Dutch Boy Blues

New regulation to update existing suitability models available from the NAIC is one way to approach the problem. A new regulation would complement safeguards that other regulatory bodies including the Financial Industry Regulatory Authority and the North American Securities Administrators Association are advocating.

FINRA’s Notice 07-43 detailed what it expects of firms in its treatment of seniors, including suitability, the use of senior credentials and “free lunch seminars.”

In April, NASAA said it had approved a new model rule on the use of senior certifications and professional designations that prohibits misleading titles while making it possible for securities regulators to recognize legitimate designations.

Another interesting suggestion was raised by Birny Birnbaum, an NAIC-funded consumer representative. He called for regulators to look at producers’ commission schedule and consider changing the upfront commission structure. Changing the structure to a level commission would discourage inappropriate sales solely for that first-year pot of gold and would encourage continued customer service, he contended.

It is not a new argument, but perhaps it is worth a look. The life insurance industry is placing tremendous emphasis on the value of annuities, both fixed and variable, in providing income for baby boomers and the generation before them. When properly used and explained, annuities can provide a valuable safety net that protects consumers against income shortfall and inflation.

Thus, it would benefit all parties–consumers, companies and producers–to look at every possible solution, both front- and back-end, to curb abuses that potentially rob consumers of their money and peace of mind and potentially rob the industry of a huge opportunity to be the resource consumers turn to for financial security in the latter part of their lives.