The annuities industry has been under increased scrutiny over recent years. After years of speculation, everything seemed to bubble to the surface with the “Dateline NBC” segment and the SEC 151A proposal, which would securitize annuities.
Never in the history of annuities has there been such a need for leaders, people who would influence and shape the direction the product and the industry takes.
This is Senior Market Advisor‘s second annual Annuities Power List, and we have gathered together just such a group of individuals.
Depending on the side you take on SEC 151A, not all of the choices here will be popular ones, but in terms of power and influence, we feel very strongly about the people assembled here — with industry leaders ranging from a CEO of a carrier and insurance and securities regulators to a major annuities advisor and an industry icon.
Each of these leaders took time to share their thoughts on SEC 151A, the future of annuities and additional insight on what drives them. Turn the pages to find out what they have to say.
While the insurance industry has been under a microscope of sorts in recent years, many of its leaders have taken a proactive stance to better educate advisors and bring about a more uniform policy for how the industry works. Chief among those leaders has been Gary Bhojwani, president and CEO for Allianz Life Insurance Company of North America, a subsidiary of Munich, Germany-based Allianz SE.
“We believe our approach — built in partnership with regulators and industry groups — serves as a strong model upon which an industry standard can be built. We will continue to work with the ACLI, NAIC and other organizations to develop industry-wide standards and processes.” The company introduced its Partnership for Consumer Trust last year, which includes a policy to make calls to all consumers over age 75 who purchase an annuity.
As for its stance on 151A, Bhojwani says, “Allianz believes fixed index annuities are insurance products, not securities, and they should remain as such. Our position on 151A focuses on three key facets: product definition, sales processes and agent licensure. First, FIAs do not meet the accepted thresholds required to classify a product a security. Second, changes in sales processes are already underway and it is important to give the industry an opportunity to establish a standard. Finally, on agent licensure, we believe the concerns about sales processes can be addressed without requiring agents to obtain securities licenses.”
While Allianz has drawn its line in the sand regarding 151A, Bhojwani realizes the importance of having a plan B in place. “We do not believe the regulatory changes are needed; however, our goal is to ensure that our agents and FMOs are prepared regardless of the outcome of the proposed rule.” He says the company is offering programs “to help interested agents and FMOs learn more about working in a securities environment.”
A 28-year veteran of the life and annuity business, Kim O’Brien began her career working for an insurance agency in Madison, Wis. and also worked as executive director of the CIGNA/WEA 403(b) trust before taking on her role as executive director of NAFA. As anyone knows who comes in contact with O’Brien, she is a national authority on the good, the bad and everything in between in the world of annuities.
Much of the news lately concerning the industry has been of a negative slant, but O’Brien sees groups such as NAFA taking a strong hand to correct that. “NAFA has zero tolerance for inappropriate, unsuitable, fraudulent or misleading sales because they are bad for the consumer and bad for the insurance industry.” As far as she’s concerned, the customer is the key to the industry’s success. “Our industry wants satisfied customers. It’s why the industry has made customer satisfaction a priority.”
Regarding 151A, O’Brien is not as rosy. “NAFA’s goal for its outcome is a complete withdrawal of the proposal with a proposed alternative to market conduct concerns and supervision to be taken up by the NAIC with guidance and recommendations from NAFA’s Market Conduct Task Force for Best Practices, Education & Oversight of Fixed Annuities.”
Looking into her crystal ball, she sees great things for the industry over the next five years. “With more certified training and education of insurance agents, the industry will continue to grow and sales will flourish. The baby boomer demographics will continue to demand more income and generational-transfer flexibility and product innovation. The insurance companies that offer annuities are among the biggest holders of high-grade bonds and the few long-term investors left providing capital to industrial and real estate projects. Their strength and durability will only lead to more product availability, interest crediting innovation and financial planning solutions for the next generations of annuity buyers.”
Bill Smith, RFC, IAR, is president of Great Lakes Retirement Group, a retirement and estate planning firm based in Sandusky, Ohio, a suburb of Cleveland. Smith is the lone advisor on the Power List and he says that maintaining a balanced life is a key part to running a successful practice.