Limitations On Selling Annuities To Seniors Insults Seniors

A number of experts have disagreed with the determination by the NASD and the SEC that variable annuities need a different suitability standard than that applied to all sales of securities.

One of the keys to suitability determinations for deferred annuities–variable or fixed–is determining likely future liquidity needs, regardless of the purchaser’s age. This is so whether the sale occurs under existing rules or under what is likely to be imposed with the new rules.

A recent review of a series of government inquiries into sales of deferred annuities to seniors is quite revealing.

The inquiries reflect a “knee-jerk” reaction of government officials to the effect that any sale of a deferred annuity to a senior is unsuitable–particularly if it involves the tax-free exchange of one annuity for another.

A more in-depth investigation of the facts indicates most of these seniors knew exactly what they were doing and had legitimate motivations for the actions taken.

What’s more, they do not need to be protected from themselves, except by applicability of suitability standards that would apply to anyone, regardless of age.

Any suitability screening process for any purchaser of a deferred annuity should include a serious look at the purchaser’s likely liquidity needs over the period while surrender penalties apply.

This does not mean that the suitability screener should substitute his or her judgment for that of the consumer. People who have not been determined to be incompetent have the right to make their own decisions, even stupid decisions!

It’s fair to say that most American adults are suspicious of the majority of government decisions on any subject and do not think it is appropriate to delegate to the government any more responsibility for managing one’s personal affairs than is already the case.

The annuity industry, through industry trade associations, has invested substantial amounts of time and money to create intelligently crafted suitability standards for deferred annuities. These standards include screening purchases of deferred annuities to consider likely future liquidity needs, taking into consideration all relevant factors, including the age of the purchaser.

This is not to single out seniors, but merely to recognize that all ages of annuity purchasers have different liquidity needs directly related to their stage of life, family conditions, health, education needs, etc.

Let these standards have a chance to work. Do not continue insulting the very people who made this nation what it is by attempting to protect them from themselves.