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August 20, 2019 at 04:12 PM
An arm of the U.S. Securities and Exchange Commission last week told investors what it thinks about a product you may sell.
The SEC’s Office of Investor Education and Advocacy expressed its views in a short document with the title “Investor Bulletin: Indexed Annuities.”
The SEC as a whole seems to have decided that the federal government should avoid smashing ordinary, commission-based indexed annuities like a bug.
Under former President Barack Obama, the U.S. Department of Labor put out a fiduciary rule, and associated batches of guidance about how to apply to rule, that seemed to be designed to make selling commission-based indexed annuities classified as fixed-rate insurance products about as difficult as selling narcotics.
The administration of President Donald Trump let the Labor Department’s annuity sales rules die in court. The SEC recently completed work on Regulation Best Interest.
(Related: 10 Key Regulation Best Interest Points, for Agents)
The SEC’s regulation appears to let annuity issuers continue to pay sales commissions, and even to offer carefully structured sales incentive costs.
But a look at the new bulletin shows that some members of the SEC staff continue to be skeptical about indexed annuities.
Here’s a look at five points from the bulletin of interest to financial professionals who sell indexed annuities, or who focus on selling products that compete with indexed annuities.
1. Annuity terminology may confuse at least some members of the SEC bulletin development team.
Sheryl Moore, president of Wink Inc., a life insurance and annuity market research firm, pointed out in a LinkedIn post last week that, in the bulletin, SEC officials said that, if the index used in an indexed annuity falls, the annuity account value could fall.
(Related: 6 Questions for Sheryl Moore, a Life and Annuity Tracking Rockstar)
In other words: The bulletin writers seemed to be unaware of the fact that the contracts that the products commonly known as fixed indexed annuity contracts come with built-in principal protection, and guaranteed, fixed crediting rates.
2. The SEC bulletin writers do not seem to be fond of the term “fixed indexed annuity.”
When life insurers expose the holders of indexed annuity contracts to the potential for loss of principal, they file those indexed contracts with the SEC, as variable insurance products.
The version of the SEC indexed annuity bulletin seen at press time includes a section describing the various types of variable indexed annuities that are available.
In the bulletin, SEC officials never explicitly acknowledge the existence of fixed or non-variable indexed annuities.
