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Life Health > Annuities

Who's who in annuities: The power list

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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.

Gary Bhojwani
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.”

Kim O’brien

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
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.

“I involve my family in the business and bring my children to client events and even the workshops,” says Smith. “It’s a win-win as the clients love to see the family and I get to spend time with them. You’ve really got to love what you do to be content with the hard work and dedication that goes into being a top advisor, and the end results make it all worth it.”

Smith says that being able to witness “the impact your services have for clients” has been among the great rewards of his 13 years of working in this industry. “I remember specifically a client couple that started with me in 1995. They were in their mid-70s and I helped them with estate planning and getting their house in order.” By 2001, the husband required nursing home care, and later the couple both passed away. A portion of the couple’s estate was in annuities, and Smith was able to pass that onto their children within 30 days of their death and without probate.

In fact, none of their estate went through probate. Their children were very happy with my services and witnessing the end result and the fruition of my advising was really an eye-opener for me.”

Smith understands the trust that is placed in advisors’ hands and, as a result, the scrutiny the industry is currently under. In regards to the SEC proposal, he says, “it has brought the need for more training and industry education to the forefront, not only on FIA products and suitability, but also with all comparable products within the financial realm, and on both side. However, I do not think that FIAs should be regulated; you cannot lose money in our products — end of story.”

Sean Dilweg

Sean Dilweg, Commissioner of Insurance for the State of Wisconsin, stepped into office January 1, 2007, where he oversees a staff of 135. While thoughts for many turn to Brett Favre or cheese when Wisconsin is mentioned, the state has been “very active ensuring that suitable annuity sales are made to consumers,” says Dilweg.

“Wisconsin enacted both the original NAIC Suitability in Annuity Transactions Model and the Model as modified to apply to sales of annuities to all consumers, not only seniors,” he adds “We also issued a record forfeiture against an insurer with an order to suspend sales of annuity products through 2012.”

Dilweg has long had a hand in the industry. Prior to becoming Commissioner, he led a number of business initiatives for the state. “I understood why annuities are an important product in financial plans to provide a continued stream of income. This is especially true given the expected numbers of baby boomers looking at retirement. When I became Commissioner, one of my first duties was to preside over administrative hearings involving annuity sales. I realized more needed to be done on the issue of annuity suitability.”

To counteract that, Dilweg created the Annuity Sales Supervision Advisory Committee to advise on the development of standards for supervision of annuity sales, an element that is missing in the NAIC Model. “In 2008, I was named vice-chair of the NAIC A Committee on Life Insurance and Annuities. Following the work of my Wisconsin annuity suitability committee, I initiated the creation of the Suitability of Annuities Sales Working Group.”

Dilweg chairs that working group and says, “we anticipate that by year-end, there will be some amendments recommended to modify the NAIC Model Act, focusing on supervisory standards and training in the sale of annuity products.”

Making sure annuities benefit consumers is a key to Dilweg’s mission and he realizes that the product will only continue to grow. “We are witnessing the largest transference of wealth that this nation has seen as baby boomers retire. Annuities are a valuable tool in building a retirement plan. I expect that annuity products continue to develop and change to meet consumer needs.”

Joe Borg

Commissioner Joseph P. Borg, Director of the Alabama Securities Commission, slips in the occasional “y’all” in conversation and it sounds … strange, spoken in his New York accent. Although he’s lived in Alabama for decades, he’s still a New Yorker at his core, and it’s that Big City drive that has earned him fans and foes among the annuities crowd.

While his position on securitizing annuities is debatable, his inclusion on this Power List is not; Borg’s stance on the issue carries much weight and he is wielding it. He’s best known in annuity circles for being a champion of SEC 151A. In his words, “it’s the only proposal with sufficient ‘clout’ and a proven system of licensing, registration, and consumer protections to alleviate the problem (of complaints and lawsuits). The industry has ignored the issues and now, when national intervention is imminent, there is a ‘concern’ to fix the problems.

“For years, and as long as the industry and agents were making huge commissions, there was little being done to address the issue. At present, unless a significant, workable, enforcement-capable alternative is proposed that insures that agents selling are knowledgeable, licensed — trackable with histories equivalent to CRD — and liable for their actions with sanctions, then the only option currently on the table is 151A. That being said, there is always room for dialogue and discussion, but delays only serve to exacerbate the problem.”

Although Borg is known for his tough stance on annuities, he sees a silver lining, moving forward. “I believe that over the next several years we will see more consumer- and investor-friendly products — more clear disclosure, transparency in the transactions, higher standards set for the companies and agents who sell. It is unfortunate that it takes legislation, litigation, expos?s, and congressional hearings to push the industry in the right direction.”

He also sees a higher scrutinization of new products than in the past. “There will come a point that the ‘theory’ that these type of products are strictly insurance will fall to the realization that these are in fact hybrid products. I expect there will be increased cooperative review and enforcement by a collaboration of insurance and securities regulators (on both state and federal levels), each recognizing and utilizing their respective strengths.”


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