June 27, 2008
As a consumer of these products (indexed annuities), I see them as being stable and low-risk enough to not require SEC licensing and regulation. Since the only real risk is found in those cases where the agent and consumer don't clearly examine the repercussions of early excessive withdrawal, it takes only a minimal amount of due diligence on both parts to ensure that a suitable mix of liquidity, safety, and earning potential is reached.
In my opinion, moving these products to SEC licensure would give them a similar status to index funds, which can yield higher gains with comparatively higher risk. I believe this would be more problematic to the public. In addition, this move would further concentrate the "expertise" perceived by the public into fewer and fewer hands (since there would be fewer vehicles with strong earnings to be offered by non-broker/dealers). This, in effect, would be similar to saying all OTC medicinal products should be given with a prescription, making it difficult for average people to easily handle their own affairs.
While I see the benefit of further training and education of the agents who would handle these products, I don't believe the "final solution" of moving them under SEC regulation is necessary or beneficial. I strongly believe that the public would be better served by, perhaps, adding a certification (be it under the SEC or some other regulating body) specifically related to handling fixed index annuities. This would be a separate designation required of anyone (even those licensed by the SEC to handle securities), to ensure that anyone handling these fixed, but somewhat complicated products would have the proper information and certification to determine if they are suitable for the use intended. This certification should probably require an initial 6-hour course (perhaps as part of existing CE requirements for financial professions??), with 2 hours of CE per year.