Federal financial regulatory agencies want information on the suitability guidelines that agents and brokers use to sell investment products to seniors and said they plan to provide the information about these practices publicly.
The goal of the initiative is to identify effective practices used by financial services firms in dealing with senior investors, said the Securities and Exchange Commission, the North American Securities Administrators Association and the Financial Industry Regulatory Authority.
The specific information being sought by the regulatory agencies will deal with marketing and advertising materials used to sell products to seniors, account opening, product and account review, ongoing review of the relationship, and appropriateness of products, the regulators said.
Other areas of interest will be how brokers “discern and meet the changing needs of customers as they age,” surveillance and compliance reviews, and training program for employees, the agencies said.
The American Council of Life Insurers said it would support the project, noting that it is just one of several new initiatives underway designed to help seniors properly evaluate annuities.
The agencies said in a statement that the initiative is being implemented because, as regulators have increasingly focused on protecting older investors, many investment advisers and broker-dealer firms are evaluating their current practices in serving seniors.
The findings will be published so all firms can improve their service to older investors, the regulators said.
The regulators cautioned in their statement there is no “one-size-fits all” approach to effective practices in these areas, and there may be many different practices that are effective.
“The goal of the initiative is not to impose new regulatory requirements, but to help firms better meet their current obligations to, as well as more generally to serve, their senior customers,” the regulators said.
The new initiative is part of the coordinated national initiative to protect seniors from investment fraud and sales of unsuitable securities underway since May 2006.
The program has a number of parts, including targeted examinations, enforcement of the securities laws in cases of fraud against seniors, and active investor education and outreach, the agencies said.
ACLI will work responsively on the SEC-NASAA-FINRA senior initiative,” said Carl Wilkerson, vice president and chief counsel, securities and litigation, for the ACLI.
“Suitability, supervision and disclosure comprise the most constructive protection for annuity consumers,” he added.
Wilkerson said life insurers are “in the forefront” of efforts to upgrade disclosure as well as suitability and supervision standards.
He said that ACLI, along with NAVA, is “pioneering” a new series of disclosure templates for fixed, index and variable annuities that provide streamlined, user-friendly, and plain-English information for informed decision-making.
“The disclosure will ensure a similar look and feel between products and among companies,” Wilkerson said. “With this information at hand, consumers will have the tools to make informed financial decisions.”
He also said ACLI’s summary disclosure initiative “parallels in purpose and scope” the summary disclosure that the SEC recently proposed for mutual funds.
Wilkerson also pointed the pilot project of the Iowa Insurance Division is designed to encourage life insurers to use the ACLI summary disclosure documents for fixed and indexed annuity disclosure to enhance information for seniors and other annuity purchasers.
ACLI expects other states will also use the new templates, and said the SEC and FINRA will be evaluating the templates for use in the distribution of VA contracts.
Wilkerson also pointed out another development: the NAIC Suitability in Annuity Transactions Model Regulation and the NAIC Annuity Disclosure Model Regulation. The suitability regulation tracks the exact substance of the FINRA suitability and supervision rules as they now exist. “The annuity disclosure regulation will assure that consumers obtain essential information,” Wilkerson said.
Together, the ACLI’s summary disclosure templates, the NAIC Suitability in Annuity Transactions Model Regulation, and the NAIC Annuity Disclosure Regulation “form a three-legged stool to protect senior consumers in a way that parallels federal disclosure, suitability and supervision standards,” Wilkerson said. “These constructive developments benefit consumers and regulators alike and achieve constructive uniformity.”