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.