Response: How Well Do You Know… Fixed Annuities?
March 2, 2009 by Leslie Schism
PDF for Setting It Straight with WSJ 1
ORIGINAL ARTICLE CAN BE FOUND AT: [URL no longer available]
Leslie,
Although I appreciate your efforts to educate millions of American consumers on the value of fixed annuities, I deplore the closing statement in your article regarding indexed annuities, “These fixed annuities are complex, so much so that the Securities and Exchange Commission voted last year to start regulating them as securities as of 2011. The change means that an insurance agent will need a securities license to sell the popular product.”
As the foremost authority on indexed annuities, and president of the only firm that tracks every single indexed annuity product, and their sales- I’d like to take a moment to educate you on the matters discussed in your article.
The SEC’s decision to regulate indexed annuities as securities product was not based on the perceived complexity of the product. In addition, this decision is currently being challenged in court by two separate entities. Insurance agents may not necessarily need a securities license to sell indexed annuities in the future, as there is sufficient legal precedence to show that indexed annuities are fixed insurance products, which means that agents may NEVER need to be securities licensed to offer these fixed annuity products.
An indexed annuity provides minimum guarantees that are typically lower than those of traditional fixed annuities, in exchange the opportunity for higher upside crediting potential than traditional safe money places (such as traditional fixed annuities and CDs). Limiting the potential interest credited is the means for the
insurance company to continue offering a minimum guarantee on the products. If there were no limit to the potential interest, it would be a variable annuity with no minimum guarantees. To clarify, caps, participation rates, and spreads are merely three different ways of limiting the potential interest credited on indexed annuities.
Each of these pricing levers performs the same function, and most indexed annuities only use one of these methods as a means of limiting the potential indexed interest.
I am appalled that newsmagazine as reputable as the Wall Street Journal would take it upon themselves to mislead millions of Americans who need the safety and stability of indexed annuities during a volatile economic environment. Any clarification you can provide to your readers on this matter would be greatly appreciated.
Sheryl J. Moore
President and CEO
LifeSpecs.com
AnnuitySpecs.com
Advantage Group Associates, Inc.
(515) 262-2623 office
(515) 313-5799 cell
(515) 266-4689 fax
