One vs. 114 complaints
August 3, 2011 by Jack Marrion
BY Jack Marrion
Published 8/1/2011
My annual study on index annuity complaints shows
on a sales volume adjusted-basis, annuity complaints have fallen 75 percent
since 2007. It seems the annuity industry is doing a much better job of
properly selling their products. Which brought a question to mind: How many
investors complain about their stockbroker or advisor?
The annuity complaint data is easily available at the National
Association of Insurance Commissioners (NAIC) website, but it can be difficult
to find securities complaint data. Although FINRA reports there were 3,208
customer complaints in 2010, the SEC only lists data on the top 10 categories
(even so they accounted for 5,919 complaints last year). The North American
Securities Administration Association (NASAA) makes a lot of noise about
enforcement, but doesn’t seem to be current on complaints; their latest report
covers the period from 2008-09, when they report 2,294 Enforcement Actions Initiated
by securities departments in 42 states.
I could, of course, go through and tally up the individual states,
but there’s a problem with that. State securities departments tend not to
report complaints, but only actions, which aren’t the same thing. Indeed, when
I was researching regulatory actions I was assured by two securities
commissioners that they had received “hundreds of complaints” against index
annuity producers.
When I mentioned to each that I had uncovered less than a handful
of regulatory actions against annuity agents in their state and would like to
come to their offices and review these “hundreds of complaints” I was told that
they didn’t keep records of those files.
Not ethically inferior
Discounting NASAA and the state securities
departments, there were 9,127 complaints against securities registered firms
and individuals in 2010 (according to FINRA and the SEC) and 80 against index
annuity carriers (from NAIC). Or, in other words, for every one complaint in
the annuity world there were 114 (at least) in the securities world. It would
seem that all of this attention suggesting that the index annuity industry is
somehow ethically inferior to the securities industry is misdirected.
There were 666,812 securities registered sales people in 2010 and
they had 114 times the complaints of the index annuity agents. I do not know
how many agents sell index annuities. I do know some of the larger index
annuity firms have over 35,000 agents, but many agents are contracted with more
than one carrier, making it difficult to get an exact count of agents selling
index annuities. Even excluding state securities departments there were still
at least eight to 10 times more complaints for every 1,000 registered/licensed
persons in the securities world than in the annuities industry.
The facts are very clear. The index annuity industry has a better
complaint record than the securities industry.My
annual study on index annuity complaints shows
on a sales volume adjusted-basis, annuity complaints have fallen 75 percent
since 2007. It seems the annuity industry is doing a much better job of
properly selling their products. Which brought a question to mind: How many
investors complain about their stockbroker or advisor?
