up! Considering the economic climate this is a huge selling point.
With annuities through National Agents Alliance, you’ll can earn a bonus on your initial premium. Some carriers have annuity products that offer a 10% bonus, your client may move $10,000 into and annuity and have the value of his/her annuity immediately rise to $11,000. If they Move $75,000 in, add 10% and it becomes $82,500.
—-
Like any sales, the important thing to remember about an annuity sale is to highlight the benefits, but also to make sure your client is going to receive the correct type of savings plan that will lend itself to their lifestyle and needs. If you do this, the annuity sale can become an additional thousand or so payment to your policy. Remember, this is Commission on top of your insurance sale!
 
Here's what I've learned from this:
1. If you don't want to be a target... don't market in ways that make you appear to be a target (ie. seminars with free meals)

2. If you're going to be an RIA (or IAR affiliate), you need to show that you are completely objective in your advice (ie. don't put 80% of your clients into FIA).

3. Include a summary of the product/service that the client has purchased from you - including surrender periods, surrender charges, liquidity provisions, WHY they bought this product and why it was allocated the way it was (fixed vs index returns, etc.)

4. Even people with securities licenses can be pretty stupid.
 
Here's some more recent bad press. Note the very similar allegations. This is from Money Magazine and then Industry rebuttals.
 

Attachments

  • Money Magazine Article Slamming Index Annuity Sales- Dec 31, 2010.pdf
    213.5 KB · Views: 23
  • Annuity Specs Rebuttal to Money Article- Dec 2010.pdf
    132.1 KB · Views: 16
  • NAFA_response_to_Money_Magazine_article.pdf
    31 KB · Views: 17
this can't be good.....

3 Questions about Annuities That NAA Agents Should Answer

September 3, 2010 nationalagentsalliance2010 Leave a comment
Annuities can intimidate some insurance agents; it’s not part of insurance sales 101, but it can be a great add-on to your sale, as well as helping protect your client’s retirement assets. The best thing to do is to study up on the basics and understand how an annuity will satisfy your NAA client’s needs concerning a savings plan.
But let’s start with the basics first…
What is an Annuity?

An annuity retirement product that allows you to save for your future on an tax-deferred basis and then allows you to choose a payout option that best meets your need for income when you retire—lump sum, income for life, or income for a certain period of time.
What are the Types of Annuities?

Below are the most common types of annuities that you should be familiar with.
  • Fixed Annuity -An annuity contract in which the premiums you pay are credited with a fixed rate of return by the life insurance company, and the company guarantees a fixed payout every month.
  • Deferred Annuity - A contract in which annuity payouts begin at a future date.
The above annuities are those that can be sold with a standard life license.
At NAA, we understand how important annuities can be in adding extra value to a client’s policy, as well as extra sales for you. Our resident annuity sales guru, John Kight talks about three crucial questions that you must answer to make the sale and protect your clients’ accounts for many years to come.
“Is my money safe?”

Question number one asks you to prove that the client’s accounts are in a safe place. Because annuities are not often discussed as a primary means of savings, many people don’t know the answer to this question. Here’s the answer:
Annuities are as safe as banks, but there are further advantages than banks. Recently several banks insured by the Federal Deposit Insurance Corporation (FDIC) have gone bankrupt, however stayed in business. Because all reputable banks must file with FDIC and make a payment into the system, this allowed them to ensure a certain amount of money
Just as banks are supported by the Federal Reserve System, insurance companies run under the Legal Reserve System. Each state has a State Insurance Department that requires Insurance companies operating in their state to file reports proving they have money to cover policies with their clients. Insurance is a highly regulated industry.
The bottom line is annuities are 100% safe, dating back to the Roman soldiers. No one’s ever lost money with annuities.
“Can I get my money if I need It?”

Annuities are not 100% “liquid”, meaning they cannot withdraw money at any time and at any amount. However, in order to ensure stability and safety of their savings, this may be a worthy exchange. Make sure that your client has the amount of liquidity you’re providing is enough. It’s called “being suitable,” and it is part of being a responsible mortgage protection specialist.
“Can your NAA client compromise with access to about 10% free withdrawal every year? Can you qualify that by 10 percent access is enough for them?”
If the answer is yes for both you and your client, an annuity may be a good idea.
“Am I going to get a fair return?”

People want a floor with no ceiling: 100% upside potential with no downside risk. The biggest thing that annuities have going for them is the great amount of growth with minimal interference from tax deductions.
Annuities offer the strongest guarantees on principal and interest. Unlike a 401k, no matter how volatile the market is, your annuity will stay at the original principal amount you invested, unless withdrawals are taken. It can only go up! Considering the economic climate this is a huge selling point.
With annuities through National Agents Alliance, you’ll can earn a bonus on your initial premium. Some carriers have annuity products that offer a 10% bonus, your client may move $10,000 into and annuity and have the value of his/her annuity immediately rise to $11,000. If they Move $75,000 in, add 10% and it becomes $82,500.
—-
Like any sales, the important thing to remember about an annuity sale is to highlight the benefits, but also to make sure your client is going to receive the correct type of savings plan that will lend itself to their lifestyle and needs. If you do this, the annuity sale can become an additional thousand or so payment to your policy. Remember, this is Commission on top of your insurance sale!

Another concrete example of why NAA should be run out of town on a rail....

Not only do they attempt to define annuities in a very limited array, but make the statement "No one’s ever lost money with annuities".... which is false. Any attempt to withdraw funds outside the narrow limits of the annuity contract will result in loss not only of interest, but principle as well. This is UNLIKE a CD and should be explained.

Which brings up another point... just "highlighting" the benefits is not a proper presentation. Discussing the disadvantages includes laying bare those risks so the client can make an informed decision.

In Medical Healthcare, a corollary would be called a "quack".

A minor point: although they don't specifically say the presenter could discuss the state backed guarantee to the client(s), any attempt to discuss the state guaranty association or its existence can be subject to investigation of an insurance law violation in most states.
 
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