To Be or Not to Be…Securities Licensed (Part 2)
Recently, we raised the issue of insurance professionals dropping their securities licenses in order to sell annuities under the regulatory radar screen. We said this practice was increasing due to advisors feeling burdened by unfair and unreasonable regulations. We also raised some hard questions that raised hackles in the industry:
- Can an advisor truly service the needs of their clients without a securities license?
- Is it ethical for them to let go of their license just so they can be “less regulated?”
- Are fixed or equity indexed annuities ALWAYS the best solution to help clients reach their investment objectives?
We understand how such questions might arouse ire. After all, no one likes being regulated. Yet complying with both the letter and the spirit of regulations is the mark of true professionalism. In our view, the issue isn’t whether or not to opt out of regulation. It’s whether or not to do the right thing—for one’s clients and for oneself.
But there’s a flip side. If annuity sellers should retain—or secure—securities licenses, then shouldn’t security sellers keep – or secure an insurance licenses? Shouldn’t they make sure they operate from a place of objectivity and competence when discussing with senior clients the obvious benefits of products such as equity indexed annuities, universal life insurance, and long-term care insurance…? What’s good for the goose . . .
Instead, we are concerned the market is headed in the opposite direction. We fear that securities salespeople without objectivity are moving clients out of annuities and other insurance products and into unsuitable, speculative investments. The impetus? The recent surge of negative publicity about annuities.
Witness the following statement appearing in the lopsided (and now infamous) New York Times article, dated May 15, 2005. “Under the guise of estate planning, regulators say, retirees are being pushed into annuities that carry commissions of up to 12 percent and that require their holders to keep them for as long as 15 years, or to pay big penalties.”
Can you hear the photocopiers at the brokerage firms firing up? And can you see the yellow highlighters on the article’s provocative headline: “Who’s Preying on Your Grandparents?”
Will securities folks use that article—and others—as leverage to move clients out of fixed annuities and other safe investments and into speculative investments? Some will. Hopefully, the majority won’t. And that’s a good thing because using fear and greed to peddle unsuitable products of any kind is unconscionable. It’s not only bad ethics; it’s bad business.
So following is the bottom line for both securities and insurance specialists:
- Put yourself in a position to provide unbiased and impartial advice to your clients.
- Submit to the spirit as well as the letter of the law.
- Wear your registrations, licenses, and designations like the white hats they are.
- Embrace regulation so you can service your clients’ full spectrum of financial needs.
Published in: Senior Market Advisor Magazine - January, 2006 — SMA Website
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