As a former Life Insurance producer (over 30 yrs. in the industry, still maintain licenses and stay up to date on happenings) I find the maze of present regulatory activity to an albatross that unfortunately hangs around the necks of middle class consumers who have been the so called targets of help from the government.
I was fortunate to have been a newbie to the industry back in the day when there was a distinction between a Life Insurance professional, a Stock Broker and a Banker. In that time an individual had the opportunity to get professional help from 3 clearly differentiated professionals who had no conflict of interest and gave the individual the best chance of getting the right product for the right financial need at the right time. The Regulators decided though that the Banks had a good point when they said they could better serve all by having the ability to provide insurance, securities and banking products. This led to the period where the Banks became stockbrokers and Life Insurance professionals as well as Bankers. This forced Life Insurance Professionals to become stockbrokers and Stockbrokers to become life insurance agents. What the consumer got was hosed.
Now the debate is how to further regulate any differential from these professionals once again. It comes in the form of the demand for all financial service professionals to be held to a standard of fiduciary as opposed to suitability. This will essentially cut the middle class consumer and investor out of the equation and make it prohibitively costly for the small investor to participate in any form of investing. It will also destroy the opportunity for the same middle class consumer to obtain an annuity when it is suitable for them to do so.
Presently there are numerous levels of laws and regulations protecting consumers and small investors but the Federal government is seeking to get its hands on the potential fees that come along with excessive regulations. At the Advocacy Network we work to protect consumers, investors and businesses from scams, fraud and predatory sales tactics. We also need to voice our concern when there is unwieldy and unnecessary government intervention that is supposedly geared to protect consumers and investors when in reality it is simply methodology for the Federal government to increase revenues in the form of regulatory fees. These fees are always passed down the line to the pocket of the consumer/investor and in essence constitute an additional tax.
As we know there are some abuses in the sales of annuities and these abuses are a small percentage of the overall sales but consumers should be protected and here is how they are presently protected:
- State Insurance departments have numerous levels of protection and also have Elder Abuse laws passed in a majority of states.
2. The suitability standard has 3 levels of protection to the consumer who purchases an annuity. The insurer must review the agent’s recommendation of suitability for each and every sale (not a sampling of sales). Second level is this strict review requirement is required before the policy may be issued and continues during and throughout the free look period. Lastly, upon delivery of any policy if the client believes the annuity policy is not suitable or no longer fits their previous suitability they may return it for a full refund of premium. There is no other financial product that offers this 3 tier level of protection. Therefore it is quite evident that best standard of care for this sale is the suitability standard and that forcing a fiduciary standard would provide no additional protection but would effectively make less product available and leave middle class consumers with less options at greater expense.
The problems that started the whole debacle was the catering to banks when they wanted to become insurance agents and stockbrokers to simply increase their profitability. The banks already had an unfair competitive advantage as they controlled a heavy portion of the population through depository and checking accounts. Once that had control of this data point allowing them sell insurance and securities put the other forms of distribution (agents and stockbrokers) at a clear disadvantage and forced them into competition instead of professional advisory roles. This was an easy mess to identify and avoid but the greed of the banking industry and their control of the regulatory agencies created this mess and is still directing its dysfunction. Now the effort to further diminish any competition is being undertaken with the guise of consumer protection through further regulatory interference.
The only people who can stop this is the middle class consumer and investors who need to stand firm on their rights for open competition and the ability for share in the marketplace opportunities that presently are being limited to wealthy investors. Time for the small investor to get the opportunity to share in the creation of personal wealth and make the playing field more even. Say NO to those legislators and regulators who are seeking to put their hands in your pockets under the guise of protecting your best interests as nothing could be further from the truth.