A Fellow Advisor Comments On Regulating Equity Indexed Annuities

Q. Hey Jeff, I loved your article "Regulations Ahead for EIAs" published June 15, 2005.

The only question I have is whether RIAs or non securities licensed insurance agents will be the target of the NASD or SEC? It's been my observation that these non securities licensed agents misrepresent/mislead the public with what an EIA's returns will be over time and compare them to mutual funds and variable annuities. I think an EIA could be used instead of a CD (assuming a 5 yr maturity) but they are not designed to compete with mutual funds and VAs the way these insurance agents do. Thanks for such a great article that is exposing the abuses!

Have a Great Day!


A. Wonderful point! I don't care who is offering EIAs, if they are being promoted as a CD alternative that will give the return of the markets with no risk then the advisor needs to be investigated!

The NASD in their recent report says that they have jurisdiction any time there is a problem with an unsuitable recommendation, so RIAs who are selling EIAs under an insurance license may be opening themselves up to potential legal liability.

Additionally, if these become classified as securities then fee-only RIAs will no longer be able to offer them.

Thanks,

Jeff

Your posted comments on this and other questions are welcome.
If you have a question for Jeff an answer is just a click away.
Find a wealth of information at Jeff's website.