Oops . . . forgot to waive 6.3 million in sales loads?

Presented by David Corwin

As we go further down the road in the financial services industry, which insurance only agents also find themselves classified in, I’ve been seeing some drastic differences. Even though, over an extended period of time, the differences seem to become harder to see.

In a recent article, I read that FINRA (Financial Industry Regulatory Authority Inc.), fined a broker/dealer for not waiving as much as 6.3 million dollars in sales loads for certain mutual fund shares, and other firms getting fined for similar offenses. Another example is a broker/dealer who was ordered to pay 11.7 million in fines and restitution for what it deemed “widespread supervisory failures” related to sales of certain complex products including variable annuities.

I speak with agents all the time, that happen to be neck deep in securities, and they ask my professional opinion on Equity indexed annuities so that they can understand and compare the differences. After the long discussion that I have explaining the main features and benefits of owning such a vehicle, they usually say “that’s way too complicated” and “how on earth could I sell such a product to anyone.” My typical response to that is asking them to explain the mortality and expense charges on variable annuity contracts, or explain why the fees on one of the myriad of sub accounts in the same asset class is drastically different than others. I go on to ask if they’ve read and understand the 569 page prospectus that they are to leave with the consumer after discussing, and ultimately selling, a variable annuity. The response sometimes, if not most of the time, is usually that I’ve made a good point and for me to send them more information.

If you’re reading this blog as a securities representative or an insurance only representative, you have to understand all annuities if you’re going to truly offer what the client desires to have.

Posted in Annuities and tagged , , , , , , , , , , , , , .