Annuity FYI Visitor Blog

In “Ally, Ally, InFRE” from Kerry Pechter of the Retirement Income Journal, Pechter explains how the certification firm InFRE has now become certified itself.  The International Foundation for Retirement Education (InFRE), directed by Kevin S. Seibert, gives educational presentations at retirement income conferences around the United States.  With slide shows and speeches, the InFRE presents to financial advisers mostly from banks and insurance companies, helping to certify them since 1997.

During his presentations, Seibert talks about an epiphany he had about annuities.  Once he realized that fixed annuity products and other types of lifetime annuities were an important part of retirement income planning, he has been telling financial advisers about their importance ever since.  While traditional thoughts about annuities say that one of their cons is the fact that they “take away from your estate”, Seibert says that they actually can help to preserve it because your basic needs are always met, even better the longer you live.

Recent regulations regarding “senior designations” have helped to rid the market of shady so-called specialists.  The National Commission for Certifying Agencies (NCCA) and the American National Standards Institute are the two top organizations that certify the certifiers of financial advisers.  That is why Seibert and his colleague Betty Meredith have worked for two years to get the Certified Retirement Counselor designation, with which InFRE confers, accredited by the NCCA.  With their nearly 300-page study guide and thorough 4-hour CRC exams, InFRE works to make sure all the financial advisers that they certify are well-informed to make the best decisions for their clients.

In “Pru annuities go online” by Peter Carvill of FT Adviser, Carvill details Prudential’s new online application process for annuities.  Advisers previously had to fill out paper applications but can now fill them out online for their clients.  Prudential’s PR Manager highlights the advantage of avoiding post office and other delays with paper applications.  Whether the client needs a 401k annuity transfer or another type, the annuity transfer times are sped up by this new process.

This new system accepts applications for Income Choice, With-Profits Pension and the Guaranteed Pension products.  Advisers are able to verify the clients themselves so that identification processes are no longer needed.  This allows for any errors to be automatically fixed.  The postcode-checking software will greatly reduce any chance of error as well.  Doing work online makes the process easier and faster for both the clients and the advisers.

While low interest rates are not great for certificates of deposit or savings accounts, they are garnering renewed interest in annuities, according to “Annuities are attracting increased attention” by Kimberly Quillen of The Times-Picayune.  Annuities have been around since the 1700s when they were used by European high society members who took care of family members without other financial support.  They became popular in the United States during The Great Depression as households no longer held many generations under one roof.  They are good for investors trying to balance the security of their principal with immediate and future cash needs.

Novice investors can be easily confused by annuities, especially with some confusing marketing out there.  They are bought through insurance companies in either a lump sum payment or multiple payments over time so they rely fully on the strength of the companies from which they are purchased.  Investors then receive payouts over the life of the annuity.  By investing your money, the companies hope to earn more than they payout to you over time.  Annuities can be deferred, where you don’t receive payouts until a future date, or begin immediately.  Deferred annuities come in two types as well: a variable or a fixed annuity.  The earnings you receive from both types depend on underlying investment performance.  While annuities may not be the best product for all investors, their guaranteed lifetime income and flexible investments are just a few of the annuity benefits worth looking into.

At the XBRL US National Conference, the Financial Industry Regulatory Authority (FINRA)’s VP gave a speech about the state of the US financial markets.  James P. Donovan, FINRA’s Senior Executive Vice President for Technology & Strategy, said that Congress is working with regulatory agencies like FINRA to make the regulatory structure of the US financial markets more modern.  They hope to prevent the extreme volatility and financial scandals that occurred over the past two years by making everything more transparent.

FINRA has new initiatives to help them in their advocacy for investors.  They have new offices and training programs specifically for dealing with fraud.  Believing that transparency is the greatest need right now in the financial markets, they have two expanded programs called BrokerCheck and TRACE.  The first is an expanded version of their free online system for investors to get a background on the work of over 650,000 brokers offering them great annuity rates and all financial investment products.  TRACE is another program that has been around since 2002 that FINRA is expanding to help investors find out more product information.

The entire market needs an overhaul to protect investors and the integrity of our markets.  Market data needs to be consolidated and less fragmented.  It seems that it would be best to have one strong regulator overseeing it all.  FINRA also believes that a standard reporting language across the globe is crucial to both transparency and investor knowledge.  While it is a challenge to win back the trust of investors, it is crucial because “efficient service, fair play, and simple honesty” will go a long way in keeping the markets strong.

The U.S. Securities and Exchange Commission’s Rule 151A might be thrown out by the U.S. Court of Appeals for the D.C. Circuit, according to “Court May Toss 151A Order” by Arthur D. Postal of National Underwriter.  The SEC’s proposed rule would classify indexed annuities as securities, allowing the SEC to apply the same rules that they do with variable annuities and other securities starting in January of 2011.  Last January, insurers filed a lawsuit against the SEC in an attempt to stop Rule 151A from being implemented.

In July an appeals court ruled that while the SEC does have the authority to apply the securities rule to indexed annuities, they “had failed to properly show the effect of Rule 151A on efficiency, competition, and capital formation.”  The appeals court said that the rule needed to be reconsidered.  Old Mutual Financial Life Insurance Company filed a motion of their own requesting that insurers have at least 2 years to comply with Rule 151A if it does take effect.  Instead, the court decided to require additional briefing from both Old Mutual and the SEC and said that they will address the issue of completely vacating the rule altogether.  It looks like the court battles will wage on for indexed immediate annuities and other EIA’s to determine whether they will be classified as securities in the future.