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Regulation and Compliance > State Regulation

An insider's view: Donald Walters

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For this issue of our newest eNewsletter, Market Conduct & Suitability, Senior Market Advisor editor Daniel D. Williams spoke with Donald Walters of the Insurance Marketplace Standards Association (IMSA), the standards setting and compliance solutions organization for the annuity, life and long term care insurance marketplace, to get his thoughts on compliance, suitability and senior protection issues. Following are the highlights.

Senior Market Advisor: What changes are you seeing in the industry (from a suitability and compliance standpoint)?

Walters: Suitability continues to be an important issue in the life insurance industry, especially as it pertains to the suitability of annuity sales. Also, with the introduction of an increasing number of federal compliance requirements such as Anti-Money Laundering and Patriot Act requirements added to existing state insurance laws and regulatory requirements, financial service providers are dedicating more resources to compliance than ever before. Hopefully, the net result of all this activity is that you will have a greater likelihood of suitable sales taking place within the marketplace which benefits all stakeholders including senior consumers, producers and companies.

SMA: What can you tell me about senior protection issues? How do you see that getting better?

Walters: There has been an increased focus in recent years on issues pertaining specifically to senior consumers. Federal and state regulatory authorities have conducted investigations of the use of “seminar sales” that are designed to attract senior consumers through an offer of a “free lunch,” when, in fact, they are used to sell products. Also, efforts are underway at both the state and federal levels to address the inappropriate use of so-called “senior designations.” Often these designations are used to entice seniors to work with a particular producer because of a perceived expertise in senior-related issues, but the requirements necessary to obtain the “senior designation” may be nothing more than attending a few classes and sending in a nominal fee. There are many rigorous designations used by financial service providers that require years of study. But it is very difficult for a senior consumer to try and differentiate those designations that have a credible basis versus those that do not. Through the coordinated efforts of federal and state regulators, we should see significant progress in senior consumer protections in the months ahead.

SMA: What can companies do (from a compliance and education standpoint)?

Walters: The key here lies in making sure that the distributors of a company’s products are thoroughly trained so they can explain the product accurately to the consumer and make appropriate determinations that lead to a suitable sale. Companies are continuing to enhance their existing training programs and disclosure materials to achieve these objectives.

SMA: What can you tell us about senior designations? Are they valid? Where is the designation issue going?

Walters: As I mentioned earlier, the use of “senior designations” has become very challenging. Federal and state securities regulators as well as state insurance regulators are working closely to develop clearly defined parameters to prohibit the inappropriate use of “senior designations” in sales of financial products to seniors. If uniform, comprehensive regulations can be developed to address these issues, then producers will be limited to using only those designations that require a rigorous program of professional study and expertise.

SMA: Is there anything you’d like to add about compliance and suitability that would educate financial advisors?

Walters: Know your customer. It is essential for producers to understand as much as possible about a prospective customer before recommending a financial product or service. Smart business people understand the importance of establishing a long-term relationship with a customer through suitable sales and professional service. To the extent that all marketplace participants (companies and their distributors) can demonstrate an appropriate commitment to ethics and professionalism, the interests of senior consumers will be well served.


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