Dateline on Fixed Index Annuities

[etimer]

Last night while cooking I watched parts of the Dateline show on FIA's. I missed some parts. I did see one guy point out the surrender charges in the brochure. That wasn't good enough for the Dateline guy. Not sure how much more is needed? Plus, at least in my State, there is a disclosure that must be signed that shows the surrender charges. The apps aren't that long and complicated so it would be hard to miss the surrender charge. In the usual government mode, they would make that app 22 pages long and then no one will read it. So in the mind of Dateline, showing the surrender charge in the brochure plus a signature required sheet that shows the surrender charge isn't enough. Hm....I wonder what would satisfy them?

If I would have been there I would have asked the expert Dateline financial reporter, what would you have people do with the safe part of their portfolio? Remember they do want to make a return on their money...

1. Stuff it in a mattress
2. Put it in stocks (yea those people are real happy right now)
3. Invest in gold or silver
4. Invest in an FIA that has a surrender charge but does have a chance to make more than a CD. About five years ago...what were CD's paying? (NEW YORK--(BUSINESS WIRE)--Nov. 20, 2002 Since the Federal Reserve Board cut rates Nov. 6 by a half point, banks have responded by quickly cutting the yields they will pay to consumers on all classes of certificates of deposit (CDs), according to Bankrate.com data.) Date: Wednesday, November 20 2002

There are many more people that are happy with FIA's than those that are not happy. When CD's were paying nothing a lot of FIA people were getting good returns.
Nov 2002
6-month CD yield: 1.35%, down from 1.50% last week
1-year CD yield: 1.54%, down from 1.68% last week
5-year CD yield: 3.30%, down from 3.39% las

I've told people, do not do these if you need to withdraw your money. Still I've had people do them and then within a year or two start taking more than their annual penalty free withdraw. Go figure????

People that need to currently withdraw money from the stock market may be taking money out at a loss. Where is Dateline on that one?

I don't sell long term surrender annuities but isn't there usually a bonus on those annuities? Like 10% or something like that? Did Dateline mention that bonus and how for those that keep the annuity benefit from that bonus. I didn't hear it.

I'd ask Mr reporter.....you go to your doctor for an ear ache and he prescribes an antibiotic. Does you doctor sit and tell you all that can go wrong with that antibiotic? Does your pharmacist explain that this antibiotic could kill you (I have experience on that one)? No they give you a paper with your drugs. Read it if you are concerned.

I don't have a problem with disclosure but how darn far must it go? There is more open disclosure on annuities than there are for prescribed drugs, something that can kill you. I guess Dateline would be happy if we didn't make any money selling annuities. I think that is the crux of their problem. Plus they had the "experts" saying that nobody should buy any of these annuities. Nobody? That's a very broad statement. I'm still looking for the perfect investment, an investment with no downside...only an upside. Is there one?

After 15 years as a Series 7 person, I wouldn't doubt that the large wirehouses were behind this story. Those guys have been losing money to the FIA side and don't like it. The large wirehouses run the (guess who sits on the board) NASD and make it very hard on the Independent Broker Dealers.

I did laugh at the idiot that said the FDIC is rated F-. Also I wouldn't sell an annuity with a 20 year surrender charge to an 85 year old. I didn't know Allianz had an annuity with a 20 year surrender charge. Maybe in States other than my State? The guy that paid to have his picture on a magazine...that's wrong. So it is good to find the bad actors but I'm sure Dateline's under cover camera found honest people. Nothing was shown about the honest ones or even mentioned.

There are snake oil sales people out there. I just don't like the broad brush they use to paint with, making the entire industry seem like under-handed sales people. None of the advertisers on Dateline have small print on the TV screen do they? You know, that small print that you can't read and isn't on the screen long enough to read it even if the font was big enough. I guess it is ok to sell stuff when it makes money to pay Chris Hansen his handsome salary.

[Big Dog]

I happened to catch that segment also. Having interned at one of the best independent financial planning firms in SoCal, and also having attained the CFP designation, one of the things I came to realize is that annuities, in whatever form they come in, are not always the best investment choice.

This article from The Motley Fool is worth the read.
http://www.fool.com/retirement/annuities/annuities.htm

Some of the biggest reasons we never recommended annuties were:

• The costs
  Limited potential to pass along wealth
  Investment limitations

As the Fools note, there are better choices.

[volstrike3]

I agree Big Dog. The only upside of an annuity is for the person making the commission. There is almost always a better option.

That being said I watched the dateline episode and the only thing I found questionable was the fake credentials, ghost written articles, etc that some of these guys were using to build credibility. The agents all said you should not place all your money in this financial product and you would pay a penalty to get at the money early. I feel like dateline was reaching a bit. You cannot expect a salesperson to highlight the negatives during a quick presentation. I am sure everything was disclosed in the paperwork and it is not unreasonable to expect people to do a little due diligence on their own investments. I know that I do.

[etimer]

That begs the question.....what is the best choice? For the 15 years I had my Series 7 shingle out, the general securities people thought stocks were the only way. When I was an RIA my RIA brethren all thought the fee only was the best. So when people talk about the best option I always like to hear the views on the best option.

As we all know, cost is important but it isn't the final decision. If it were, people would never care about the service for commercial policy but would only buy the cheapest policies.

There still exists that age old which is better term or permanent argument. All that I can give is anecdotal evidence. Now that I've been in this business since the early 1980's it is long enough to see people that ran out their 20 year level term policy. Guess what, they now have a new mortgage, an unexpected kid and they are looking for life insurance. I had a referral call me in the exact situation I mentioned. The problem is that at his current age, he has some big, bad health problems. No life insurance for the poor guy. He followed the experts life insurance advice but look where he is now.

There are pros / cons / cost / risk and it is an individual choice to which way they may go.

[volstrike3]

[quote="etimer"]That begs the question.....what is the best choice? For the 15 years I had my Series 7 shingle out, the general securities people thought stocks were the only way. When I was an RIA my RIA brethren all thought the fee only was the best. So when people talk about the best option I always like to hear the views on the best option.

As we all know, cost is important but it isn't the final decision. If it were, people would never care about the service for commercial policy but would only buy the cheapest policies.

There still exists that age old which is better term or permanent argument. All that I can give is anecdotal evidence. Now that I've been in this business since the early 1980's it is long enough to see people that ran out their 20 year level term policy. Guess what, they now have a new mortgage, an unexpected kid and they are looking for life insurance. I had a referral call me in the exact situation I mentioned. The problem is that at his current age, he has some big, bad health problems. No life insurance for the poor guy. He followed the experts life insurance advice but look where he is now.

There are pros / cons / cost / risk and it is an individual choice to which way they may go.[/quote]

I am guessing he didn't buy term and "invest the difference". The advice is good but it suggests that people have enough discipline to do so and in my experience, very few do. They buy term and spend the difference and have nothing to show for it. Whole life isn't the best investment in the world but forced savings is better than no savings.

[etimer]

Why yes he did the BTID but the stock market is down, he's bought a new house, has that unexpected 12 year old hang'in around, to feed, send to college, etc. The plan changed on him. Pregnancy has a funny way of doing that :

Most people don't want to sell their stocks in a down market to pay off a mortgage. Plus the associated probate, tax cost, etc. that would appear if this guy left this world.

We are in the business of risk and the transfer of it....aren't we?

[volstrike3]

I guess the moral of the story is to get snipped.

[indexedannuitygirl]

My name is Sheryl J. Moore, and I am an independent market research analyst that owns a consulting firm which tracks every product and company in the indexed annuity market, as well as the sales of the products. I have been awaiting this segment, and warning my clients in the indexed annuity market about it since last November.

I must admit, was sorely disappointed after seeing this undercover investigation.

Was Dateline trying to use psychological methods by repeating the chant "indexed annuities have lengthy surrender charges?"

Fact: the average surrender charge duration on indexed annuities sold as of the fourth quarter of 2007 was ten years. (Source: AnnuitySpecs.com Advantage Index Sales & Market Report.) Are there products on the market with longer surrender charges? Yes- as long as 16 years and as short as one year, but longer-term products usually come with a premium bonus to enhance the consumer's cash value (hence those "hefty surrender penalties" your producers kept pointing out on the show; yet no mention of the benefit the consumer gets from the bonus?).

Furthermore, what were producers trying to accomplish by alluding that indexed annuities are illiquid? Fact: 92% of all indexed annuities offer 10% penalty-free withdrawals annually with no cumulative limit, and some offer 20% penalty-free withdrawals! (Source: AnnuitySpecs.com)

Another aspect of disappointment was using Attorney General Lori Swanson as a credible source of information on indexed annuity products. Is this a reliable person to provide unbiased information on the product line? Would you rely on someone who is suing carriers that offer indexed annuities, just for her own political gain? In all fairness, Chris Hansen should have disclosed that Minnesota's legislative auditor has launched a preliminary investigation into allegations of ethical and legal lapses in Attorney General Lori Swanson's office (of interest, Swanson and some of her top aides have been accused of trying to find defendants to fit lawsuits on high-profile topics.) Coincidence?

Indexed annuities are not a one-product-fits-all solution and there is never an excuse for agents behaving badly. Yes, at times indexed annuities are the instruments that are used in the course of bad agent behavior. However, I would hope that by now Chris Hanson, along with all of the viewers, would realize that this is the case with ANY financial product. Insurance companies in this industry do not put up with it. Market conduct and suitability (particularly senior suitability) have been a primary focus in our industry since Fall of 2005, and tremendous strides have been made.

Overall, I will close with the fact that I hope the investigation was a big wake-up call for all of the agents that aren't doing their job and disclosing all of the facts to their clients. DO YOUR JOBS IF YOU WANT THESE VALUABLE PRODUCTS TO BE AVAILABLE FOR YOUR CLIENTS! To Lori Swanson, she needs to worry more about her consumers than about suing indexed annuity carriers just for the sake of suing and headlines. And to Chris Hanson, a special message- indexed annuities are NOT investment products.

As a consumer, I rely on the news for unbiased information that provides BOTH sides of the story. I wish I could have received that with your broadcast.

Sheryl J. Moore
President and CEO
AnnuitySpecs.com
Advantage Group Associates, Inc.

[etimer]

I guess the moral of the story is to get snipped.

Very good!!!!

I have a nephew that should have done it a long, long time ago.

[etimer]

I wish that Dateline would have exposed the bad agents. Instead they misled everyone and left them with the idea that all FIA's have 20 year surrender charges (they did say 20 years). Never mentioned any options of penalty free withdraw percentages, etc.

I'm sitting here thinking, if I misrepresented a Mutual Fund, FIA, auto coverage, etc. as badly as Dateline I could be sued and lose my license. Does Chris have a liability exposure????

My name is Sheryl J. Moore, and I am an independent market research analyst that owns a consulting firm which tracks every product and company in the indexed annuity market, as well as the sales of the products. I have been awaiting this segment, and warning my clients in the indexed annuity market about it since last November.

I must admit, was sorely disappointed after seeing this undercover investigation.

Was Dateline trying to use psychological methods by repeating the chant "indexed annuities have lengthy surrender charges?"

Fact: the average surrender charge duration on indexed annuities sold as of the fourth quarter of 2007 was ten years. (Source: AnnuitySpecs.com Advantage Index Sales & Market Report.) Are there products on the market with longer surrender charges? Yes- as long as 16 years and as short as one year, but longer-term products usually come with a premium bonus to enhance the consumer's cash value (hence those "hefty surrender penalties" your producers kept pointing out on the show; yet no mention of the benefit the consumer gets from the bonus?).

Furthermore, what were producers trying to accomplish by alluding that indexed annuities are illiquid? Fact: 92% of all indexed annuities offer 10% penalty-free withdrawals annually with no cumulative limit, and some offer 20% penalty-free withdrawals! (Source: AnnuitySpecs.com)

Another aspect of disappointment was using Attorney General Lori Swanson as a credible source of information on indexed annuity products. Is this a reliable person to provide unbiased information on the product line? Would you rely on someone who is suing carriers that offer indexed annuities, just for her own political gain? In all fairness, Chris Hansen should have disclosed that Minnesota's legislative auditor has launched a preliminary investigation into allegations of ethical and legal lapses in Attorney General Lori Swanson's office (of interest, Swanson and some of her top aides have been accused of trying to find defendants to fit lawsuits on high-profile topics.) Coincidence?

Indexed annuities are not a one-product-fits-all solution and there is never an excuse for agents behaving badly. Yes, at times indexed annuities are the instruments that are used in the course of bad agent behavior. However, I would hope that by now Chris Hanson, along with all of the viewers, would realize that this is the case with ANY financial product. Insurance companies in this industry do not put up with it. Market conduct and suitability (particularly senior suitability) have been a primary focus in our industry since Fall of 2005, and tremendous strides have been made.

Overall, I will close with the fact that I hope the investigation was a big wake-up call for all of the agents that aren't doing their job and disclosing all of the facts to their clients. DO YOUR JOBS IF YOU WANT THESE VALUABLE PRODUCTS TO BE AVAILABLE FOR YOUR CLIENTS! To Lori Swanson, she needs to worry more about her consumers than about suing indexed annuity carriers just for the sake of suing and headlines. And to Chris Hanson, a special message- indexed annuities are NOT investment products.

As a consumer, I rely on the news for unbiased information that provides BOTH sides of the story. I wish I could have received that with your broadcast.

Sheryl J. Moore
President and CEO
AnnuitySpecs.com
Advantage Group Associates, Inc.

[jackweho]

Just a quick comment on the term insurance...why didn't the agent discuss the conversion privilege under almost all term policies? Best of both worlds-invest the difference and, if circumstances change, still have the option to continue on a permanent insurance basis.
As to Dateline, they make their bones by sensationalizing-no one wants to hear about the FIA with the 5 or 10 yr surrender charge, or the yearly 10% no-surrender charge withdrawal option. Nor did they highlight the fact that these surrender charges decrease on a yearly basis, so that the income earned may more than offset the imposed surrender charge and, in fact, leave the principal intact or higher than the original investment. I believe there are even a few FIA that offer a full or modified cumulative withdrawal option.

[etimer]

He did look into the conversion but for the amount of insurance he wanted, the price was an objection. In the end it may have been his final option.

[jackweho]

Not to beat a dead horse, but with 35 years experience in Financial Services (ser 7/63/65, L&H, P&C), I am willing to bet that price was an objection (or would have been) had permanent insurance been proposed vis-a-vis the term that was purchased. Thirty year term was available even back then, so there was another option; today there is the ROP option as well. As others have said, there is no one cookie cutter solution for everyone, but many times it is the election of the investor/insured at the time of purchase, contrary to the advice offered, that comes back to haunt in the future. Funny how the story, a person's memory, and the circumstances change over the course of time; inevitably, it is always the salesperson who misled the poor John Q. Public.
In today's world, it is all those "evil" Mortgage Brokers that "allowed" applicants to lie and misstate income in order to qualify for a mortgage they never should have purchased.

[etimer]

I've found that memory lapse run rampant among the public. No matter how hard you try to explain something, no matter how many disclosure forms there are, people will conveniently forget. Maybe they only hear what they want to hear?

[havogel]

I have made a decision to never sell something that I can't understand. And, unfortunatly, not enough insurance agents understand an indexed annuitie. I also insure a law firm that tells me they have never lost a case sueing an agent and or a broker dealer orver an indexed annuity. With this in mind, I would rather lose the commission on a sale rather then take a chance and lose my E&O. To me an indexed annuity is a lawsuite waiting to happen.