We have all read the public accounts of alleged inappropriate sales to consumers. All too often the focus is on vulnerable elderly people who trusted the advice of an annuity salesperson but wound up having their money placed in an unsuitable product. BHC seeks to foster better market conduct practices and in turn an improved reputation for our industry. Accordingly, we're trustful you will adhere to the following message and subscribe to the attached documents that we have prepared for your exclusive use.
BHC embraces wholeheartedly SEC Chairman Christopher Cox's sentiment that hell holds a special place for those who do intentional harm to senior citizens. We also believe that the unintentional damages caused to consumers can be just as devastating when the advice given, although lacking malice, lacks adequate suitability considerations. Accordingly, BHC advises those serving the seniors market to be especially diligent in their suitability assessment.
Who is responsible for determining client suitability? The short answer: you are. You have a fiduciary responsibility to "know your clients". That means you cannot hide behind the excuse that just because a carrier offers a product it must be acceptable for all prospects based solely on the ages for which it is approved. In our opinion, some carriers manufacture junk while simultaneously insulating themselves behind a legal firewall and then claiming that you, not they, are responsible for consumer suitability. Accordingly, we strongly encourage you to rely on your due diligence and your suitability assessment efforts rather than blindly accepting the parameters set by carriers.
We do not know your clients and therefore cannot know which annuities, if any, might be appropriate for each of them; however, we do know that individual circumstances can lead to different recommendations. Nonetheless, we strongly believe the following two points deserve special focus:
If your client cannot walk away without penalty at the end of a clearly defined surrender period, we recommend you not offer the product, period. These types of annuities are called "two-tiers" and we cannot think of a justifiable reason why you would ever recommend one. This is our opinion and increasingly the court of public opinion is agreeing with us.
Any product recommendations you give to elderly people should generally feature reasonably short surrender periods and relatively small surrender penalties. Penalties should always be waived in case of death and due consideration for liquidity and income needs should be a priority.
To assist you in performing your suitability assessment, we have developed three indispensable aides which we encourage you to study and then incorporate into your practice. The first is our "Client Suitability Assessment" form that will help you better match recommendations with your clients' needs. The second is a consumer-facing publication called "Is Your Annuity Good or Bad?". The third is the “Compliance for Annuity Reps” which is required reading for all producers offering fixed annuities. These documents can be accessed below or you can call BHC for hard copy supplies.
Lee R. Howard
President & CEO
