Last month, I wrote a blog asking the question: are financial products too complicated? The piece I wrote was based on a recent LIMRA study of financial advisors who “feel that guaranteed income products are too complicated and seek materials and support from wholesalers and companies to help explain the products to their clients.”
I received numerous comments via e-mail and phone regarding the story, with advisors weighing in on the topic. Following are the highlights:
Delivering on the promise will be the industry’s greatest challenge as compliance evolves from “point of sale” due diligence issues to performance measures over the course of contracted periods. Many products nowadays are in fact complex legal contracts imbedded with an array of contingency driven and default provisions. This alone makes them difficult to understand and explain. Of course, the fact that very few advisors actually read the contracts they sell could also contribute to the “malaise.” The desire for simpler and more transparent products is understandable. When it comes to sales, easier tends to trump challenging. However, it is not a shortcoming of the industry for its alleged failure to “dumb down” products. Perhaps, the failure lies elsewhere.
- David F. Sterling, Esq.