I've talked to over 5,000 producers and marketing organizations in the past 90 days and have often heard comments like:
- I am good either way, I am already securities licensed.
- I have a broker/dealer, so this won't impact my business.
- What's one more license? I can get my Series 6.
But if you think this rule will only require an additional license or will only affect fixed indexed annuities, you're not paying attention. Rule 151A will negatively impact your products, your business and your livelihood.
More than just fixed indexed annuities
As written, the rule applies to indexed annuities and certain other insurance contracts that are more likely than not to exceed the amounts guaranteed under the contract. That definition is so broad you can drive a FINRA pickup truck through it.
Even AARP, who is one of the loudest voices in favor of Rule 151A, is worried. In August 2008, they submitted a comment letter to the SEC supporting the rule, but encouraging the SEC to reword it to ensure that other fixed annuities were not unintentionally "impacted" by the rule.
Products will suffer
Consider this singular but telling example: A company recently filed a registered indexed annuity. They had interest rate crediting tied to a major index, minimum guarantees, income guarantees, and guarantee of principle and prior earnings. Look like an FIA? Look again -- they were told that there wasn't enough "upside" to be approved as a registered security, so they must remove or limit some of the guarantees.
Consider, too, that if you can create a product that meets the "securities test," the additional filing fees, broker-fees and expenses that will need to be added to the product will severely impact the credited interest or the underlying guarantees.
Not convinced? Consider this headline: "FINRA's proposed fee hike draws ire." Last month, after FINRA announced a fee increase, Investment News reported that the Financial Services Institute told its members they should not "bear the burden of increased fees from [FINRA] after the regulator's failure to properly prepare for the inevitable market down turn."
Goodbye independence -- Broker/dealers will pick your products and direct your sales
Because of the high cost of the broker/dealer distribution system, those who do carry FIAs will only approve a limited number of products and/or limit selection of carriers and products.
If you don't sell enough securities, your broker/dealer may terminate you. Few will allow you to just sell fixed annuities without a minimum of securities sales or assets under management.
Don't think it will affect you or all fixed annuities? Think again!
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