September 21, 2012
RE: SCBuzz Forum/CNNMoney: Ask the Expert Article (Walter Updegrave), September 12, 2012
Dear Mr. Updegrave:
We appreciate a voice to remind consumers, especially seniors navigating this economy, to seek trusted, professional advice when it comes to financial and retirement matters. Unfortunately, your recent comments in CNNMoney and the tone framing them squandered your opportunity to provide readers sound advice on safe money options. We would like to suggest that you consider offering your audience resources that provide a balanced understanding of the products, their limitations and how to avoid fraudulent or misleading sales situations. FixedAnnuityFacts.com has an informative series of articles to educate consumers on fraud, protection, and income among other indexed annuity facts.
The difference between a retirement product with investment risk (you lose money when the markets lose money) and one with no investment risk (you never lose money when the markets lose money) is the GUARANTEE that all the money will be there at retirement. Indexed annuities offer piece of mind in these challenging economic times with guarantees of: 1). NO investment risk; 2). minimum interest earnings; and, 3). lifetime income. Indexed annuities also offer the opportunity for additional interest earnings above the guaranteed minimum. We agree that consumers should not be left to feel that this is a “too good to be true” option for their retirement planning needs. The tradeoff is early withdrawal charges. These charges enable the insurance company to give the consumer what they purchased – protection from market losses and attractive interest rates over traditional savings accounts and CDs. In addition, the charges ensure that the indexed annuity benefits are enjoyed by millions of annuity owners by protecting them from the indecisions or changes one annuity purchaser makes.
The vast majority (over 83 percent) of indexed annuities owners that were satisfied with their purchase in a recent LIMRA study understand these facts. What other financial product (or any product) can you think of with this overwhelming statement of consumer satisfaction? Other consumers deserve the information to choose to be among them as well. Not only does self-reporting evidence prove positive for indexed annuities, but an empirical study released by the Wharton School of the University of Pennsylvania indicates that interest credits provided by fixed indexed annuities are not only much more consistent than S&P 500 index returns, but are quite attractive to consumers as well.
Your comments regarding FINRA underscore the competing nature of the securities industry with the insurance industry and remind us that it is ever more important to put the suitability of the consumer, and respect for their financial goals, over the bottom line of a sale and our competitors. To accomplish this, the industry and state regulators have put a number of protections in place to ensure indexed annuities are sold ethically and fairly to consumers. Bad products, bad advice, and sadly even inappropriate motivations for product sales are found in every sector of the financial industry – from indexed annuities to securities. That, however, should not diminish the effectiveness of the solid products available.
We often appreciate your comments that are guiding financial consumers daily. We are hopeful that your future topics relating to index annuities will balance the facts for your readers. If there is any way we can assist you with factual information as you develop your copy, please contact me at any time.
Kim O’Brien, President & CEO