Annuity Marketplace Challenges

Part One: A Deadly Cocktail? The “Extreme Makeover” of Annuity Agents into Registered Investment Advisors

Earlier this year I published an essay on the burgeoning effort to recruit annuity agents into the ranks of Registered Investment Advisors. While I haven’t written about this issue since that time I’ve thought about it a great deal. So have a lot of other people including some who see an opportunity to create lucrative new businesses by disrupting independent agent distribution. I’m all for free enterprise. But I’m opposed to initiatives that may seek to exploit agents who are frustrated by challenges they didn’t’ ask for or expect.

Today’s article is the first in a series devoted to the agent-to-RIA conversion “pitch.” The more I delve into this the more concerned I become. One of my goals with this series is to help protect annuity agents by providing them a balanced perspective on the RIA option. It’s my hope that a thorough understanding of the risks and potential rewards will lead to good decision-making.

Back in April I expressed caution about the pitch to annuity agents that urges them to become registered investment advisors. My early caution has crystallized into a strong belief that for most annuity agents the RIA option is, well, unsuitable.

Opting to become an RIA may be a viable course of action for annuity agents willing to submit to a truly extreme makeover in terms of their stated allegiance and compensation model. How many agents will be willing to drink the fiduciary cocktail and take on the related responsibilities that come with observing a fiduciary duty once they understand all of its ingredients?

What’s in the Fiduciary Cocktail?

Ahh, fiduciary duty! That’s the key issue, isn’t it? I checked Wikipedia’s definition of fiduciary duty and this is what I found:

“A fiduciary duty is the highest standard of care imposed at either equity or law. A fiduciary is expected to be extremely loyal to the person (the principal) to whom they owe the duty. They must not put their personal interests before the duty, and must not profit from their position as a fiduciary, unless the principal consents. The fiduciary relationship is highlighted by good faith, loyalty and trust.”

“When a fiduciary duty is imposed, equity requires a stricter standard of behavior. It is said the fiduciary has a duty not to be in a situation where personal interests and fiduciary duty conflict, a duty not to be in a situation where their fiduciary duty conflicts with another fiduciary duty, and a duty not to profit from their fiduciary position without express knowledge and consent. A fiduciary cannot have a conflict of interest.”

The very last sentence, “A fiduciary cannot have a conflict of interest” would seem to crystallize the key challenge: how can an individual simultaneously act as a fiduciary and an agent for an insurance company within the framework of a single client relationship?

It’s not possible in the opinion of Rick Miller, a Certified Financial Planner from Cambridge Massachusetts and a member of the National Association of Personal Financial Advisors. According to Miller, “An annuity agent who is simultaneously a fiduciary sounds like a contradiction in terms at the most basic level. As a fiduciary the advisor must act in the best interest of the client. As an agent, the advisor must act in the best interest of the insurance company. I wouldn’t want to be the advisor who has to attempt to resolve that conflict.”

The website for Miller’s firm, Sensible Financial Planning, states: “We accept no commissions or any other payments from any financial product or service provider. We work only for you.” That description stands in stark contrast to the way annuity agents typically operate.

The August 2007 edition of Investment Advisor Magazine contains an article written by Bob Clark that stated, “The inescapable conclusion for anyone looking at the financial services industry and its marketing machine is that financial consumers—middle class and affluent—are completely ignorant of the fact that their stockbrokers or insurance agents are not fiduciaries, and have no legal obligation to put their clients’ interests ahead of their own or their firm’s.”

Some annuity agents may not fully understand the legal structure of the “principal-agent relationship” that governs their obligations to the insurance companies they represent. In the same manner that stockholders of a corporation (the principals) hire managers (the agents) to act in their best interests, the insurance company (principal) hires agents to act in its best interests. The fact is, under this relationship framework the primary duty an annuity agent undertakes is to represent the insurer’s interests, not the client’s.

There’s No Escaping Regulation

I sought the opinion of Joan Boros, who is a friend and a well-known expert in securities law. Joan, an attorney with the prestigious Washington, D.C. law firm, JordenBurt LLP, had this to say about agents contemplating registration as investment advisors:

“Agents should be aware that registration as an investment adviser carries its own set of burdens and vulnerabilities; there are always trade-offs. At a minimum, agents are subject to a whole new regime of regulation in each state where they operate. On a more challenging level, plaintiff’s lawyers and regulators have asserted the view that as an adviser the agent owes a fiduciary duty to the prospect or customer. While that may not be the outcome, threading through fiduciary duty obligations makes suitability determinations seem like a walk in the park.”

Yet the advertising coming at annuity agents sounds like the RIA makeover is a walk in the park. “End broker-dealer harassment and haircuts” goes the RIA pitch. To annuity agents who have seen their businesses impacted in ways they view negatively since the issuance of NASD NTM 05-50, it’s a powerful message. Is “harassment” a code word for rigorous broker-dealer compliance when used in the context of the RIA pitch? I suspect it is. And what annuity producer doesn’t want to earn more money by eliminating broker-dealers’ commission “haircuts?”

Annuity agents who have seen broker-dealers disapprove their relied-upon annuity advertising and sales presentation materials including letters, seminar presentations and display ads, will surely be attracted to the notion of becoming their own compliance officers. But how many annuity agents possess the knowledge and experience to develop compliant advertising in the context of a registered advisory practice? And what of the longer-term consequences following biennial audits of registered investment advisors’ practices including their advertising? Could annuity agents be setting themselves up for an unpleasant future shock?

Possible Unfulfilled Financial Expectations

One shocking change annuity agents who become RIAs may encounter in the future is reduced income. Agents who are accustomed to making larger commissions as their sales volumes increase may find that new approaches to annuity compensation may alter their expectations. According to Paula Hogan, Principal of Hogan Financial Management, a Milwaukee-based, fee only firm providing comprehensive financial planning services, “When people wear two hats it’s very confusing to the consumer. Consumers have a right to know who the advisor is working for.”

Hogan also believes that the transition to income-generation will lead to new ways to compensate advisors: “The issue you raise (compensation) is also an important one because it speaks to changes taking place in the financial services industry as people shift from accumulation to retirement income distribution. Annuities will play an increasingly important role as more and more people seek to insure their standards of living in retirement. I believe that advisors have real value to offer their clients and they deserve to be paid for it. However, agents’ traditional commission-based compensation models may prove as unworkable as advisors’ AUM-based models. It may be that new approaches to compensation will be needed including flat-fee arrangements.”

Fewer Advisors, Greater Responsibility

Boomer retirement is certainly likely to propel increases in annuity sales. But according to Harold Evensky, Chairman of Evensky & Katz, a wealth management firm headquartered in Coral Gables, Florida, annuities fit in a larger context of retirement planning which must prioritize the best interests of consumers. Says Evensky, “There’s good news for professionals in fields related to financial planning. The need for quality advice for retiring boomers is fast outgrowing the current supply of practitioners. However, as investment advice is often the core element of a good retirement plan, advisors need to ratchet up their knowledge of investment issues and register as Investment Advisors with the State or SEC. Doing so will meet their legal responsibility and insure that they are legally committed to placing their client’s interest first.”

Key Questions

Agents considering the transition to RIA status should evaluate the move carefully and ask themselves some important questions:

Am I willing to place the interests of my client ahead of my own?

Am I willing and able to accept an entirely new method of compensation with the result that my compensation may decrease?

And, under what legal framework do I wish to operate?

The potential answers to these questions imply an interesting set of trade-offs, opportunities and costs.

©2007 David A. Macchia. Al rights reserved.

Retirement Income Authority and Certified Financial Planner, Philip G Lubinski, Takes On Fixed Annuity Income Riders: “Quit Implying It’s Simple!”

On the topic of retirement income planning Phil Lubinski is one the most experienced and knowledgeable financial advisors practicing. His virtually exclusive concentration on income distribution over more than two decades places him among a tiny minority of advisors who have mastered the investment and income tax strategies required to properly place retirement assets into a distribution mode.

Lubinski, who is both a friend of mine and business associate, doesn’t believe in easy answers to income planning needs. Too often, he says, advisors take the easy way out by substituting products for good planning. In response to yesterday’s essay Lubinski sent me his views on income riders that are increasingly being applied to fixed indexed annuity contracts. I thought I’d share his commentary as he makes some great points.

Insurance companies would be well-advised to move cautiously and carefully in the positioning of these fixed annuity income riders to both agents and consumers, in my judgment. Already, some broker-dealers have become concerned about financial liability potential arising out of their registered representatives’ positioning of variable annuities with guaranteed income riders as “solutions” to retirement income needs. Among the concerns expressed are worries that these riders in many cases may not provide step-ups in retirement income over time. This worry is arguably more urgent when the same type of riders are placed on fixed indexed annuity contracts where the long-term growth potential is less than with variable annuities.

The tendency of some insurance companies to seek the easy way out with their agents by appealing to the agents’ desire for an “easy” solution to a complex income planning challenge may provide insurers with short term gratification. But that gratification may come to insurers at the expense of long-term financial pain should consumers determine that these riders are really not the “solution” they expected.

David Macchia

I appreciate the attempts by annuity providers to create single product solutions, but I feel they are trying to cater more to the needs of the “fixed only” licensed reps, than to the true retirement income needs of retirees.

Research has shown that systematically withdrawing from a growth asset class is “risky business” Yes, a fixed indexed annuity protects the client from negative returns, but it does not protect them from losses due to “over withdrawing” during periods of “low” returns over normal market cycles.

Additionally, when markets are strong, every indexed annuity I’ve seen deprives the investor of S&P 500 dividends (2-3% of the total return) and credits interest based on complicated mathematics that I haven’t found an advisor or even a wholesaler can adequately explain it to me. All I know is that when discussing the rate-of-return goals of an indexed annuity with actuaries, I’m told that, at best, an EIA will deliver 50-60% of the S&P 500.

Moreover, when I’ve looked at research that has tested annuities with income riders, there is a significant probability that the account balance can go to zero leaving the beneficiaries nothing. Also, who in their right mind would want to tie the success of their retirement income to one company, one asset class and one product?

Imagine if doctors wrote prescriptions in this manner (we certainly wouldn’t need to worry about longevity any more). Indexed annuity products may have a place in an overall, multiple product/multiple strategy retirement income model, but they certainly are not a solution in and of themselves- no matter what income riders they may offer.

Retirees should be looking for advisors with legitimate credentials (CFP or ChFC), and multiple licenses (life and health, series 6, 7 & 65) who can demonstrate a comprehensive approach to retirement income planning. We’re dealing with an individual’s life savings here, folks. Quit implying it’s “simple”. It’s NOT

Philip G. Lubinski, CFP
Denver, CO

* * *

©Copyright 2007 David A. Macchia. All rights reserved.

Which Industry Will Grab the Brass Ring of Consumer Confidence and Principal Protect Boomers’ Retirement Assets?

In spite of its warts, the indexed annuity industry and the products it provides may well play an important role in helping Boomer investors maximize their capacity to generate retirement income. People like me who advocate for an improved annuity industry hope that the indexed annuity industry will meet its varied challenges head-on and ultimately realize its full market potential.

Today I’d like to share some information about Wealth2k’s efforts to promote improvement in the indexed annuity industry in terms of sales practices, consumer education, product quality, suitability and agent productivity. As I see it these are the five main problem areas which cry out for improvement.

Armies of Virtual Agents In Response to 05-50

Largely in response to the publication of NASD NTM 05-50, about 18 months ago Wealth2k developed a vision for a new and better way for annuity agents to market, present and close indexed sales. We believed that by fostering improvement in key areas we could help lift the fortunes of those indexed product providers that wished to be perceived as being tangibly separated from the poor sales practices and inferior product designs that were driving significant business to some providers.

In part, Wealth2k’s new strategy was designed to help annuity agents increase their productivity, thereby making it possible for them to begin to transition to selling indexed annuity products that offered greater consumer value albeit with lower commissions on a percentage of premium basis. Increasing the productivity of annuity agents is an elusive goal that has not received the attention it deserves.

Annuity agents typically do not connect with enough prospects for the products they sell. So, among other things, the Wealth2k strategy would have utilized our Traject network’s capacity to dynamically create virtual agents for each human agent, technological alter egos designed to extend the human agents’ reach and brand.

The virtual agent’s job would be to support and strengthen the human agent’s capacity to prospect and educate on indexed annuities. The virtual agent meets with prospects at their web browsers and utilizes streaming video presentations to deliver high quality education on indexed annuity products. The engaging video presentations are fair and balanced and they serve to help prospects gain realistic expectations of an indexed annuity’s performance potential.

No human agent is capable of working 24 hours a day, not to mention working without salary and benefits. But that’s what the virtual agent offers as a non-stop “sales assistant” toiling away on behalf of its human boss.

Not bound by constraints of geography and time, the virtual agent meets with prospects at any place and at any time the prospect chooses. It’s the prospect who’s in control of every interaction with the virtual agent without ever being subjected to sales pressure.

After meeting with the virtual agents the prospect may click on a button to send a message to the human agent:” I just watched the movie at your website and this product seems to make a lot of sense. Let’s get together and talk about it for some of my retirement money. Are you free on Tuesday? 7:00?”

Growing the Pie

Growing the entirety of the indexed annuity pie was and is a major aspect of Wealth2k’s strategy. I’ve long stated and have written in published articles that the $27 Billion high-water mark for indexed sales has the potential to be four times that level in the not too distant future. $100 Billion in sales is an attainable goal because the underlying value proposition indexed annuities offer- principal protection combined with continuous interest growth potential- is one that is critically important to millions of Boomer customers as they enter the Transition Management phase of retirement.

Academic research has shown that investment losses occurring over the period beginning roughly eight years prior to retirement and continuing until ten years after retirement will cause a lifelong reduction in retirement income if not portfolio ruin. (to read an academic paper on this topic that I co-authored with three other members of the Retirement Income Industry Association click here).

To implement its strategy Wealth2k set about to create what amounted to an advanced “operating system” for the indexed annuity business. In terms of its distribution, the industry has been operating on what would we believed was analogous to the old DOS operating system for PCs in as much as the functions that couldn’t be delivered were serving to both limit growth and expand future financial liability- a bad combo, to say the least.

Our analysis revealed that the “old” operating system was deficient in these areas:

It had little or no capacity for real-time management by compliance officers

It didn’t put video at the forefront of its prospecting and educational efforts

It failed to leverage web-based technology to boost marketing effectiveness

It did little to help agents increase their overall sales volumes, and,

It wasn’t in harmony with broker-dealer culture or process.

For these reasons I led Wealth2k’s effort to develop the” windows” analogy application for indexed annuity distribution: modern, technologically-advanced, compliance-centric, consumer friendly, video enabled, even successfully reviewed by the NASD. This was a model for success if there ever was one!

The Peril of Being Too Early

Did it work? No. Why not? Simply put, it was just too far ahead of its time. By April of 2006 when we had finished the application that we called…

• The Massachusetts Securities regulator had not yet set his sights on annuity sales practices. He hadn’t yet sent a letter to every senior in Massachusetts advising them to exercise caution before purchasing an annuity.

• Regulators’ focus and criticisms over specious professional designations for annuity agents had not yet begun

• Hundreds of articles in the consumer press negative to annuities had not yet appeared

• The Parade Magazine expose on fixed annuities had not yet been published

• The devastating front page article (July 2007) in the New York Times had not yet appeared and been parroted by hundreds of other news outlets

• Certain class action lawsuits had not yet gained certification, and,

• Congressional hearings looking into indexed annuity sales practices had not yet been deemed necessary

On May 9 of 2006 Wealth2k brought together nine indexed providers for a meeting in Boston to explain our vision of how to transform, improve and set-up the indexed business for compliant, quality growth.

I opened that meeting by introducing our goals and during my remarks predicted virtually every sad event that’s taken place over the succeeding fourteen months. Honestly, I even predicted the New York Times’ front page article.

The value proposition that day to the carriers was straightforward:

Act quickly and decisively to separate yourselves from the questionable sales practices of certain indexed providers and upend your competition

.Take action to enhance your marketing and distribution by adding features that are far more “B-D friendly” in terms of compliance and process.

• Place high-quality, balanced consumer education front and center in the sales process

• Give your agents impressive, consumer-facing technology that allows them to reach more prospects with compliant, value-based messages

• Set yourselves up for robust growth at the expense of others who won’t be endowed with the same compliant tools, technology and strategies that you will be working with

The company representatives who came together that day were mightily impressed. But they could not as a group get together to act on the opportunity we presented.

Why? With the benefit of hindsight it’s quite understandable. When things are going well there’s little in the way of perceived urgency to make changes. The focus on short-term tactical needs and quarter-by-quarter sales goals is simply too powerful to undertake a structural repair job. Who needs to upgrade operating systems when the present one is still serving your needs?

Now, of course, it’s a very different world. The indexed annuity industry has two black eyes, a few broken bones and an uncertain diagnosis. The accumulated toll of so many unfortunate events over the past fourteen months serve to validate Wealth2k’s strategy, in my judgment. It’s past time for the industry to embrace a new model that can be perceived by objective observers as serving consumers’ interests.

My sense is that the entire indexed business is really up for grabs in a way that’s never before happened. Or maybe what’s up for grabs is not so much the indexed annuity industry as it is its value proposition. Already, other industries are targeting the very same economic benefits offered by indexed annuities. Have no doubt that competition from non-traditional sources will pose big challenges for all indexed annuity providers.

Will it be the structured products providers that grab the brass ring of consumer confidence? Or will it be one or more enlightened and committed insurance companies?

That’s a key question in determining which industry will serve millions of Boomer customers by addressing a fundamental financial need.

©Copyright 2007 David A. Macchia. All rights reserved.

Be Schlocked!! The Cracker Rappers Rap “Let’s Go Sell Some Annuities!” A YouTube Peek Into the Surreal World of Annuity Agent Recruiting

lemoncut“Let’s go sell some annuities!” We got the tools, and the education too.”
“We got the drive, it ain’t no jive. We got the only game alive”

“We got the FMO to see us through!”

The Cracker Rappers
“Let’s Go Sell Some Annuities”

Don’t you just love YouTube? It allows everyone in the world to see what everyone else in the world is doing. No wonder that by July of last year YouTube was streaming one-hundred-million videos each day. This July it may be up to 200 million for all I know.

You might wish that video had not won the peoples’ choice award for preferred information conveyance vehicle but it’s too late. The votes are in and it was video in a landslide. Now everything is watchable, even annuity agent recruiting ads. (Or even a video to promote this blog. Click here to see it).

Historically, if you wanted to see some examples of advertising that many might describe as sleazy you could look to agent recruiting advertisements created by certain annuity wholesaling firms (variously described as FMOs, IMO, Marketing Companies) that are designed to entice annuity agents to sell indexed annuity products. This type of advertising is generally confined to insurance industry magazines and email campaigns to agents and is paid for by marketing companies that typically cater to indexed annuities. I’ve seen this form of advertising for many years and I know that it has often been effective in attracting a segment of annuity agents who fall prey in a serial manner to “get rich quick” invitations. But that was before the dawning of the digital age in annuity land.

Today I offer you a peek into this arcane world because I can no longer avoid doing so. My hand has been forced. The reason, once again, is that even this peculiar advertising genre has migrated to the Internet. Let shine the white-hot light of public scrutiny!! Today’s example takes my oft repeated comment that the annuity business shoots itself in the foot every three minutes and accelerates the pace to every thirty milliseconds!

I introduce you to Mr. Gary LeMon who casts his gaze into your web browser and asks, “Are you rich yet? No, seriously! Are you rich yet?” (Click the video image below to see it).
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In his funny and schlocky YouTube video Mr. LeMon tells his agent (and non-agent) viewers, “The road to success is littered with land mines, detours, dead ends…and maybe you’ve taken a few. I know I have! Then I figured out how to sell fixed indexed annuities!!!

Fixed indexed annuities obviously changed Mr. LeMon’s life, and now he wants to change the lives of other annuity agents by helping them “make a fortune selling indexed annuities.” In fact, he’s developed quite an elaborate system to do so.

In his video Mr. LeMon states that he has the tools needed to accomplish this in terms of “tutorials, selling systems and a fully-scripted seminar system that generates a million dollars a month in premiums.”

Mr. LeMon asks viewers to “imagine… No, I’d like you to burn this image into your brain: can you see yourself banking $10,000, $20,000, $30,000, ever $40,000 a month? How will you and your family feel about that?”

The annuity industry needs to think through the implications of messages like Mr. LeMon’s being available for anyone to see including, of course, the press, regulators and consumers who may already own or may be asked to purchase annuities in the future (recall the famous New Yorker cartoon: a dog is typing on a keyboard and staring intently into a computer monitor; the caption reads: “On the Internet no one knows you’re a dog”). Well, on the internet we can’t know who’s watching Mr. LeMon’s get rich pitch. Here’s a question: After watching Mr. LeMon’s video would a nice lady from Topeka who’s interested in learning how to invest her $500,000 in 401(k) assets because she’s preparing to retire be interested in putting her money in an annuity? What’s Fidelity’s number, again?

On the one-to-ten scale that measures how much I worry about the annuity industry’s future, the migration of agent and marketing company advertising to the Internet takes my concern into uncharted territory. Who needs the New York Times or Parade Magazine to damage the public perception of annuities and the agents who sell them when the agents and marketing companies can do it more quickly and less expensively themselves? Glory! We’ve discovered technology!

I wish I could get insurance company executives to move a little more quickly to the video party. For a few years now I’ve been trying hard through the creation of web-based communications networks to build the compliant infrastructure that annuity providers need to get out in front of the video revolution. With some notable exceptions (all Wealth2k clients, I’m proud to say) the providers have moved slowly. The video party did begin, however, but the agents brought the keg.

Video can be used as the linchpin in a compliant strategy to improve the public image of annuity products and agents, or it can be used to further damage the industry’s public standing. Consumers want to “watch” more than they want to read. Make no mistake they’ll watch Mr. LeMon and I fear that his funny rapper act might anytime get highlighted on the home page of YouTube. If that happens we’ll be seeing Mr. LeMon’s recruiting pitch on the Today show and 60 Minutes,

Mr. LeMon, may I suggest that you do your industry and your agents a favor: show your video at a recruiting meeting that’s not so global.

©Copyright 2007 David A. Macchia. All rights reserved.

PLEASE NOTE: Coming Tuesday morning: a fascinating interview with behavioral finance authority Professor Meir Statman of Santa Clara University.

Tony Bass Responds; My Apology to Allianz Life; A Statement from American-Equity Life

Yesterday’s essay focusing on the indexed annuity marketing utilized by Tony Bass of Georgia elicited quite a lot of interest. I heard from Mr. Bass who informed me that he removed his YouTube video and “free report” as a result of my writing about them. He also asserted that he was not attempting to mislead anyone with his marketing strategy.

While there’s no condoning the inaccurate content of the materials used by Mr. Bass, they signal a larger issue which annuity providers can’t duck: How are annuity agents to remain financially viable in the face of the most hostile annuity marketing real environment in memory? That’s a critical question that screams for a viable answer. Providers’ continuing reliance upon independent agents hangs in the balance.

Mr. Bass told me that his marketing strategy was “not to give away everything up-front” and to have “prospects call him.” This is entirely understandable when you consider that had he employed a marketing strategy that placed his agenda to sell annuities front-and-center it would have resulted in almost certain failure. This is why agents seek to obtain meaningless professional designations, portray themselves as “senior advisors” and “safe money experts”, and generally hide their true annuity sales agendas. It’s also why some state securities regulators have begun to prohibit such practices.

How far the indexed annuity business has sunk. It has literally lost the ability to properly convey the value of its products. This points to a leadership vacuum… and a business opportunity. When a market devolves to this extent the opportunity for creative entities to succeed is increased exponentially. In an academic sense that’s the good news. The key question is will any provider show the courage that will result in their scooping-up the indexed market? This is the rarest of opportunities to quickly create an unlevel playing field.

An Apology to Allianz Life

I frankly owe a sincere apology to Allianz Life. I guessed wrong on the product Mr. Bass was aiming to sell. It wasn’t Allianz’s MasterDex 10 annuity. I’m sorry for this inaccuracy.

What was it then that Mr. Bass wanted to sell? It was an indexed annuity that is issued by Des Moines, Iowa based American Equity Life. American Equity also offers an indexed annuity that provides a bonus of 10%. This annuity was, I’m told, designed to compete favorably with Allianz’s product.

I tried to reach American Equity’s CEO, Dave Noble, to seek his comment. He was traveling and unavailable. I did, however, speak to the company’s General Counsel, Wendy Carlson, who provided the following statement:

We at American Equity are committed to maintaining high standards in sales practices. We have a stringent set of advertising guidelines that our agents are required to adhere to when marketing our products. Had Mr. Bass submitted the contents of his video to us for evaluation under our advertising guidelines it would not have passed muster, and we will communicate that to him. We also require our agents to use clear and concise disclosures of all product terms at the point of sale, and we conduct our own in-house suitability review of every sale prior to contract issuance. Mr. Bass has been appointed with us for several years but has had only one sale in all that time. That would tell us our process is effective.

What Have We Learned? And Haven’t?

In the past 24 hours we’ve learned that Mr. Bass’ agenda was to indeed sell indexed annuities. We now know the company and product he wished to sell. We know that Mr. Bass has withdrawn his misleading marketing materials. And we know that American Equity disavows marketing tactics like those used by Mr. Bass.

We’ve also learned something about the importance of video that has potentially far-reaching implications and future liability potential for annuity providers. As agents move their sales practices to the Internet there’s no hiding what they are doing. Just as surely as the YouTube culture is impacting politics it will also impact insurance and financial services. This is why product providers must move aggressively to supply agents compliant video educational presentations lest they develop their own for consumers who prefer to learn by watching rather than reading (look for more on video-based agent marketing that will appear here in the near future).

What we’ve not learned is how annuity agents will compliantly navigate through today’s aggressively hostile marketing environment. I’m convinced that most annuity providers in spite of their best efforts have no practical ability to control the marketing activities of agents who grow more and more frustrated with each article that appears that is critical of annuities. As exemplified by the recent front page expose in the New York Times, it may be that we’ve still only scratched the surface of what’s to come. “The Process” continues to play-out to the detriment of the annuity business.

The value proposition inherent in an indexed annuity is exceedingly valuable to many people, especially those in the transition management phase of retirement. While undue product complexity can impede the clear conveyance of that value to consumers, I have a good deal of sympathy for Mr. Bass and other agents like him who believe sincerely and strongly in the legitimate economic value annuity products provide to Boomers and seniors. It’s a calamity on the scale of a Greek tragedy that they can’t tell anyone in a straightforward manner.

©Copyright 2007 David A. Macchia. All rights reserved.

Now on A Stark Example of Why the Indexed Annuity Industry is Destined to Implode Unless it Tackles the Misleading Marketing That is Behind Much of Its Product Sales

I don’t know where to begin or who to blame: The annuity agent trying hard (and very creatively) to market indexed annuities? Or the carrier or carriers he represents? The regulators? Maybe it’s just a manifestation of “The Process” out of which negative results emerge from the efforts of good people.

Today I introduce you to Mr. Tony Bass, although I have never met him in person. I have met him online. My guess is that he is a very decent man who has undertaken a misguided indexed annuity marketing campaign. I’m sorry to be critical of his methods but I can’t ignore them given that they are on display for the entire English-speaking world to hear and see.

Mr. Bass’ medium is the right one. He’s using video to convey his story professionally and effectively. I applaud him for delivering it in this manner. It’s his story”s content that I believe is simply fraught with problems.

Regular readers will be familiar with the long and detailed exploration of annuity sales practices that has accounted for so much attention at this site. Today I offer you a particularly egregious example of how the public can be misled about indexed annuities. This one is for the text books. I sincerely admire creativity. Mr. Bass seems to have plenty that could and should be channeled into compliant marketing strategies.

Mr. Bass’ example of indexed annuity marketing demonstrates the limitless creativity of producers. It also demonstrates how misleading sales practices are making the leap to digital delivery, a development that brings with it new levels of liability potential for indexed product providers. Any pretense that a misleading marketing campaign might be confined to an agent’s local territory is blown away once it has been migrated to the internet. Moreover it’s going to be potentially more difficult for a provider to deny knowledge of its agents’ poor sales practices when those practices are exposed for all to see on demand.

In his video Mr. Bass tells viewers that hs is “President and Financial Wealth Strategist for Bass Financial Solutions, a nationwide wealth management firm.”

Bass’s nicely produced video extols the virtues of his “strategies” that “guarantee a minimum rate of 13.68% over the next twelve months.” According to bass, consumers ‘pay nothing to implement these strategies.” He invites viewers “to receive more information about the retirement accounts and strategies, and finally become part of the informed group of successful investors versus the uninformed group that’s being robbed each and every year.”

Bass’ video never explains what the “strategy” is or how it is able to pay 13.68%. It’s implied that the answer will be discovered by visiting his website. More on that, later.

Bass’ target market is 401(k) pan participants who have left their employer and have a critical decision to make in regards to their accumulated 401(k) account values. In his video Bass tells viewers that it is a mistake for employees to leave accumulated assets in their previous employer’s plan, and also that it is a mistake to roll those assets into a new employer’s plan.

Bass explains that millions of investors change jobs each month and that many make “huge mistakes when it comes to how to handle their retirement accounts.” To sway viewers from considering keeping retirement assets in their previous employer’s plan, Bass raises the specter of Enron and MCI WorldCom and states, “Ask some of the Enron and WorldCom employees how this worked out for them.”

Bass explains that it is a mistake to rollover retirement assets into a new employer’s plan because it “limits investment choices.”

“What’s the Best Solution?”

In the movie Bass asks, “So what the best solution?” He states that the best solution is, “Rolling your retirement account into an investment where you have total control over your money by investing in the best financial products in the marketplace.”

Bass’ marketing strategy gets most interesting when you read his free report. It’s astonishingly misleading, in my judgment. Entitled “How to Maximize Your 401(k) or IRA after Leaving or Retiring From Your Previous Employer”, like the movie the report also focuses on the examples of Enron and WorldCom in order to frighten readers into not keeping their retirement assets in 401(k) plans. The report states that rolling over to an IRA is “the only practical way of re-gaining control of your life savings.” According to the report an IRA rollover is “hands-down the best choice.”

Bass is also on the side of making life more convenient for potential clients. His report states:

“Something else to consider is the convenience and ease of management
that comes along with consolidating your retirement accounts into one
professionally managed IRA account. If you receive statements from
multiple fund companies, you might be less inclined to review each one
and simply add them to your “financial stuff” file, which you may not
review often enough. Consolidating accounts will improve the ability to
manage investment activity and maximize performance results.”

Bass’ report then goes on to extol the virtues of his firm’s “no-fee accounts” that come with “phenomenal guarantees” and “access to accounts offering “13.68% guaranteed growth.”

From the Bass report:

At Bass Financial Solutions, Inc. you will have the opportunity to invest
your money in several of the industry’s top investment accounts, and
several offering GUARANTEED rates of returns. Most of our clients are
interested in the 13.68% Guaranteed Return Program. We can offer this
guarantee in writing from one of our top investment companies in the

Along with this tremendous guarantee you get the following:

• NO fees or commissions to pay EVER!
• NO stock market risk to your principle EVER!
• NO losses – ALL gains are automatically “locked-in” each year!
• NO taxes to pay – Tax deferred until you need the money!


Hammering Mutual Funds

Bass’ report is sharply critical of mutual funds. It states that “even though millions of investors own mutual funds inside their 401(k) s and IRAs, many would be better off transferring their mutual funds to an indexing strategy. Indexing participates in the upside gains of the market (like your stocks and mutual funds) with the downside risk of losing your principal (like CDs). In other words, you literally get the best of both worlds wrapped in one investment.

Next Bass’ report implies that mutual finds have expenses that are high, that the average portfolio manager has insufficient on-the-job experience, and that the average mutual fund turns over “90% of their portfolio annually.” Bass’ report even hammers no-load mutual funds.

Bass wants investors to “Stop paying unnecessary fees and risking your investments in the market with all the political uncertainties that exist today. Why not get the same type of performance with no fees, and a guarantee that your principle is
protected 100% of the time.

The report advises that “ Some of our most popular and sought after ‘indexing strategies’ offer a 13.68% GUARANTEED first year return on your investment and a 10% bonus on day one.

Part of a Dangerous New Trend?

I searched Bass’ company on Google and found a link to the site There I learned that Bass Financial Solutions is a registered investment advisory firm in the state of Georgia. This has caused me to think more about the recent trend among annuity agents who seek to form registered investment advisory businesses in various states as opposed to Federal RIAs.

I think that when annuity agents become registered investment advisors they undertake a potentially dangerous course if they persist in acting as annuity agents in the traditional manner. Moreover, if the motivation to become an RIA owes to the desire on the part of the agent to side-step broker-dealer oversight it’s almost surely to ultimately play-out badly for the agent. Why?

RIAs are fiduciaries by definition. Annuity agents, on the other hand, are bound to uphold the best interests of the insurance companies they are licensed to represent. Can an individual simultaneously serve two different agendas? Can RIAs simultaneously put their clients interests ahead of their own while still carrying on their traditional annuity sales and marketing activities? To me these are oil and water paradigms and the two competing agendas cannot coexist within the same client relationship. Generally speaking I think the idea of annuity agents becoming RIAs is a formula for disaster for all parties.

What is Bass’ “Top Investment Account?”

After reading Bass’ report I believe that his agenda is primarily to sell Allianz Life’s MasterDex 10® annuity. Unfortunately, this is never revealed in Bass’ marketing materials.

MasterDex 10 is a complex fixed indexed annuity that offers a 10% “bonus” on premiums paid during the first five contract years. When added to a base interest rate of 3.5% plus one year’s worth of compounding, the stated total first year rate becomes 13.86%. If not explained properly the 10% “bonus” can be highly misleading. In the context of Bass’ marketing materials a consumer would naturally believe that the “13.68%” is a “real” meaning realizable net cash return on rollover assets. It’s not, of course.

MasterDex 10 is arguably one of the least liquid indexed annuities ever marketed. Its focus is annuitization and Its surrender penalty is effectively perpetual. The annuity must be liquidated in systematic payments that begin not less than five years after contract inception and over a period lasting not less than 10 years. In other words, over a minimum of 15 years. Why?

Think about the economics behind this annuity. It “pays” a 10% bonus to the consumer, a 9% commission to the writing agent and a 3% commission to the marketing company that wholesales the annuity. That’s a total of 22% paid out by an insurance company which invests the premiums it receives in bonds that pay about 6%, annually. The only way to make this work is to restrict liquidity to systematic payments with below-market internal interest assumptions over periods that last many years. It’s telling that MasterDex 10 is the most popular indexed annuity ever sold.

Marketing That’s A Long Way from Being Compliant

The example of Mr. Bass’ YouTube video and report are vivid reminders that some contemporary annuity agents’ sales practices are a long way from meeting acceptable compliance standards. It’s hard to know where to begin in identifying all of the standards these marketing materials seem to violate: invalid and incomplete comparisons with investments; categorizing the annuity as an investment; inaccurate assertions as to the “investment” being “insured”; alleging comparison to CDs; comparing the annuity favorably to mutual funds, etc. Clearly there seem to be violations of “safe Harbor” ruling 151 and Rule 3(a) 8.

On the other hand from Bass’ perspective there may be nothing at all misleading about the video and report. As an RIA he is his own compliance officer. Of course, RIAs are generally subject to audit including the content of their marketing programs. I do imagine, however, that Allianz Life might take issue with much that’s portrayed in these marketing materials. Perhaps an Allianz Life representative will choose to comment on this.

What Would a Consumer Looking at Bass’ Materials Think?

What would a typical 401(k) investor think after watching Bass’ video and reading his report? I believe they’d be quite excited about moving their retirement assets into Bass’ “strategies” and “investment accounts” paying 13.68% guaranteed. They’d probably like the fact that they can receive “the upside gains” of “stocks and “mutual funds” without the “downside risk.” And I’m sure they would be comforted by the fact they their monies invested in these “strategies” and “investment accounts” are insured “up to an unlimited amount” by the National Association of Insurance Commissioners.”

Allianz is Really Trying

Allianz life has recently stated a strong commitment to upholding consumers’ interests. I believe this is a sincere effort. I also believe that Allianz Life had no prior knowledge of Bass’ strategies for marketing MasterDex 10. Rather, this incident is more likely a symptom of a free-wheeling annuity agent culture that sees producers engage in virtually whatever it takes to bring in their needed level of sales.

I’ve written extensively on how this culture took root and also about the vicious cycle at work that sees more pressure put on agents with each negative article that lambastes annuities in the consumer press. Agents see no hope in a marketing strategy that publicly identifies them as individuals with an explicit agenda to sell annuities. That this pattern must be arrested is not in dispute. The only question is how. The benefits of annuities are too vital and too timely to not find a way.

To address the root causes that lead annuity agents to engage in questionable sales practices I’ve spent a good part of the past five years leading Wealth2k’s development of compliant, next-generation communications networks, streaming educational video, advisor-branded micro sites and real-time monitoring capacity for compliance officers all designed to help annuity agents transition to a better/more compliant way of gaining new business. Agents cannot unilaterally implement such innovations, however. I believe these are inevitable capabilities that annuity providers must introduce if they stand a chance of saving the indexed annuity business in its present form.

Sales practices like those used by Mr. Bass are a virtual invitation to the SEC to intervene in this messy situation. That would be tragic, in my judgment. Is it finally time for indexed annuity providers to take urgent action?

©Copyright 2007 David A. Macchia. All rights reserved.

Whose Side Am I On? I’m On the Side of a Successful Annuity Industry. And I Can Prove It!

Following my essay on the July 8th article that appeared on the front page of the New York Times, I heard through a friend that a life insurance executive employed by one of the companies mentioned in the Times article read my piece and then called my friend to ask, “Whose side is Macchia on?” It’s a fair question that deserves a straight answer. The answer is that I’m on the side of a vital and healthy annuity industry. Please read on and I’ll prove it to you.

Clearly, some of what I’ve written about the annuity industry is critical of certain sales practices and products that I view as ultimately detrimental to the health of the entire annuity industry. I’ve also criticized in a general sense the top management of some companies for countenancing these practices. By doing this I’ve served as a lighting rod for some who reflexively seek to defend the status quo even though that defense is damaging to the long-term interests of the industry.

As someone who truly loves the insurance business and has benefited so much from my involvement in it, my criticism has always been intended as constructive. Of course, it may not appear that way to some.

The Process: Good People and Bad Practices

Sometimes good and decent people ignite bad business practices. In one of the installments of the blog series I called “The Preventable Demise of the Fixed Annuity Industry” I talked about the fact that the people in management positions in life insurance companies are almost universally good and decent individuals. I’ve met hundreds of insurance company executives and I’d be hard pressed to remember more than a couple I didn’t like. The business is staffed by legions of quality people.

I’ve had the greatest association with executives responsible for sales, marketing and product distribution. Virtually all of these people live under high pressure to deliver sales on a quarter-by-quarter basis. Because this pressure comes from top management, it’s almost impossible for these individuals to take a long-term view. At the CEO or Presidential levels there is also often times severe pressure to achieve sales targets. This gets transmitted to the distribution executives, regional managers, sales desk and individual wholesalers who are charged with forging the relationships with distributors that result in new sales.

The distributors present a constant challenge to insurance company distribution executives who are many times played-off against each other by the distributors. The big marketing companies ask, “Company A did ‘this’ for me so why don’t you match it?” There’s intense pressure on company “B” to match company”A”. The “this” that’s being asked for has often been products that pay higher compensation or have “special” features that appeal to marketing companies and down line agents.

This process repeats itself in a serial fashion and the result over a number of years is that products that start out with excellent consumer value can devolve to versions that are far worse. To effectively disguise the loss of consumer value gimmicky features emerge that mask the higher costs structures needed to generate higher levels of commissions. This is the history of the indexed annuity business.

As this process unfolds the annuity providers find themselves between a rock and a hard place. They are under pressure to generate new sales and they are forced to make compromises within limits to get those sales.

The intensity of competition among carriers for relationships with distributors is extreme. The natural tendency is to cave in (again, within limits) and give the distributors what they are asking for. All product manufacturers need distribution to be successful.

So what’s described above shows how good and decent people perform in a high-pressure game to deliver annuity sales. No one involved intended to damage anyone, least of all consumers. It’s a big, complex and aggressive process that yields the negative results we have today.

None of this, however, changes the fact that in order for the annuity industry to reach its potential it must confront the negative results the process delivers. As years pass and the negative results expand exponentially culminating in Sunday’s New York Time article, you reach a point where the business is so threatened at its most fundamental level that drastic action is called for. We’re at that point, in my judgment.

The Gifts We Are Given

We’re all blessed with skills that are as diverse as we are. Take me golfing and you’ll be in for a good laugh, I have to tee-off with an 8-iron because it’s the only club I can use to hit the ball straight. On the positive side I was blessed with a special vision for this industry and I could see years ago what the industry is confronted with now.

Two years ago I saw the future of the equity-indexed annuity business. I saw that it was on a dangerous course in terms of its most popular products offering the lowest levels of value to the consumer. I saw the unpleasant inevitable result of combining gimmicky products with poor sales practices. I literally had the vision of the New York Times article of last Sunday.

Driven both by my sincere desire to set the indexed annuity business on a course for quality growth (and make some money), in November of 2005 I conceived and set about to build a web-based application designed to separate the quality providers of equity-indexed annuities from the “bad guys.” Even then I recognized the urgency to create an un-level playing field in favor of the good companies at the expense of the other companies. The solution to accomplish this was a one-of-a-kind web-based application called EIAToday™. We went to work on the application development in December of 2005 and finished it by late February of 2006.

The idea behind EIAToday was to use compliant, web-based technology, video sales presentations and web-based marketing to dramatically improve the manner in which agents could explain the benefits of indexed annuities. It was intended to help expand the “pie” and increase the total volume of annuity business agents produce (I remain convinced that only by helping agents grow their sales volumes will they be able to afford the transition to superior products).

The technology platform underneath EIAToday was unprecedented in its capabilities and would have allowed quality insurance carriers to distribute indexed annuity products across multiple distribution channels in a consistent and compliant fashion. The companies would have been able to monitor their agents and insure that all required broker-dealer disclosure on an agent-by-agent basis was being presented to the public. The technology would have allowed the carriers to meet any distributor-specific requirements in terms of customized marketing materials and disclosures.

Every agent would have been provided a personally-branded micro site capable of streaming a compelling (and compliant) video educational presentation for consumers on indexed annuities. This would have enabled more consumers to learn about indexed annuities in a way that maximizes convenience and compliance. Remarkably, the video presentation even received successful review by the NASD.

Actually, the reaction among the life insurance executives to the NASD-reviewed presentation was quite interesting. Some reacted extremely negatively feeling that I had essentially betrayed the industry by asking the NASD (through a B-D customer) to review a presentation on what is not a security. Others thought it was very effective. In fact, as an educational presentation it achieves what I like Wealth2k to achieve: it explains a complex product in a fair and balanced manner without sacrificing sales appeal. Had it gone into wide circulation it would have been a key enabler in helping insurance companies foster quality relationships with broker-dealers. It’s just what the broker-dealers needed… and still need to better educate their registered reps.

It was a time-consuming and expensive effort to build the EIAToday application and I honestly felt that I had conceived a better future for the indexed annuity industry.

I invited eight quality companies to the Ritz Carlton hotel in Boston to come together and redefine the future of the indexed business. What an ambition! They did come. Some sent more than one person. What resulted from the day long meeting? Nothing much. Actually one company did signal interest but that company hadn’t yet come to market with its indexed annuity and ultimately never did.

These quality companies passed on what was a remarkable opportunity to distance themselves from those companies that have spoiled things for all annuity companies. They could have benefited themselves and consumers greatly had they been able to pull the trigger.

No regrets.

I have no regrets at all over the EIAToday effort in spite of the substantial financial and emotional investment made. I still like and respect all of the people who attended that opportunity meeting. I understand that when things are going pretty well it’s difficult for insurers to come to a decision to change what they are doing.

But now I believe that companies no longer have the luxury of suspending disbelief. Sales are declining, the public image of annuities has plummeted, regulators are advising seniors to stay away and the future is uncertain. Perhaps I should pull EIAToday out of the closet? Make it exclusive to one company?

The next few months will prove to be a very interesting time for the entire annuity industry. How it chooses to respond to today’s vexing problems will likely define its future for the next decade. It will also largely determine its success in attracting Boomers’ retirement assets.

I think my tangible investment in developing the EIAToday application proves how determined I was then and am today to help make a more healthy and successful annuity industry. It also proves that my vision is quite real. When challenges present themselves one can hunker down and defend even the worst aspects of the status quo, or, see that a new and promising door has been opened.

©Copyright 2007 David A. Macchia. All rights reserved.

7/8/07, The Day that Signaled the End of Business as Usual for the Annuity Industry; The “New York Times Test” Finally Arrives and Too Many Can’t Pass

“Executives at most admired companies conduct all business as though every conversation, every e-mail, every meeting and every Board discussion was going to appear tomorrow on the front page of The New York Times, or typed up and distributed to all of their customers. So I think your ‘New York Times Test’ is absolutely accurate. Moreover, most admired companies are driven to produce superior customer service, not because of what their legal contracts say, but because of their desire to do what’s right for the client.” Northwestern Mutual SVP, Chuck Robinson, commenting on my May 21, 2007 essay on what it will take for life insurance companies to become truly admired.

I really think that yesterday marked the beginning of the end for certain annuity sales practices (and products) that simply cannot withstand public scrutiny. After all, “The New York Times Test” I’ve been talking about for a few years finally happened. If you’re not familiar with this analogy it simply means: If your business practices were to become the subject of a front page article in The New York Times, how would you feel? There are many in the annuity industry feeling sick this morning.

As I’ve so often written, the annuity industry continues to endure a painful transition period that’s resulted from a combination of poor sales practices, regulatory scrutiny, hostile press coverage and civil litigation. Equity-indexed annuities and the sales practices used in conjunction with them have drawn the most attention, of course. But other types of fixed and variable deferred annuities have also been snared in the spider web of bad publicity and periodic overreach by regulators. For example, John Setzfand, director of financial security with AARP is quoted in yesterday’s Times article as saying, “But a deferred annuity is almost always a bad idea for a retiree.”

The critics of annuities smell blood and they will not be deterred by anything including the truth. Of course the industry brought this upon itself by not having the will to address some of its most intractable problems while it still had the chance. (You may download a booklet addressing these problems including my proposed remedies by clicking here).

But it’s important to realize that beginning yesterday the scrutiny of annuities and questionable sales practices has reached the “China Syndrome” level. When the Sunday edition of The New York Times puts annuities on the front page (above the fold!) and in the context of victimized seniors, it means that a new and deeper scrutiny of the industry is about to begin.

A Very Different Monday for Life Insurer CEOs

It’s Monday morning in more ways than one. It’s the start of a new work week and it’s the start of a new era in the annuity industry. I’m convinced that annuity company CEOs need to bite the bullet and start getting their companies perceived as being on the side of consumers. It’s the right thing to do, and it’s also the gateway to robust growth. Not sure how to do it? I’ve laid out a plan I believe will work.

As if the present situation didn’t create enough urgency, the Boomers are coming and a good portion of their $30 Trillion in retirement assets needs to be longevitized. This is the greatest business opportunity annuity providers will face in our lifetimes. Providers need to make a clean break with the “old” way of doing things in terms of how they position their products. Incremental adjustments won’t cut it. Time for something more dramatic. Real reform will result in a couple of quarters of lower sales but will be followed by robust, quality growth.

I make the “China Syndrome” analogy with good reason. The New York Times sets the pace for newspapers all over the U.S. as well as the big television networks. Routinely, other news outlets pick-up on what the Times is reporting and make it their own. Will we see CBS, ABC, NBC, CNN, FOX and MSNBC launch their own investigations of the annuity industry? It’s a pretty certain bet that most if not all will.

And what’s the likelihood of ambitious politicians being able to restrain themselves in the midst of mass media exposure of an industry that is described by one regulator as tolerating sales practices that, “….seem designed to trick seniors into listening to swindlers.” Ouch! And is there any reason to doubt that all of this will only increase the desire of plaintiff’s attorneys to make the industry pay a big financial price?

Time is running out on the annuity industry. Real harm is ahead. High-placed heads may roll. Some businesses that not long ago seemed “healthy” will become marginalized. Shareholder value is at risk. New competition may steal the Golden Goose.

Am I a Cassandra? Or have I read it in the Times?

©Copyright 2007 David A. Macchia. All rights reserved.

Now Playing on Vegas TV, “Bad Animals” Annuity Videos; Consumer Warnings Against Annuities Jump from Print to Digital

Nevada insurance regulators are portraying some sellers of annuities as people who are really “bad animals.”

National Underwriter Online Edition- June 19, 2007

Well, if annuity providers won’t use videos to compliantly communicate the value of their products then I guess regulators will use videos to stop their annuity sales.

Here’s the latest “development” in regulators’ continuing creative efforts to save consumers from, “… buying a faulty annuity for the wrong reasons.” According to the website Broadcast Newsroom: This new campaign titled “Bad Animals” simulates conversations between annuity “sales people” who are really “animals” underneath the surface.” OK, I’m sick.

National Underwriter reports that the Nevada Division of Insurance developed the “Bad Animals” advertising campaign to encourage consumers to check the licenses of annuity suppliers, officials say. The campaign includes 4 television commercials airing in Las Vegas and the Reno, Nev., area and 2 billboards, officials say.

Each ad represents a ‘simulated sales’ vignette shown from the perspective of the purchaser as they are coerced into buying a faulty annuity for all the wrong reasons,” officials say. “The ads creatively show a ‘sales person’ communicating with a potential annuity customer, then flashes to a photo of a predator that most creatively represents each salesperson, demonstrating how the customer is deceived through witty and coercive tactics.” The slogan of each ad is, “Check with us before you write a check,” officials say.

In the 1976 movie, Cool Hand Luke, actor Strother Martin famously said, “What we have here is failure to communicate.” In the annuity industry what we have today is failure to communicate compliantly. It doesn’t have to be this way.

Message consistency, fair and balanced product explanations, quality education of producers and consumer empowerment are anything but vague and unattainable objectives. The required tools and technologies to achieve these improvements are fully developed. What’s lacking is courage.
How many hostile consumer “warnings” can the industry absorb before it is irreparably harmed?

©Copyright 2007 David A. Macchia. All rights reserved.

New Blog Excerpts Book Available for Download: The Preventable Demise of the Fixed Annuity Industry

You may recall the four-part series entitled The Preventable Demise of the Fixed Annuity Industry. This series sought to identify the seeds planted years ago that have sprouted into the negative public image and distribution challenges facing today’s fixed annuity industry. It also led to an OpEd published by InvestmentNews.

The fourth and final installment presented my vision for tomorrow’s fixed annuity producer, someone who is better aligned to meet the needs of a wider range of prospects. The annuity agent of the future will be more successful- and busier. Reliance, in part, upon next-generation consumer-facing marketing technology creates greater productivity and leads to the ability to successfully market products that offer inherently greater consumer value.

The four parts of this series have been published in a book format you may download at no cost by clicking here.