Agents selling indexed annuities, whose returns are tied in different ways to the performance of equity markets, should work to increase their understanding of the product and the transparency of their sales, according to speakers at a recent Annuity Roundtable here.
Sponsored by the National Association of Securities Dealers and the Minnesota Department of Commerce, the discussion focused on indexed annuities, a product developed about 10 years ago and regulated as a fixed annuity by insurance regulators.
The disconnect between state and federal regulators, and their lack of understanding of some of the products regulated by the other, was a concern for NASD Chairman and CEO Robert Glauber. As products blur the lines between insurance and securities more and more, Glauber said that forums such as the roundtable event will become important, and he called for the discussion to be continued, perhaps even as a formal working group.
Typically, according to Wendy Carlson, the chief financial officer and general counsel of Des Moines, Iowa-based American Equity, purchasers of indexed annuities are, on average, about 66 years old and buy in with $50,000. The income credits for the product are tied to the performance of an outside index, such as the S&P 500, although she added that market losses are typically only carried through as a zero percent income.
“It’s really not that difficult to follow,” she said, although other members of the panel disagreed.
Thomas Streiff, director of fund and annuity solutions at UBS Financial Services Inc., argued that while indexed annuities are only slightly less safe than other fixed annuities, those selling indexed annuities should have some specific training on the exact workings of the product, as should those looking to buy one.
“A well-trained distribution force and a well-educated client are indeed a requirement,” he said. “Some specialized training goes a long way to helping registered representatives understand what they’re offering.”