Anybody who is in the annuities business
knows that the business has a bit of a reputation problem. Despite the fact that annuities are a tremendous product for anybody who is serious about their own retirement planning, the market has had perhaps more than its fair share of embarassing regulatory moments, wherein shady operators mostly interested in lining their pockets at their clients' expense have been caught acting, shall we say, not entirely in their clients' best interests.
This has led to a lot of state insurance regulators squaring their gunsights on annuity producers as both the most likely source of predatory busines practices in their jurisdiction, and as the most likely way to score some easy points as a Defender of the Public. Catch a shady annuity producer in the act, be seen as a good guy cracking down on those insurance nogoodniks presumably lurking in the rose bushes outside fo your front door. That kind of thing.
And to be honest, there have been just enough of these kinds of rogues to make the entire industry look bad. And so, the vast majority of annuity producers who are playing by the book and trying to help their clients, get tarred by an awfully broad brush.
We saw this most clearly when the prosecutor for Lake County, California, dropped the hammer on Glenn Neasham
a few years ago for selling an annnuity of questionable worth to an elderly client who, it turned out, was suffering from dementia. Never mind that the client's companion approved of the sale. Never mind that the sale netted the client more than $40,000. Never mind that Neasham himself claimed he did not think his client was mentally impaired at the moment of sale, nor the lack of hard evidence proving that he did. Despite all of that, Neasham still was prosecuted for felony theft, and was convicted on it. He managed to stay out of jail by the thinnest of margins while his case was appealed, and even though Neasham ultimately maintained his innocence, his practice was destroyed and he and his family suffered a ruinous financial turn thanks to the long arm of the law.
So when I see news releases from the California DOI about how, during National Retirement Planning Week, that it's important to be on the lookout for signs of fraudulent business practice
, I don't see a DOI that is being fair and even-handed with the industry it is supposed to be watching over. I see a presumption of guilt before innocence, of a default inclination toward suspicion of wrongdoing, and of the kind of "round up the usual suspects" mentality that we should never see in our regulators.
Surely we should not expect regulators to extol the virtues of the industry they oversee. That job is best left to marketing and advertising departments. But to make blanket and preemptive statements warning potential clients that by meeting with an annuity producer, you might be letting a fox into the henhouse is the sign of a state that simply doesn't see this kind of business as entirely legitimate.
Maybe I'm overreacting. You can make the call yourself. I have attached a copy of the press release below. If you think that the CA DOI is out of line here, drop them a line and let them know how you feel.
FOR IMMEDIATE RELEASE: April 8, 2014 (#014)
NOTICE TO CONSUMERS
Annuities are good retirement tools, but exercise caution
SACRAMENTO, Calif. – In observance of National Retirement Planning week, the California Department of Insurance is reminding consumers about the importance of understanding what they are purchasing before signing on the dotted line. Annuities can provide a steady income after retirement and increased financial security, but they can also be confusing. The Department of Insurance is offering important tips for those planning retirement.
• Don’t be pressured by a sales pitch to sign before you are ready. Take the time you need to make a decision that is right for you. • It’s always a good idea to have a trusted family member or friend with you when considering investments. • Remember you control the process.
“Consumers planning for retirement and those who have already retired need to know that not all annuities are a good fit for their individual situation," said Commissioner Dave Jones. "Annuities can be good options for retirement planning, but buyers need to be aware of what they are purchasing, and what it will mean for them."
Many consumers purchase annuities to ensure they have a steady income after they retire. An annuity is an investment and should not be used to reach a short-term financial goal. Buying an annuity may or may not be right for you. The Department of Insurance offers a list of things for consumers to consider to ensure they are making the right decision.
Uninformed consumers are more likely to be taken advantage of if an insurance provider uses less than ethical sales tactics. Some common red flags include relentless sales pitches that pressure you into buying a product quickly or a deal that seems too good to be true. The best way to protect yourself is to research the agent and company you’re considering, make sure they are licensed by the California Department of Insurance. If consumers have questions or concerns the Department’s Consumer Services Division is available to assist at 1-800-927-4357.
The Department of Insurance has additional resources for consumers preparing for retirement, including baby boomers in the “sandwich generation” who are facing the extra challenges of caring for aging parents and sending their kids off to college while planning for their own retirement. Seniors who are about to retire can learn about their insurance needs on the Department’s Web site.
# # #
Additional Consumer Note:
The best way to protect yourself is to research the agent and company you’re considering:
• STOP before writing a check, signing a contract or giving out personal information.
• CALL the California Department of Insurance.
• CONFIRM that the agent and company are licensed to write insurance in California.
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The California Department of Insurance, established in 1868, is the largest consumer protection agency in California, regulating the $123 billion insurance marketplace. In 2012 the California Department of Insurance received more than 160,000 calls from consumers and helped recover over $64 million in claims and premiums. Please visit the Department of Insurance web site at www.insurance.ca.gov. Non-media inquiries should be directed to the Consumer Hotline at 800.927.HELP. Out-of-state callers, please dial 213.897.8921. Telecommunications Devices for the Deaf (TDD), please dial 800.482.4833.