New annuity suitability

[Golfnut2112]

DATE:

November 9, 2018

TO:

American Equity Agents and NMOs

FROM:

Dave Milligan, Assistant Vice President, Regulatory Compliance

RE:

Licensing Requirements and Permitted Activities

The NAIC Suitability in Annuity Transactions Model Regulation, and the many state laws and regulations governing suitability, require you to gather certain information and use that information in making a recommendation to a consumer. Some of the specific items you are required to review with your client include:

• financial situation and needs, including the financial resources used for funding the annuity
• financial experience and objectives
• existing assets, including investments and life insurance holdings
• risk tolerance

If you have an insurance agent license but not a securities license, some of these items put you in a situation where you may not be licensed to discuss certain items or concepts. While we cannot provide you with specific answers that may be construed as legal advice in relation to your state’s securities or insurance laws, here are some generally permitted and prohibited activities that you, as an insurance-only licensed agent, need to be aware of:

Generally, you may discuss items that an individual consumer can access through public resources or that are considered to be of general knowledge to the average consumer, and information in the media that is general in nature, but factual, about financial markets or products. For example, the discussion may touch on:

• the consumer’s risk tolerance, financial situation and needs
• the stock market, in general terms, including market risk and recent/historical economic activity that would be general public knowledge
• tax status of the proposed product and whether the consumer should consult a tax advisor or attorney regarding assets to be used for the purchase (if they need to be tax deferred, etc.)
• the consumer’s desire, such as to have a minimum lifetime income stream
• the suitability, replacement and transfer forms, and the information contained in them, as required by law
• balancing risk or diversification
• the insurance or annuity product as part of a sound financial plan

All of these topics should be explained and discussed only as necessary.

Again, in general, you shouldn’t talk to a consumer about specific performance of a security product, provide information you would gather from a non-public resource or discuss product specifics other than the insurance product for which you are licensed and appointed to sell. Examples of items to avoid:

• discussion regarding specific risks in a consumer’s individual securities portfolio
• giving advice to a consumer about securities or investment performance, or providing a comparison of how specific securities have performed compared to other financial products
• recommending the liquidation of a specific security or identifying securities that could fund an annuity or insurance product
• offering or performing research, analysis or providing a recommendation to a consumer on securities
• assisting with the completion of securities forms
• using improper titles, terms or descriptions that might mislead a consumer as to what you are licensed to perform or sell

If you get specific or personal with a consumer in providing information or services surrounding securities, you most likely will be in violation of securities laws. How do you protect yourself from accusations of improperly providing securities advice or performing securities functions?

Document everything. After a discussion with a consumer, send a letter of understanding to them outlining your discussion and recommendations, if any. Consider having the consumer sign and return a copy of this letter for your records. Keep copies of all documents, tools, comparison forms, etc., that demonstrate your discussion and the action you took.

While we cannot say for certain doing the above will guarantee your avoidance of any violation of securities law, we suggest you look into implementing similar processes. Before adopting any process, you should seek the advice of an attorney or another expert in securities laws to assist you in determining whether or not your business processes are compliant. Some state insurance departments have issued bulletins or statements aimed at providing you guidance in this area. You should consider contacting your state regulator for additional information.

Finally, if you hold or are considering getting a securities license, make sure you do so for the right reasons. If you decide to pursue a securities license simply so you can talk to consumers about their security portfolio or to increase the ease of handling liquidation of securities, but only offer consumers fixed products as a solution to their financial goals, you could still be fined or incur other discipline.

Be advised, American Equity does not provide legal advice or guidance on issues surrounding securities laws and regulations. This article should not be relied on as providing any advice other than encouraging you to consider your practices to better serve your clients and remain compliant with all necessary laws, rules and regulations.

For questions or more information, call 1-888-221-1234 and ask for Compliance, or email [email protected]. Thank you for your business and support.

 

[DHK]

Thank you for sharing! These are excellent guidelines for everyone's consideration.

Personally, I have the following disclosure on my website:

Not Legal, Tax, or Securities Investment Advice:

* DHK is not registered nor licensed as a Registered Investment Advisory Firm (RIA), Investment Advisor Representative (IAR), nor as a Registered Representative (RR) with any broker/dealer firm, and is therefore not registered with, or supervised by, the U.S. Securities and Exchange Commission (SEC), Financial Industry Regulatory Authority (FINRA), or any state securities regulatory office. As such, DHK does not provide investment advice, specifically: buying, selling, holding, risk analysis, or any other analysis of securities, nor the asset allocation of securities portfolios. He does offer general investment information for educational purposes and may propose alternative financial strategies that do not contain or include securities. He does also discuss the pros and cons of various kinds of accounts (such as IRS Regulated Retirement Plans) and is considered incidental advice surrounding various strategies and solutions., but this does not necessarily constitute advice on the underlying securities. For specific investment advice on your securities investment portfolio, please contact a licensed and registered investment professional in your state.

The material discussed on this web site is meant for general illustration and/or informational purposes only and it is not to be construed as tax, legal, or investment advice, nor does it represent any specific company or specific products. For tax or legal services and advice, please consult a licensed professional in your state. Although the information has been gathered from sources believed to be reliable, please note that individual situations can vary and the information should be relied upon only when coordinated with individual professional advice.

If an insurance-only agent wants training on how to be in better compliance AND do a better job, I recommend checking out the Insurance Pro Shop. One of the things they teach is how to document and present your solutions in a very compliant manner.

 

[DHK]

I wonder if Yahoo Finance (Morningstar) would be considered a "public resource"?

Here's all the modern portfolio theory stats on CAIBX:
CAIBX Risk | Capital Income Builder Cl A Shs Stock - Yahoo Finance

Probably best not to bother as it would be too dangerously close to giving analysis advice on mutual funds.

 

[DHK]

I'll just add this link here:

https://www.naic.org/documents/committees_a_suitability_reg_guidance.pdf

 

[DHK]

Charlie Gipple on the Facebook page sent out a copy of the following email also from American Equity dated October 3, 2019.

http://view.email.american-equity.c...86c1245eea63241ac729703a05981f0d92ec503a29e11

Disclosures, training and customer survey update
DATE:
October 3, 2019
American Equity diligently works to improve the business needs of our agents whom we partner with across the country. We are making updates to our product disclosures, product training and customer survey to better serve you and your clients.

PRODUCT DISCLOSURES

Effective immediately, all products will offer updated disclosures (dated 9.30.19) reflecting product feature changes and new client attestation. Previous versions will no longer be accepted after Friday, November 15, 2019.

Any disclosures with a revision date prior to 9.30.19, but signed and received in our office by November 15, 2019, will receive the product features offered on the signed disclosure.

Attestation: Because of the current regulatory environment and guidance we have received from regulators, we will be requiring the applicant to complete a “Source of Funds” attestation.

The attestation, located on the last page of each product disclosure, demonstrates whether funds received originate from a security or non-security source. It also indicates the applicant’s understanding of their agent’s authority to provide securities advice.

Please click here to preview the attestation. [See below]

The applicant should read each option carefully, because in certain situations, multiple options may be chosen. Failure of the applicant to complete this section properly will result in a processing delay until the attestation is properly completed.

Nursing Care and Terminal Illness Riders: In an effort to align rider language with our current contract language, our Nursing Care and Terminal Illness Riders have been updated to be owner-driven. These riders are available to owners under age 75 at issue.

In addition, owners activating the Nursing Care Rider now only need to wait one contract year to request a penalty-free withdrawal of up to 100 percent. Previously issued contracts will retain the riders they were issued with.

This update will not require you to retake previously completed product training. However, we are requiring agents to review a few short slides detailing the provisions of the updated riders. Please view the updated riders here.

California only: Unfortunately, the Nursing Care and Terminal Illness Rider will no longer be available on any American Equity products.

Massachusetts only: The Nursing Care and Terminal Illness Riders are now available in your state. You must use the updated disclosures to receive these riders.

Pennsylvania only: The maximum Nursing Care Rider benefit has increased from 20 percent to 100 percent.

Texas only: The maximum Terminal Illness Rider benefit has increased from 75 percent to 100 percent.

PRODUCT TRAINING

We are excited to announce our product training modules have been updated to provide a fresh and interactive experience.

You will be able to access these modules by navigating to the training tab on our Agent Website, then clicking on “Product Specific Training.”

Please note, if you have previously taken a specific product training, you will NOT be required to retake product training at this time.

CUSTOMER SURVEY

As we are continuously working to improve our customer service, we are making a change in our contract delivery process.

Starting in early October, we will be sending a customer survey directly to the contract owner through the U.S. Postal Service. This will occur 10 days after the contract has been issued and sent to you for delivery.

We wanted to give you this information as we realize you may not have made arrangements for delivery of the contract before the customer receives the survey.

You may wish to let your clients know at the time of the application that a survey will be coming and may be received prior to when you meet with them to deliver the contract.

You can view a copy of the customer survey here. Thank you for helping facilitate this change.

If you have a question about any of these updates, please contact the Marketing department at 888-647-1371.

Thank you for your business and support of American Equity.





www.american-equity.com • Call us at 888-221-1234

01EBOP-FMNCR 10.03.19
For Agent Information Only.
Not for use in soliciting or advertising to the public.
This email was sent by: American Equity Investment Life Insurance Company
6000 Westown Pkwy West Des Moines, IA, 50266, US
©2019 American Equity. All Rights Reserved.

Here is the attestation referenced above:
http://image.email.american-equity..../m/3/f8924dd8-4706-47db-be40-f24ff6c9846e.pdf

Owner Statement
Source of Funds Attestation: Check the appropriate statement(s) to indicate the source of money used to fund this annuity:
[___] Savings, checking, fixed annuity or other sources and not from the liquidation of mutual funds, stocks, bonds, variable products or other investment vehicles as defined under the Securities Act of 1933 (collectively "securities")
[___] Liquidation of security. I acknowledge that my insurance agent is appropriately securities licensed and authorized to recommend I liquidate these securities and otherwise provide investment advice related to my securities holdings.
[___] Liquidation of security. This action is my sole decision. Neither the company nor my insurance agent recommend I liquidate any securities or provide any investment advice related to my securities holdings. I understand my agent acts only as an insurance agent and is not licensed to offer investment advice and that my agent advised me to consult with an investment advisor, registered representative, or other qualified professional if I have any questions or concerns about my securities holdings.

 

[DHK]

I have taken that same American Equity owner attestation form and erased the logo and address of American Equity. I added two signature lines for anyone to use for any product. Better to have signatures and not need them than to need them and not have them.