No Free Lunch

Over the past week, the U.S. Securities and Exchange Commission has been on a roll, taking on free lunch offers used as bait to lure seniors to what can amount to pressured product sales pitches, and approving new rules regarding variable annuity sales practices developed by the Financial Industry Regulatory Authority (see stories on pages 6 and 7.)

In fact, it has been a whirlwind month for the agency which earlier in September criticized allegedly deceptive professional titles used by producers to sell to older investors.

The free lunch offers should put anyone who has ever heard the old “no such thing as free lunch” saw on alert. Free has its price tag. And it is often a dear one.

But glib marketing and a convincing salesperson can cause even the most skeptical consumers to let down their guard. And, for older consumers who are often prey to the unscrupulous, the risk is even greater.

What applies to consumers also applies to providers of financial products including companies that sell retirement products such as income annuities.

Life insurers are placing tremendous hope in their “unique” ability to sell products that guarantee a smooth financial ride in retirement, particularly if that ride promises to be a long one.

Just this week, KPMG’s 19th Annual Insurance Conference in New York kicked off with an analysis of why solving the longevity dilemma holds great potential for life insurers. Keynote speaker Donna Kinnaird, president of Swiss Re Life and Health America, told a packed room of insurance executives that despite the industry’s recent lackluster financial performance, products such as income annuities and long term care insurance offer great promise.

For companies that “can crack the code,” according to Kinnaird, the future looks bright.

But here is where the free lunch saw comes in. The future looks bright if the public trusts. If the public doesn’t trust, the bill comes due but will be paid in lost consumer confidence, not more business.