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.
In years past, I got 24 long term care insurance leads per week. I only sold annuities with long term care riders to those folks that were not healthy enough to qualify for coverage with my pure long term care carriers. My expertise is on the one item only. It is my passion, perhaps due to my complete recovery from a near-fatal brain aneurism in 1992.
- Carolynn Brady
I’ve done a series of focus groups on one very specific product: EIAs. I do a very simple and clear 20-30 minute EIA PowerPoint presentation. Attendees complete a before-and-after questionnaire. Some very intelligent people (a retired school superintendent, for example) still can’t seem to grasp how an insurance company can guarantee protection from down markets, among other things. Who would have thought back in the ’90s that the day would come when people would think 6 percent to 7 percent returns were “too good to be true!” Back then I had clients complain that they weren’t getting 30 percent returns like their golf buddies. I don’t think the learning curve is bent by complexity, I think it’s the pervasive (and well-deserved) distrust of the insurance and investment communities. And unless some major heads roll from those industries, nothing else will renew the public trust. They feel burglarized that the crooks got away scot-free. So do I. Need I say “Goldman-Sachs”?
- Gary Duell
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