Wow! While it’s understandable we don’t want persons licensed only as insurance agents giving “investment advice” (Red flag reminders, May 2007 SMA), it seems impossible to know where the various regulating bodies/authorities will draw the line.

It seems as agents only, we should be able to say things like: “Fixed indexed annuities are possibly a good vehicle for the portion of your assets you want safe.” We also should be able show historical index annuity returns (both “actual” and “lookback”) and compare them to actual index or mutual fund returns.

Shouldn’t a client know things such as the fact that the S&P 500 Index has outperformed roughly 80 percent of all mutual funds?

Index annuities offer a portion (not all) of the index upside, and that’s a drawback. The “plus” is they offer none of the downside…

I could go on and on, but you get the idea … the statements above are statements of cold, hard fact. If stating simple facts is considered “offering investment advice” or “inducement to withdraw money from securities to be used to purchase annuities,” we’re in a ridiculously over-regulated environment, in my opinion. The simple truth is the average individual investor in the market makes only about one-quarter of what the market actually does, because of emotion and bad timing decisions. Index annuities definitely outperform that number, and remove emotion and bad timing decisions from of the hands of the investor…

I think any objective observer here can see the real issue (and all the squealing) is really about market share, and not about some supposed concern for Joe Q. Public.

- David Gray

NEB RESPONSE
THANK YOU for sharing your excellent response to our recent Red flag on giving
investment advice without a license. We fully agree that agents should be allowed to refer to undisputed facts without a securities license. However, what’s logical and what’s feasible in the current environment are two different things. So what are your options? You can ignore change and get crushed by it. Or you can embrace it and ride it to future success. We encourage all NEB members to follow the latter course. It involves less risk, fewer headaches, and a lot more upside potential than continuing to resist the inevitable.

- Harry J. Lew
National Ethics Bureau