August 11, 2011
Letter to the Editor of Money Magazine
Re: “Protecting your parents: Keep the sharks at bay” by Lisa Gibbs
At the National Association for Fixed Annuities (NAFA), we and our members agree that there is no place for abusive sales practices in our industry, and much effort has been made both on a regulatory front and within the industry voluntarily to prevent such practices and punish their purveyors. NAFA, for example, is currently putting together a consumer guide to annuity scams and fraudulent sales tactics. It will be available in the fall.
Of course, our world being far from perfect, it is not possible to stop every such instance, although we try our best.
However, I believe that your article could have been considerably improved by stating near the beginning that the vast majority of financial advisors and insurance agents are reputable individuals, and further that many of the sales methods and products mentioned in the article are used extensively by trustworthy professionals whose clients benefit from their use.
Instead, by omission of that basic, indisputable fact, your article created the impression that every advisor or agent who buys a client lunch, who touches on a topic that a client fears, who befriends a client, or who offers to help a client increase their money’s rate of return is attempting to victimize the client. The feeling was created that advisors or agents who are paid by commission are inherently wronging their customers. The sense was created that products such as annuities are sold by an uncaring industry that preys on seniors.
A universally-accepted tenet of financial planning is that clients, as they age, should generally allocate a greater portion of their assets to safer financial products. In the fixed and indexed annuity industry, the products that we offer appeal strongly to seniors because our annuities offer safety of principal, attractive rates of interest, guarantees of lifetime income, and tax deferral, just to name a few key benefits.
Thus, by publishing an article which seems to call into question the integrity and trustworthiness of the providers of these products, we believe that you have done a disservice to your readers.
Kim O’Brien, President & CEO
The National Association for Fixed Annuities