The marketplace for financial products has long been subject to a disjointed array of state and federal laws and regulations. For any consumer trying to choose among the multitude of annuity products, the sales experience is more likely to be dictated by which government agency regulates a particular product rather than an individual’s need to compare one product to another.
Fortunately, things may soon start to improve for consumers as well as the financial services industry. National Association of Securities Dealers Chairman Robert Glauber has issued a clarion call to the industry, regulators and consumer interests around the country, hoping to start a dialogue and introduce common sense into the marketplace. By having the NASD convene the Annuity Roundtable in Washington earlier this month, in conjunction with state insurance and securities regulators, Glauber hoped to get state and federal regulators to put differences aside and work together to better serve the marketplace and protect consumers.
In fact, the NASD and the Minnesota Department of Commerce have announced they will form working groups to compare regulatory standards in the areas of supervision, suitability, advertising, sales force training and disclosure requirements. Hopefully, participants will be able to rise above turf struggles to “make life easier” for consumers, companies and professionals who sell the products.
In this era of transparency and good governance following scandals on Wall Street and in corporate boardrooms, what we need is better, more efficient regulation to reflect dynamic product changes and heightened consumer expectations. Unfortunately, the current regulatory patchwork quilt remains disorganized, inconsistent and unnecessarily expensive. But the greatest failing of the current structure is that it doesn’t adequately meet the current needs or expectations of consumers, companies or distributors of annuity products.
The quality of consumer protection in the financial services marketplace should be consistent and should not depend on product features that determine whether a product may be regulated by federal or state regulators with varying degrees of protection and consistency. Consumers purchasing annuities and other financial services products should be adequately protected, no matter who regulates their products.
At the same time, companies should be subject to consistent, sound and efficient regulation. History has shown that too much regulation can kill a market. Conversely, inadequate regulation can foster market distortions and short-term gains for a few that usually lead to long-term losses for many.