NAFA Meeting Kicks-Off; Press is a No-Show
What if you invited three-hundred people to a party and nobody showed?
While I know that press is highly skeptical of the fixed annuity business, even this jaded observer was astonished to hear NAFA Executive Director, Kim O’Brien, report that only 10 of the 300 reporters invited to NAFA’s Annuity Summit even bothered to reply. All who did responded declined.
If I were a Board member of NAFA I’d be in intense self-examination mode; a total press boycott should send a message about the strategy NAFA has taken in rebuttal of every negative article that’s hammered fixed products. I’ve read a number of NAFA’s formal, written responses to reporters who have criticized annuities-especially indexed annuities- and they all have corrected numerous factual misstatements about annuity products.
While that’s good and necessary, the responses aimed at the reporters have typically conveyed a “put down” feel to them that at times has sounded arrogant, angry and heavy-handed. This is a formula for alienation rather than cooperation that is unlikely to serve NAFA’s interests as indicated by the boycott.
If you are a regular reader of this blog you know that I’ve been on a mission to galvanize leaders to the urgency of confronting the industry’s most endemic, difficult-to-tackle problems: sub-optimal agent productivity, over reliance on high commission, opaque and complex products, suspect sales practices, suitability and archaic consumer-facing marketing. A thorough self-examination is vital so that the industry can set itself on a course for greater success in the future.
The industry needs to find the will to do what it’s never done: “call-out” providers whose products and marketing serve to damage the entire industry. I’ve not been timid about doing this. See my comments about Allianz Life as reported in InvestmentNews on 1/15/07. If, say, three years ago companies committed to consumer-oriented indexed products had attempted to isolate and marginalize competitors whose products are manifestly negative to consumer interests, I doubt that the industry would be facing the challenges it now faces.
This is where NAFA can provide leadership in a vital area. I don’t know, however, that it possesses the will to do so. Compare the strategies taken by NAVA and NAFA.
In February I attended the NAVA Marketing Conference. The conference began with NAVA’s CEO, Mark Mackey, delivering an entirely sober, candid and disturbing “State of the Union” that pointed out the tangible challenges facing variable annuity providers. For instance:
• 80% of financial advisors shun the product
• That VAs have been mis-marketed (igniting criticism in the press over fees and tax efficiency) by comparing the variable annuity to other investment products like mutual funds rather than positioning them as risk the management vehicles they are
• That VAs have expense charges that many view as unreasonably high
• That the product acquisition process is cumbersome and inferior when compared to other investment choices
• That the effectiveness of the VA industry’s consumer marketing has been lackluster
To me, this candid acknowledgement of the VA industry’s challenges by the VA industry’s national association is smart, appropriate, real, and entirely healthy. This self-examination and willingness to address its toughest challenges will lead the VA industry to its greatest success. NAFA, in my judgment, should step-up, mimic NAVA and take an active and relevant leadership role. If it doesn’t it will surely drift into irrelevancy.
Yesterday’s kickoff speakers demonstrated that some in the fixed annuity industry remain in a bit of a time warp. The first two speakers, Bob Williams, of Old Mutual, and Barb Cole, of M&O Marketing each presented with skill and passion. Yet, I was left with the feeling that they were missing the mark in terms of providing attendees the timely guidance they need to succeed; each presentation seemed slightly out of context in light of the undeniably hostile marketing environment annuity agents are facing.
I liked Cole’s exhortation to annuity agents to lay down their “credentials” early on in the interview process. She advised audience members that they should proudly tell their prospects that they belong to organizations such as the National Ethics Bureau, or carry designations such as Certified Senior Advisor, or possess any of the many other “certifications” agents typically acquire.
As I heard this I was left to wonder- in the context of the complaints issues in Massachusetts by that state’s securities regulator- if what’s being advised here is arguably illegal in one or more states. The National Ethics Bureau and the Society of Certified Senior Advisors were specifically alleged to be elements of unethical and dishonest marketing activities that agents use to “prey” on the senior population.
Moreover, the presentation techniques illustrated were likely to place the agent in a situation where he or she could be charged with acting as an unregistered investment advisor.
It’s clear to me that yesterday’s marketing techniques and presentation strategies are in need of complete overhaul.
Kudos to Richard Kado of Genesis Financial Products who delivered what, for an actuary, was a riveting presentation on new developments in indexed product design. Genesis’ research has shown that longer indexing periods (multi-year) deliver the best interest growth over time. He also enlightened the audience on the tough balancing act providers face in terms of providing annual liquidity balanced with the attempt to maximize cash value accumulation.
Aviva’s Mark Heitz presented a splendid albeit brief overview of the current annuity market and made some positive predictions about adoption of indexed products by broker-dealers and banks. After the meeting I had treat to share dinner with Mark and found him to be a very humble, classy and passionate industry leader. Mark also agreed to be my interview subject for an upcoming “Leaders & Innovators” piece
I’m anxious to find out how Day Two of this conference unfolds. More tomorrow.
©Copyright 2007 David A. Macchia. All rights reserved,