SEC Rule 151A
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“I want to rebalance my portfolio can you help?”
"what do you think about my current holdings?"[quote=Squash1]“I want to rebalance my portfolio can you help?”
"what do you think about my current holdings?"[/quote] I can give anyone any opinion I want. I cannot DO anything about it without being registered with a firm. I can look up information and give my own opinion based on the information I get. I can have any conversation with anyone that I want. The key is - WHO can help the client make the changes? The key also is in the disclosure: I cannot DO anything about this but give you my own opinion. It is up to you to execute any changes you want with your own broker. Also, I would not be making any NEW suggestions or recommendations of securities. I wouldn't say to exchange your American Funds for Goldman Funds for example. But I can talk to anyone about anything. I can't EXECUTE new trades or recommend new securities holdings, but I can always have a discussion - that is based on my personal opinion.I understand what you can and can’t do…
But you will look goofy saying nothing "this is what I would do, if i qualified to do it" or "buy an eia, I can sell those".. Not saying this is you(sounds like it isn't, and you are one of the better ones)but this is how most conversations go with insurance guys I have run into. To me it is like having a really high IQ and trying to teach a college course.. Sure you probably could, but no one is going to hire you without the proper degrees or background.theironhorse:
.... ditto How about your friend, the life insurance agent? not legally if in relation to making an investment recommendation between a fixed or variable product. [/quote] i have no problem with eia's. i have been looking at them more and more in the last 2 years as the product has evolved and become much more consumer friendly. but i do have a problem with the whole cloak and dagger way a good number of people sold them in the past.[/quote] We're simply talking about whether EIAs should be registered products. Based upon your response, if the insurance agent can't talk about about variable products when trying to sell a fixed product, that would pertain to all fixed products. That really gets to my point that if an EIA should be a registered product, all fixed products should be registered, and that, of course, makes no sense at all. The point was attempted to be made by someone that one needs to be registered to legally explain how an EIA works and that simply isn't an accurate statement. I would even make the argument that the EIA crediting method is not based upon a security. It is based upon a change in an index. An index is not a security. There are security products that are based upon an index, but the index itself is not a security. It doesn't matter whether this argument is valid or not.[quote=anonymous][quote=theironhorse]How do you guys sell an EIA without ever talking “market” or “securities,” since those opposing 151A without a securities license in place must not discuss this detail when explaining the product?
[quote=Squash1]I understand what you can and can’t do…
But you will look goofy saying nothing "this is what I would do, if i qualified to do it" or "buy an eia, I can sell those".. Not saying this is you(sounds like it isn't, and you are one of the better ones)but this is how most conversations go with insurance guys I have run into. To me it is like having a really high IQ and trying to teach a college course.. Sure you probably could, but no one is going to hire you without the proper degrees or background. [/quote] Squash, I am in agreement with what you are saying. It sure is helpful for someone to have an advisor who can sell multiple things or advise on multiple things. That still doesn't have any bearing on whether an EIA should be registered.But it goes to the heart of the matter/problem…
If I can only sell EIAs and that is my income, why would I recommend something else? That is like a Acura sales guys saying "Yeah those American companies are making a comeback, you should go check out what Ford is doing"Nobody can only sell EIAs. Anyone who can sell EIAs can sell any fixed insurance product. Therefore, we get back to my argument that EIAs are nothing more than a fixed product.
By the way, if you can only sell fixed products, it wouldn't stop you from being ethical. You would only sell them to people who would benefit from fixed products. It's no different than if now you can only sell fixed and variable products. That is what you sell. You don't recommend food purchases or car purchases or shoe purchases... I certainly understand your point, but there is still no legitimate arguments to call an EIA a security. All the exact same arguments can be made about traditional fixed annuities.[quote=Squash1]But it goes to the heart of the matter/problem…
If I can only sell EIAs and that is my income, why would I recommend something else? That is like a Acura sales guys saying "Yeah those American companies are making a comeback, you should go check out what Ford is doing"[/quote] Thank you for your previous compliment. I take on a different stance on this business that most do not. I want to be involved in every facet of someone's total financial picture. That doesn't mean that I need to DO everything within it, but I want to be involved. For me, if I can tell that someone's allocation has strength and security based on their income needs (6- months cash reserve & stable assets growing for retirement), then I WOULD recommend that they begin looking for some additional returns through securities or other investments - because they HAVE the financial foundation built. I completely agree with you that not every agent acts or feels this way. I have been securities licensed (7 & 66) and I prefer to specialize in life insurance & other insurance products. I also believe in "karma" - that if I do right by my clients, I will be receiving referrals and additional business because I treat them right - with the right contexts for their entire financial picture, not just the things I get paid on.I really enjoyed this thread. I pray to god that they pass this bill.
Gordon - you seem to have a good business but I am surprised by your arguement. I appreciate when the SEC looks into people further becasue frankly there is a TON of scum in our industry. These scumbag people are the reason why when you tell people you sell annuities people look at you with distain. These products are 100% securities. Anoymous. 100%. And I believe the people selling them should be licsensed to the fullest. It is only state farm, country companies, etc insurance salesmen who are advertising retirement help on TV? No, now everyone wants to participate in our industry of financial advice (or selling a product to make money) but yet you don't want to take the test to prove you know what you are talking about? Why shouldn't people who deal with finance be more educated and have to prove some form of education? I know it will cost you a few bucks but my god if you are ethical you should be all for the SEC looking over your unethical brethren.I don’t sell “annuities”. I help people make educated financial decisions that feel right to them - including doing nothing. If in the decision making process an annuity might make sense, then I’ll suggest it. I’m not simply an annuity salesman. I sell life, DI, annuities, LTC and use those products to fit solutions to problems my clients have.
I'll tell you this: Anonymous is securities licensed. He can sell securities. What we're talking about is the ethics and boundaries of regulatory bodies on different products. If a product has a guaranteed interest rate, BUT has the potential to earn a higher rate... is it a security? How are the funds invested within the contract that the client has control over? No, it is NOT a security because the very funds that are in the contract are only allocated to which "index" the client was credited (if even given a choice)... not stocks, bonds or any "sub-accounts" that the clients controls. Licensing (apparently) doesn't prove that anyone knows what they're talking about (including you since you completely destroyed your knowledge of EIAs).[quote=anonymous]Nobody can only sell EIAs. Anyone who can sell EIAs can sell any fixed insurance product. Therefore, we get back to my argument that EIAs are nothing more than a fixed product.
By the way, if you can only sell fixed products, it wouldn't stop you from being ethical. You would only sell them to people who would benefit from fixed products. It's no different than if now you can only sell fixed and variable products. That is what you sell. You don't recommend food purchases or car purchases or shoe purchases... I certainly understand your point, but there is still no legitimate arguments to call an EIA a security. All the exact same arguments can be made about traditional fixed annuities.[/quote] i think the difference is what the public knows. People understand fixed annuities. Similar to CD without FDIC and some surrender charges. But EIAs have a link to a security market, and have crediting strategies which people don't understand. So if a client doesn't want a fixed rate of return for x amount of years. The insurance guy has to use to the EIA to come close to marketing securities. So the intent is to compete with products you can't sell.[quote=RealWorld]I really enjoyed this thread. I pray to god that they pass this bill.
Gordon - you seem to have a good business but I am surprised by your arguement. I appreciate when the SEC looks into people further becasue frankly there is a TON of scum in our industry. These scumbag people are the reason why when you tell people you sell annuities people look at you with distain. These products are 100% securities. Anoymous. 100%. And I believe the people selling them should be licsensed to the fullest. It is only state farm, country companies, etc insurance salesmen who are advertising retirement help on TV? No, now everyone wants to participate in our industry of financial advice (or selling a product to make money) but yet you don't want to take the test to prove you know what you are talking about? Why shouldn't people who deal with finance be more educated and have to prove some form of education? I know it will cost you a few bucks but my god if you are ethical you should be all for the SEC looking over your unethical brethren. [/quote] RealWorld, please define the word "securities". I have no idea under what definition of the word an EIA can possibly fit. I do think that people who sell these products should be tested. The test should be a state insurance exam. If you think that the problem is that there are unethical salespeople, more knowledge won't make these people ethical. Also, it's not as if the SEC and FINRA have shown that they have the ability to oversee securities, thus, there is no reason to think that they can properly oversee insurance sales. I do want unethical salespeople to be busted and thrown out of the industry and put in jail if necessary. Calling a fixed product a security will not make this happen. As I have previously mentioned, the rule would actually help me, because my B/D won't allow me to sell them and if they were treated as securities, I could sell them. Why won't my B/D allow me to sell them as a fixed product, but will allow me to sell them as a security? Quite simply because as a fixed product, they can't make a penny on the sale, but still have responsibility to supervise. This is all about money and power and nothing else. I'm speaking out against something that is in my best interest because the rule is rotten down to its core. Again, nobody has been able to give a single decent reason of why an EIA would be categorized as a security and a traditional fixed annuity would not be.[quote=Squash1][quote=anonymous]Nobody can only sell EIAs. Anyone who can sell EIAs can sell any fixed insurance product. Therefore, we get back to my argument that EIAs are nothing more than a fixed product.
By the way, if you can only sell fixed products, it wouldn't stop you from being ethical. You would only sell them to people who would benefit from fixed products. It's no different than if now you can only sell fixed and variable products. That is what you sell. You don't recommend food purchases or car purchases or shoe purchases... I certainly understand your point, but there is still no legitimate arguments to call an EIA a security. All the exact same arguments can be made about traditional fixed annuities.[/quote] i think the difference is what the public knows. People understand fixed annuities. Similar to CD without FDIC and some surrender charges. But EIAs have a link to a security market, and have crediting strategies which people don't understand. So if a client doesn't want a fixed rate of return for x amount of years. The insurance guy has to use to the EIA to come close to marketing securities. So the intent is to compete with products you can't sell. [/quote] Squash, we can't use the "it's complicated" line to determine whether something is a security. Can we agree that a 10 year treasury is a security? I'll assume that we can. In an EIA, the insurance company guarantees a minimum return that is 0% or is something greater. Additionally, the investor may get a return higher than the minimum based upon changes in an index. All of the money is invested with the insurance company. None of it is in separate accounts. I sold a traditional fixed annuity today. The product that I sold, guarantees 4.25% the first year and 2.25% the second year. For the third year and beyond, it is guaranteed to pay at least 2%, but the actual payment will primarily be based upon the rates of 10 year treasuries. In other words, the rate will fluctuate every year, but is guaranteed to be at least 2%. Nobody is trying to argue that a traditional fixed annuity is a security, but it should be painfully obvious that it is every bit as much of a security as an EIA. However, we are then changing the very definition of the word security. Insurance companies hedge their risks. They hedge them differently for EIAs than for other products. However, it doesn't change the fact that all of the client's money is with the insurance company and if the insurance company screws up their hedging, it has no impact on the client. If the insurance company gets extra profit via their hedging strategies, it has no impact on the client. Why not? It's not the client's money in the market. The client's money is with the insurance company. This makes it a fixed product.I think if more FA’s understood how these products work and how to use them there wouldn’t be such an issue. Nobody bashes the safety and security of a CD and yet EIA’s that fit into a client’s overall objectives in the same way but with a historically higher rate of return get bashed.
There are bills in the house and senate that would nullify 151A, our firm has been spearheading the effort to gain support for this bill. If you want to take 15 minutes of your time to help, PM me.
[quote=Squash1]
But EIAs have a link to a security market, and have crediting strategies which people don't understand. Like alot of products you can make these products as easy or as complicated as you like, they are very simple to understand and explain if you know how.So if a client doesn't want a fixed rate of return for x amount of years. The insurance guy has to use to the EIA to come close to marketing securities. So the intent is to compete with products you can't sell. "Insurance guys" are not the only ones selling these, my top 10 agents are ALL securities licensed with some of the largest financial firms in the country.
[/quote]
[quote=anonymous]
I certainly understand your point, but there is still no legitimate arguments to call an EIA a security. All the exact same arguments can be made about traditional fixed annuities.[/quote]Exactly anon, and that’s a huge problem, first it’s EIA’s, then it’s fixed, then it’s life, DI, LTC…who knows where it will end? And will the client’s be better off? will the agents? will the insurance companies? How about the compliance officer that is so overloaded checking “suitability” on a fixed annuity he completely misses the churning in another account?
Like alot of you have said it’s about power and greed…nothing else.
EPT - PM me. I think we work at the same place.
BTW - 151a is not going to pass. At most, a compromise between the SEC and insurance carriers and the industry may occur. There are ongoing meetings about this that I'm aware of. There will probably be some regulatory changes, but all signs point to 151a not going forward.
[quote=ManOnTheCouch]
BTW - 151a is not going to pass.
I hope you're right but we're not taking any chances, last week we got one of our congressmen to co-sponsor HR2733 and we have a meeting with another one next week.
For those of you that are currently not licensed, you might consider having your Marketing Organization seek out a relationship with a “wholesale broker dealer.” It’s always better to have a plan.
You might check out:
http://www.centerrecapital.com