Insurance Agent Forum

[sman]

Originally Posted by john_petrowski

I'm not sure if risk has anything to do with whether or not something is an investment. There are CDs, bonds and notes that are near zero risk yet they are investments.

The question isn't whether or not an EIA is an investment, it is. The question is whether or not it's a security and should it fall under the governance of the SEC and NASD. I say no. It has a guarantee which no security does. The closest a security comes to a guarantee are the high watermark mutual funds. And the only reason they have this guarantee is because they purchase INSURANCE to guarantee it.

It makes no difference to me whether or not an EIA is categorized as as security. I have my securities license. I just hate to get a haircut on the business (not that I do a ton of annuity business). The issue, IMHO, is the abuses of the product by ill-informed agents. In addition, the securities industry has seen a ton of business leave to EIA's. That means they are making less money. So of course they are going to push for oversight. Again, just my humble opinion.

[healthagent]

I think the real problem is insurance agents are taking on the role of investment advisers.

I'm expected to sit down with a 65 year old couple and assess their financial situation? How would I go about that with no formal training except for my annuity marketing company painting all investments as "risky and horrible."

The agent is out there on the appointment to basically bash everything; equity investments, CDs, etc... in order to close the annuity sale. Just how would that untrained agent dissect their financial portfolio in order to make a recommendation?

The unbelievable ethical problem is how much to recommend? How much of that $750,000 should that couple move into an annuity? The agent gets more money the larger the annuity. Why would they recommend a $50,000 annuity when they could recommend $250,000? That's like putting a hungry mouse near a block of cheese and saying "just take a small bite."

[senior-advisor-indiana]

I cant believe I need a securities license to tell someone a FIA or a CD is safer than securities. I should lose my license

[joshril]

Originally Posted by JMO Fan

You're selling investment safety, not annuity benefits. That makes it a security. Yes, you need a securities license. (In my state, the state securities office will ask the DOI to pull your insurance license for touting EIAs over other investments--and it will be done.)

What a lunatic!! No offense, but your post makes no sense. And you clearly aren't very familiar with indexed annuities. The client shares no risk with the insurane company in the investment into the indexes. And I find it hard to believe that state DOIs will revoke a license because you tell someone a product with a guaranteed rate of return is a safer investment than a securities product. CD's, savings accounts, all fixed annuities... Come now... Do you even hold a securities license??

[senior-advisor-indiana]

I don't think he knows what we are talking about. Must of had a few too many drinks

[joshril]

Originally Posted by john_petrowski

I think the real problem is insurance agents are taking on the role of investment advisers.

I'm expected to sit down with a 65 year old couple and assess their financial situation? How would I go about that with no formal training except for my annuity marketing company painting all investments as "risky and horrible."

The agent is out there on the appointment to basically bash everything; equity investments, CDs, etc... in order to close the annuity sale. Just how would that untrained agent dissect their financial portfolio in order to make a recommendation?

The unbelievable ethical problem is how much to recommend? How much of that $750,000 should that couple move into an annuity? The agent gets more money the larger the annuity. Why would they recommend a $50,000 annuity when they could recommend $250,000? That's like putting a hungry mouse near a block of cheese and saying "just take a small bite."

I agree with John on all of this, but you could have the same argument about fixed annuities that aren't indexed. I am a firm believer with doing what is in the client's best interest, but making indexed annuities a securities product will not fix the problem. The mice that have securities licenses are just as hungry! I worked with securities for almost 2 years and sold securities as well as fixed products, and there were ethical dilemas with registered reps just like there were with insurance only reps... I believe there are always going to be bad apples and inexperienced agents.. Hell.. health agents that aren't experienced can cause just as much damage and we all know how many of those guys are running around!

Getting back to the original question about whether or not EIAs are good products or just crap... the answer is yes! There are great EIAs that meet a need and others I wouldn't recommend to my worst enemy. It all depends upon the client's circumstance and what they are trying to accomplish.

[senior-advisor-indiana]

well put and good point.

[senior-advisor-indiana]

By the way, I am calling my state's securities office tomorrow to get these unethical banks shut down. They have been touting that there CD's are safer than securities. I know those tellers and loan officiers don't have thier securities licnese..........BUSTED!!!

[joshril]

Originally Posted by senior-advisor-indiana

By the way, I am calling my state's securities office tomorrow to get these unethical banks shut down. They have been touting that there CD's are safer than securities. I know those tellers and loan officiers don't have thier securities licnese..........BUSTED!!!

ROLFLMFAO

[James]

Insurance, Banking and Securities have always had obvious problems within the family of the Industry. Yet what the NASD and SEC is now attempting to do is beyond the pale of common sense. I mean let's look at the Merrill Rule, do we need to go any further? Now though you have the CFP Organization and their desire to become more powerful even at the cost of other Financial Destinations, notable ones at that while they are out their begging for their SRO.

A EIA is a Fix Annuity, no matter how twisted the logic of claiming them as a Security. If they win then all Insurance Products of any Cash Value including WL (since the investment portion is often touted) and the HSA will become a Security Product.

[healthagent]

First of all everyone - if any person including agents and financial advisers is using the words "no risk" for ANY investment-related product you shouldn't be in the field. There is no such thing as "no risk" for anything.

[JMO Fan]

Originally Posted by joshril

What a lunatic!! No offense, but your post makes no sense.

Calling me a "lunatic", followed by "No offense"? Who's kidding whom?

And you clearly aren't very familiar with indexed annuities. The client shares no risk with the insurane company in the investment into the indexes.

Actually, I have followed their development for 20 years. Before becoming a regulator I managed annuity pricing as an actuary. The main reason companies can pay higher commissions on indexed annuities than on fixed FPDAs is the transfer of investment risk to the contract.

And I find it hard to believe that state DOIs will revoke a license because you tell someone a product with a guaranteed rate of return is a safer investment than a securities product.

State securities office has no reason to lie to me. And my boss, the DOI commish, has said very emphatically that agent licenses be pulled for just what you said here. You'd better adjust your thinking.

CD's, savings accounts, all fixed annuities... Come now... Do you even hold a securities license??

No, but if you do, you'd better be very careful.

[senior-advisor-indiana]

The moral of this story....No one should use this forum as fact. Obviously it is moslty opinion and people who are scared by bad stories. There is no more risk in a FIA that gaurantees a minimum 3% on 100% of contract value than there is in a CD paying 3%. FIA are safer than securities. YOu do not need a securities license to say that, you need common sense.

Obviously there isnt a place you can put your money where it is absolutley safe. But there is alot more protection in a FIA and CD. Have you looked at a pyramid where it shows risk versus return? FIA, FA , CD's are at the bottom, securities are at the top. Sounds like JMO has an agenda here. Your info is nothing more than scared opinions.

[James]

Originally Posted by JMO Fan

State securities office has no reason to lie to me. And my boss, the DOI commish, has said very emphatically that agent licenses be pulled for just what you said here. You'd better adjust your thinking. No, but if you do, you'd better be very careful.

I find this statement rather strange also? Yet though the Thought Police are seemingly out in force in society today. Yet though, I have little patience for those who tout such nonsense. I still do not know what State this person is talking about? I mean this person is claiming things that if true he shouldn't be on a public forum, claiming such as my Boss the DOI Commissioner and his friends at the State Securities Office and expressing a rather Therefore attitude as speaking in first person for those people. What State are you referring to JMO? I would like to call your so call DOI Boss and ask them in person if they would like to comment about pulling license for such practice as selling Annuities as a Safe Harbor.

[JMO Fan]

Originally Posted by James

Insurance, Banking and Securities have always had obvious problems within the family of the Industry. Yet what the NASD and SEC is now attempting to do is beyond the pale of common sense. I mean let's look at the Merrill Rule, do we need to go any further? Now though you have the CFP Organization and their desire to become more powerful even at the cost of other Financial Destinations, notable ones at that while they are out their begging for their SRO.

A EIA is a Fix Annuity, no matter how twisted the logic of claiming them as a Security. If they win then all Insurance Products of any Cash Value including WL (since the investment portion is often touted) and the HSA will become a Security Product.

As product support actuary for a major carrier, one of my tasks was to review each life & annuity marketing piece. If half of the material emphasized investment aspects, I flagged it for the Legal Dept. To avoid classification by the SEC as securities, the co attorneys would then work with marketing to revise the emphasis to insurance.

This cautionary work was the direct result of SEC Rule 151, i.e., the Safe Harbor Rule for Insurance. (Note that it is applicable to insurance, not to CDs and other investments.) In its announcement bulletin for Rule 151, the SEC put all indexed products outside the safe harbor. The NASD statement that all EIAs are securities is based upon that rule.

The first EIAs were put into separate accounts, and registered as securities. Later, a few attorneys talked their companies into issuing EIAs in the general account. Soon after adopting Rule 151, the SEC stopped providing private opinions on whether insurance products were securities (i.e., requiring registration); but they never changed the rule.