Annuity FYI Visitor Blog

FINRA has partnered with the United Way to spread financial education, according to FINRA’s news release “FINRA Investor Education Foundation and United Way Worldwide Announce Nearly $1.5 Million in Grants to Support Grassroots Financial Education Projects.”  Twelve United Way branches and community groups received the grants to help promote the FINRA Foundation and United Way’s new program, Financial Education in Your Community.  FINRA is working hard to help lower-income families become financially stable.  Through these education programs, someone who doesn’t even know what an annuity is may realize that the product is best for protecting their financial future.

Community groups have the ability to reach large numbers of people and relay information that can help them without bias.  During this tough economic time, these grants were given in areas hardest hit financially to help people become stable and look forward to their future.  Free educational programs will help working families and individuals on the road to financial stability.  They may learn about the best annuity rates to protect their retirement or simply how to balance their checkbook.  Community needs are across the financial spectrum.  These twelve grants were given to seven United Way branches located in Texas, Nebraska, Wisconsin, Pennsylvania, Connecticut, and New York.  The community groups receiving the other five grants are in Georgia, Arizona, South Dakota, and Tennessee.  FINRA believes that their help in financially educating the communities will make Americans self-sufficient and in charge of their futures.

With $30 billion of sales in 2009, indexed annuities set a record for the highest sales of all time, according to “2009 Indexed Annuity Sales Set Record” from Insurance News Net.  The previous record from 2007 was beat by close to 10%.  Data representing 99% of the companies selling indexed annuities was collected by Annuity Spec’s Indexed Sales and Market Report.  While 4th quarter indexed annuity sales were down from the third quarter, sales levels were adjusting back to a normal level after their record highs.

Allianz Life remained in the top spot for total 2009 sales, as well as staying in the #1 carrier position in the market.  Their MasterDex X held its position as the top selling indexed annuity for the third quarter in a row.  Indexed annuities are tied to the markets, proving that their annuity rates were popular to investors.  After Allianz Life, Aviva moved up to the second spot in this annuities market.  The third, fourth, and fifth spots were occupied by American Equity, Jackson National, and ING.  In regards to bank and wirehouse 4th quarter distributions, Jackson National Life had the most indexed annuity sales.

In “AXA Equitable Launches Variable Annuity With Dual-Account Investment Platform,” a staff reporter at Insurance Business Review describes AXA’s new product.  AXA Equitable Life Insurance Company says that their new variable annuity gives a greater selection of investment portfolios and protection from the downside.  Variable annuities across the market are changing after losing steam in the recent financial crisis.  Retirement Cornerstone is their new dual-account investment platform.  It is a tax-deferred platform supporting two accounts that are interactive.  The first focuses on maximizing the performance of your investments by using money managers.  The second account is optional and simply focuses on retirement protection.

The account focused on long-term accumulation gives the choice of over 90 different investment portfolios with different investment styles and asset classes.  The account with downside-protection has a guaranteed income benefit option which invests in index portfolios and asset allocation.  The Retirement Cornerstone has what AXA believes to be one of the best annuity rates available for similar products.  Their roll-up rate is one point higher than the 10-year treasury rate average and is updated annually.  The dual-account platform has many tax benefits including tax-free transfers among portfolios which helps investors build lifetime income and respond to changes in economic conditions.  AXA believes that their new annuity product is a unique response to the past market turmoil which allows investors to build up their cash and protect it in the future.

In the Financial Times article “More providers offer post code annuities,” Josephine Cumbo describes the process of determining annuity rates based on Canadian post codes.  Insurance providers offer better annuity pricing to those living in less affluent areas going on the assumption that they will live shorter lives.  This also applies to investors that are smokers or have medical conditions hinting at a shorter life expectancy.  Canada Life is one company who has adopted this policy.  They offer annuity rates up to 7 percent lower to investors that live in a post code considered to have wealthy and healthy citizens.  Since annuity products pay a stream of income over one’s lifetime in exchange for a lump sum down payment, a longer life expectancy means more years receiving that income stream.

Three other companies who are already using this mapping system are Prudential, Aviva, and Legal & General.  All of the post code mapping systems are diligent about the financial breakdown.  They do not look at the whole city but break down their analysis on a street by street basis in some areas, realizing that there are financial differences within neighborhoods.  Variable and fixed annuity rates ranged anywhere from 3 to 7 percent in the city that was reviewed.  The poorest neighborhoods typically get annuity rates of around 3 percent more than the more affluent neighborhoods.  It is important to fill out the medical questionnaire associated with your annuity purchase for this reason.  Investors living in a wealthy neighborhood who have poor health will receive a higher rate because of the health issue.  Without properly completing the medical questions, that investor would be subject to the lower rates associated with the wealthy neighborhood.

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.