Annuity and insurance groups insisted they were working hard to stop inappropriate sales of annuities following a nationally televised depiction of allegedly improper annuity sales practices earlier this month.
The April 13 broadcast on Dateline NBC featured hidden-camera segments showing several producers attempting to sell annuities to senior citizens.
The format followed a similar ruse of earlier Dateline broadcasts, “To Catch A Predator,” in which Dateline reporter Chris Hansen trapped alleged Internet sex offenders as they tried to contact volunteers posing as teenagers.
The program, “Tricks of the Trade,” depicted a number of questionable sales practices it said took advantage of seniors. Among the practices it questioned: offering incentives to entice seniors to so-called seminars designed to set them up for later sales calls at their homes; the use of professional titles implying special expertise in advising seniors; and the flaunting of spurious magazine articles and radio broadcasts fabricated to make the agent appear to be a financial authority.
One producer shown on the Dateline broadcast offered a free steak dinner to retirees and near-retirees who attended a seminar. During the seminar, he was shown stating flatly that he was not there to sell them anything.
The agent then went on to tell seminar participants flatly that the Federal Deposit Insurance Corporation had a financial rating of “F minus.”
As a commentator noted on the broadcast, the FDIC, the federal agency that insures bank deposits, carries no financial rating.
The same agent later was videotaped making house calls on some of the meeting attendees. He abruptly terminated one visit shortly after noticing what he called a “little box” on a table. It turned out the item was a hidden microphone that had fallen out of its hiding place.
Hansen noted the agent, James Rieger, never pointed out during the presentation that annuities carry heavy surrender charges if they are cashed in early, in which case consumers could get back far less money than they had they put in.
Rieger later stated through a lawyer that he would have explained the surrender charges before he had completed the sale.
Annuities that lock up funds for years are widely considered by industry experts unsuitable for seniors, who may not live long enough to see their savings annuitize.
The individual who had volunteered to listen to Riegel’s sales talk for the broadcast was in his 70s, Dateline noted.
Another agent shown on the program told a client outright there was no penalty for withdrawal, “unless you take out 10%.” The annuity did provide for penalty-free withdrawals after the first year, Henson said, but the salesman never did say how large the penalty would be if the individual did need to liquidate his annuity.
The broadcast also included a training session for annuity producers offered by Brokers Choice of America Inc., Englewood, Colo., an insurance agent and broker.
Dateline videotaped a trainer, BCA President Tyrone Clark, flatly advising participants in his company’s “Annuity University” to use scare tactics in selling to seniors, such as stating the FDIC is insolvent to suggest the client’s money might not be safe even in a bank. He also emphasized advocating annuities as a liquid investment.
Clark responded to the Dateline program by issuing a statement on his company’s website maintaining that “BCA has, in fact, become an industry icon for regulatory compliance. We also champion a high level of ethical standards in our industry and many of you also know how much we have progressed to that end through the years.”
Clark’s company was named in a Massachusetts regulatory action in 2002 for a number of alleged violations of state regulations, including failing to disclose to seniors that many of its associates neither were properly registered with the state nor took the required examination to conduct business as investment advisors in Massachusetts.
Clark’s firm settled with Massachusetts without admitting any wrongdoing, Dateline noted.
Dateline also noted Annuity University promoted a subsidiary that helps financial advisors publish articles that make them appear to be experts in their field. It also offered a scripted, advertorial-type radio program in which the advisor would be introduced as a financial expert. Advisors paid hefty fees to participate in these promotions, Dateline noted.
Among authorities quoted on the program was Minnesota Attorney General Lori Swanson, who said the presentations of some annuity advisors shown on the show were “absolutely misleading.”
Hansen was shown in one part of the segment pressing an agent named Rickey Gibbs to tell him why he hadn’t told a prospect about penalties of up to 16% of their equity for early withdrawal.
When Hansen finally told Gibbs he was a reporter from Dateline, Gibbs replied that he doesn’t think he’d done anything wrong, then complained that what Hansen had done to him was “awful.” That was followed by this exchange:
Hansen: “There was not a lie here, sir.”
Gibbs: “I say you’re a liar because you didn’t tell me what you were doing and who you are.”
The National Association for Fixed Annuities blasted the Dateline NBC segment as “irresponsible and biased.”
NAFA said that it warned Hansen and the show’s producers before the broadcast that “consumers may erroneously be left with a negative view of all fixed annuities or all sales people based upon the deceptive sales practice of a few. As a result, they could react in a way that would be financially harmful to them, especially in today’s economic environment.”
NAFA criticized Swanson, the Minnesota AG, for complaining on the program about “confusing contract language” for annuities, noting that her state regulates the language used in all policies sold in her state.
NAFA also stated that “the fixed annuity marketplace offers a diverse set of low-cost and competitive choices for the consumer, and consumers are protected by their state insurance department’s oversight and enforcement of robust state regulations.”
The group added that it was against “any fraudulent and deceptive sales tactics and inappropriate or unsuitable sales” and stated that it was “working aggressively with others in the industry to ensure a safe and informed environment for consumers.”
The National Association of Insurance and Financial Advisors, Falls Church, Va., responded to the broadcast by stressing that it “will continue to strongly condemn any behavior that intentionally misleads consumers or leads to inappropriate recommendations and tactics in connection with the sale or marketing of all financial products, including annuities.”
The American Council of Life Insurers, Washington, said the sales tactics and training depicted on the Dateline program contradicted the standards both insurance carriers and agents generally use with customers.
ACLI pointed out the industry supported model suitability regulations for annuities and other financial products adopted by the National Association of Insurance Commissioners
It also noted that it had joined with other groups in an initiative to assure annuity buyers receive uniform disclosure documents “written in plain English,” explaining features of the annuity, including costs and fees.