Ahead: Dislocation, Turmoil, Angst… and Growth; The SEC Finally Speaks on Fixed Indexed Annuities
An open meeting took place on June 25 during which the SEC decided to propose a new rule (151A) that would require many fixed indexed annuities (those that count for virtually all of the sales made) to be registered as securities with the SEC. Chairman Christopher Cox made it quite clear that “senior investment fraud” motivated the SEC to act at this time.
Quoting past North American Securities Administrators Association (NASAA) President, Patty Struck, Chairman Cox referred to an indexed annuity marketing landscape “littered with slick schemes and broken dreams” that has been “devastating” to the victims and their families. You can read Chairman Cox’s full comments by clicking here.
What’s certain about the SEC’s action is that it comes in direct response to the failure of the indexed annuity industry to arrest incomplete, misleading and confusing sales practices that should have been shut down years ago.
What’s in store for the indexed annuity industry if- as I believe it will- the SEC’s proposed rule becomes law?
Continued turmoil in the fixed indexed annuity distribution channels, for one. As the center of gravity for distribution turns permanently toward broker-dealers, many independent marketing companies that wholesale these products may become marginalized.
Non-registered agents will be factored out of the distribution of fixed indexed annuities unless they opt to become registered representatives or Registered Investment Advisors. The RIA option is one fraught with peril for insurance agents, however. For more, click here.
Insurance carriers that manufacture fixed indexed annuities will fall into two camps. Some will see sales decline dramatically as their market share is taken away by others that adopt new business models, new technology and new (FINRA-reviewed) sales tools.
Consumers- especially millions of individuals entering the “Transition Management” phase of retirement- will be the big winners as improvements in indexed annuity contract designs in terms of greater transparency and improved pricing lead to the indexed annuity finally becoming a mainline product.
As I’ve always stated, wipe away the bad sales practices, overly complex contract designs, and too high fees and you are left with a value proposition- downside protection combined with upside growth potential- that is as important as any found in a financial product.
Two years ago Wealth2k introduced www.FIAToday, a compliant, technology-driven solution to the problem of poor fixed indexed annuity sales practices. Arguably, it was ahead of its time. The SEC’s action has just increased its value to all parties. Exponentially. FIAToday is available at no cost by clicking here.