Annuity Industry Leaders Meet in D.C. to Address Compliance, Regulatory and Government Relations Issues

This year’s NAFA Annuity Leadership Forum was held June 12 – 14 at the Westin Arlington Gateway, gathering nearly 50 leading insurance carriers and independent marketing organizations to discuss the most important compliance, regulatory, legal and government relations issues surrounding fixed annuities.

Many of the attendees spent the first day of the conference participating in NAFA’s annual Capitol Hill walk meeting with members of Congress and the U.S. Senate educating those they met with on the benefits of annuities.  With Capitol Hill just outside the door of the event, attendees heard from national experts, discussed industry innovations and debated the impact of key issues facing the annuity industry and the economy.

Key topics presented at the 2013 Leadership Forum included:

• Tax Reform and Political Outlook for Annuity Tax Laws, Mark Griffin (Managing Partner, Davis & Harman)
• Trade Winds: The Annuity Outlook from the ACLI (J. Bruce Ferguson, ACLI)
• The Catch-22 of Source of Funds (John Olsen, Olsen Financial Group)
• Uniform Processing and Reporting Standards
• New Compliance Rules and the Changing IMO Landscape
• Legal Issues and Annuities (Joan Boros, Esq., Jorden Burt, LLC)
• State and Federal Review by Capcity Advocates

According to Kim O’Brien, president and CEO of NAFA, “The event brings together wide-ranging experience and expertise in compliance, marketing, sales and those with a passion for their industry. The Forum is truly a unique networking event for industry professionals to work together with their colleagues in the furtherance of fixed annuities as a vital component of the financial services industry.”

NAFA’s 2013 Report to Members provides a comprehensive overview of 2012 Operating Expenses & Income Budget, 2013 Strategic Plans, 2013 Board and Committee Rosters as well as upcoming NAFA events.  View the full 2013 Report to Members.

Debunking Berko

According to the FINRA BrokerCheck Report on Malcolm J. Berko (Report #455575-38307),available at www.brokercheck.finra.org, numerous clients, over the period of 2001 – 2009 made formal complaints to FINRA, alleging  everything from unsuitable investments to fraud to breach of fiduciary duty. Upon investigation of these complaints, on July 13, 2009 FINRA barred Mr. Berko permanently from the securities industry.  Although he can no longer act as a principal or investment adviser, Mr. Berko continues to write his syndicated column, “Taking Stock.”  Given his history, perhaps his opinion is not worth commenting on;  however, since some people do read the column and perhaps, sadly, rely on information it contains, NAFA, the National Association for Fixed Annuities, will clear up a few items contained in his April 28, 2013 Taking Stock column.

“[The CEO's] professional Qualifications are reflective of his mendacity”…

Mr. Berko engages in a shocking level of name calling among other specious and overwrought characterizations.  This is particularly rich, given Mr. Berko’s lifetime ban from any FINRA activity!  But, to the point about professional qualifications, a person, in order to sell a fixed annuity, must be licensed in the state where the sale is made.  You may also hold other financial services licenses but YOU MUST hold an insurance license. As such, you are subject to strict marketing, advertising, and disclosure laws and must always put your client’s interest first by making a suitable recommendation that is based on their financial situation, risk tolerance, and access to funds for emergencies — or just plain fun.

“[The] CEO is one of these things…”

The “CEO” that called upon “BT” in Bethlehem, PA lives just 18 miles up the road from “BT” in Center Valley is indeed many things.  He is a small businessman pays taxes and provides jobs.  In a small rural town of about 8300 people, those jobs are pretty important if you want to work close to home and family.  And at the end of each day, like most annuity salespeople, he goes home to a house he owns and a family his business helps to keep clothed and fed.

“The volume of complaints [is] beyond the SEC’s ability to respond…”

Really?  Where did Mr. Berko get this information?  It is not on the SEC online complaint data report nor could we find it in the SEC “WhistleBlower” Sanctions Database.  The NAIC tracks complaints filed by state insurance departments and insurance companies (who are required by law to track and report customer complaints) and the complaints are identified by product and complaint type (e.g., service issues versus sales practices).  The NAIC data^[1] tells us that fixed indexed annuities are one of the highest in consumer satisfaction with far fewer complaints than financial products sold under FINRA or the SEC jurisdiction.

“There is no [fixed] indexed annuity guaranteed not to lose money…”

Wrong! All indexed annuities guarantee you can’t lose money when the index does.  Indexed annuities are fixed annuities that simply can earn additional interest based on changes in a market index.  If the index is down the insurance company pays ZERO interest into the annuity, but it does not lose money – this is guaranteed.

NAFA, the National Association for Fixed Annuities, has one simple mission – to promote better awareness and understanding of fixed annuities.  One would hope financial reporters shared this mission.  Fixed annuities are not for everyone, nor should they necessarily represent your entire savings plan.  But in order to determine if a fixed annuity is right for you, you need to know the facts about them – their benefits and limitations.  Please visit www.fixedannuityfacts.org for more information.

April 30, 2013

Letter to the Editor of Yahoo! Finance Morningstar

Re:       “5 Key Question to Ask Before Purchasing an Equity-Indexed Annuity” by Christine Benz, 4/25/2013

Dear Editor,

We appreciate Ms. Benz’s effort to educate readers about indexed annuities. We can all agree that the public should be well informed of the benefits and limitations of any financial product they are interested in purchasing.

We too encourage all potential buyers to ask critical questions about the annuity they are considering. Unfortunately, how can they ask these important questions when they are not provided factual information?  The author’s seems more intent on scaring the public away from indexed annuities than from arming them with the facts to help them plan more effectively. Let us provide some of those facts…

There are two types of annuities – fixed and variable. The key difference between the two is investment risk. With variable annuities clients may gain and lose money based on the performance of their investment choices. Fixed annuities do not have investment risk.  An indexed annuity is a fixed annuity as confirmed by Congress, the National Association of Insurance Commissioners and most state insurance departments.  It only differs from other choices of fixed annuities by how the insurance company calculates additional interest above the minimum guaranteed interest.

Basically, the insurance company determines the annuity’s interest by calculating the performance of a market index between two points in time typically covering one year.  The consumer is not investing directly in the market or the index. If the index goes down, zero interest is credited and all prior interest and premium paid into the annuity (the annuity’s value) remains untouched.  That annuity’s value is simply carried over to the next period.  Any interest earned during the next period is added to the annuity’s value and so on and so on compounding interest all along the way.

This zero-percent floor is critical but not the only reason people buy indexed annuities. As questions loom over the future of Social Security, with fewer and fewer defined benefit plans, and more Americans looking for ways to supplement their retirement income, indexed annuities are purchased to provide the peace of mind in knowing your retirement dollars are safe from market volatility and economic crisis. They also want certainty in knowing their annuity provides minimum guaranteed interest and the potential for additional growth from stronger markets.  And, they know that their indexed annuity can provide them with the insurance of income they cannot outlive when the time is right.  As you can see, an indexed annuity can serve as the certain and safe part of a retirement income plan.

NAFA is committed to providing fair and accurate information regarding indexed annuities to the public. To provide your readers with more facts about indexed annuities we encourage you to visit www.fixedannuityfacts.org or call us directly.  Thank you for your time and we look forward to hearing from you.

Sincerely,

Kim O’Brien, President & CEO
The National Association for Fixed Annuities (NAFA)

PS:  The insurance companies haven’t referred to indexed annuities as “equity-indexed” for years.  Continuing to use the outdated term only confuses readers as they are not likely to read it in articles not written by the securities industry or in any piece of insurance literature.

NAFA was represented by Kim O’Brien at the NAIC Spring Meeting in Houston last week.  During the Life Insurance and Annuities (A) Committee Annuity Disclosure (A) Working Group briefing, our influence and involvement were recognized along with those of Brenda Cude, the consumer rep.  NAFA has been actively engaged with the A Committee since the formation in November of 2009.

NAFA is pleased to announce that the Iowa Insurance Division has provided clarifying guidance on the new annuity illustration requirements through its Bulletin 13-01 issued April 3, 2013.  Iowa had adopted the NAIC model regulation that is in effect in 30 states now and expected to pass in more states soon.  Since the adoption of these rules, questions have arisen as to interpretation and application of parts of these rules.  The Iowa Bulletin provides important guidance to insurers and producers to ensure they are complying with the regulation.

NAFA is a strong proponent of fair and understandable consumer disclosure and supports the NAIC annuity illustration requirements.  We also support this Bulletin as it resolves some of the uncertainty with the requirements.  NAFA led intense and ongoing discussions with the Iowa Insurance Division and is grateful to their receptiveness and willingness to work together on this issue.  We applaud Iowa’s steadfast determination to help clear up confusion with the regulation and partnering with the industry to understand our challenges. The advocacy efforts of our membership were very helpful in pursuing a workable resolution consistent with the disclosure regulations.  NAFA remains committed to ensuring that consumers receive greater understanding of the annuity they are considering through compliant illustrations and transparent product information.  If you have any questions please do not hesitate to call Kim O’Brien at 414-332-9306 or email kim@nafa.com.

NAFA announces the release of a new publication dedicated to guiding annuity professionals on the best practices and proper use of professional designations. Using the framework set forth in the NAIC’s Model Regulation # 278, NAFA’s Principles paper provides a road map for annuity professionals, detailing the standards and best practices set forth in the NAIC’s model regulation. View full press release.

March 19, 2013

Workers and employers in the U.S. are bracing for a retirement crisis, even as the stock market sits near highs and the economy shows signs of improvement. New data shows that powerful financial and demographic forces are combining to squeeze individuals and companies that are trying to save for the future and make their money last. View full article.

March 19, 2013