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July 10, 2018 at 04:32 PM
Annuity issuers and annuity distributors may face a challenge when they’re in negotiations over new annuity sales and marketing standards: new complaints about annuities.
The U.S. Securities and Exchange Commission recently began taking public comments on its effort to develop a best interest standard. The proposed standard would require a broker-dealer to act in the best interest of the retail customer.
(Related: SEC Hits the Road to Hear Investors’ Thoughts on Best-Interest Plan)
The SEC proposal lacks many of the specific provisions in the U.S. Department of Labor best interest standard guidelines, such as minimum size requirements for indexed annuity wholesalers, that outraged the indexed annuity community.
Comments on the SEC proposal won’t be due until Aug. 7. At press time, the SEC had not posted any comments from insurance or annuity issuer or distributor groups.
The American Council of Life Insurers moved, early on, to praise the SEC’s general approach to the topic.
Leaders of the Fixed Annuity Consumer Choice Campaign have objected, in a comment letter emailed to reporters and others, about the idea of requiring insurance agents who sell indexed annuities to meet anything beyond the current suitability standard.
The SEC has already posted some early comments submitted by consumers, individual financial professionals, tax preparers, and at least one anonymous operations manager at the regional office of a wirehouse.
The early comments are showing up here.
Most of the early comments deal with general investment and retirement savings matters.
Some of the early comments are highly critical of how at least some annuities have worked in the real world.
Here’s a sampling at five of the critical comments, to give you a taste of what’s in the hopper now, and what may be in the back of SEC officials’ minds as the officials are revising the SEC’s best interest proposal. The comments are public documents, but we have edited the comments provided here, to take out sections that might invade the privacy of individual people or companies.
1. Michael Steffens (a consumer)
“I watched my Dad lose thousands of dollars of retirement money to a shady investment guy who churned him whenever he wanted to buy something new, resulting in a LOT of stress. Unfortunately for Dad, this guy was his nephew, so he overlooked the facts that he wasn’t licensed to sell in Dad’s state, and that he lived really well off people like my father and others. He also put my mother in a 10-year annuity product that would have finished paying at 90! The result: after Dad’s death, Mom ran out of money in two years, but lived another three after that. This shouldn’t happen to anyone as a result of brokers who are not held to fiduciary standards in managing money.
“I’m counting on you to make a stronger rule that closes the loophole. Americans who’ve worked hard to save for retirement deserve peace of mind about their financial security.”
2. Jeffrey Bryan (a consumer)
“Got ripped-off by a representative (salesman) at huge investment company, lost $32,000 on a bad annuity. The fees went to the salesman, penalties to the company, and taxes to the government. If that sounds un-American and unethical than the SEC needs to do something about it.”
3. Roxine Moore (a consumer)
“I was duped by a “financial advisor” … who sold me a variable annuity. In order NOT to have been duped, I would have to have a university degree in finance and investments, which I don’t have. When he coerced me into buying this product, he had only HIS best interests in mind. This cost me thousands of my retirement dollars while he made thousands off me for himself and his company.
“I’m counting on you to make a stronger rule that closes the loophole. Americans who’ve worked hard to save for retirement deserve peace of mind about their financial security.”
4. Barbara Hosmer (a volunteer tax preparer)
