Investor Alerts Regarding Annuities and Insurance

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Below are investor alerts, investor tips, notices, press releases and buyers guide put out by regulatory agencies such as the National Association of Securities Dealers (NASD), National Association of Insurance Commissioners, Securities Exchange Commission (SEC), etc.

Investor Alerts

Variable Annuities: Beyond the Hard Sell
National Association of Securities Dealers (NASD) May 27, 2003
Should You Exchange Your Variable Annuity?
National Association of Securities Dealers (NASD) February 15, 2001
Equity-indexed Annuities – A Complex Choice
National Association of Securities Dealers (NASD) January 16, 2002
Should You Exchange Your Life Insurance Policy?
National Association of Securities Dealers (NASD) September 23, 2002

Investor Tips

Variable Annuities: What You Should Know
Securities Exchange Commission (SEC)

Notices

The NASD Reminds Members of Their Responsibilities Regarding the Sales of Variable Annuities
National Association of Securities Dealers (NASD)

News Releases

NASD Proposes Specific Requirements For Deferred Variable Annuity Sales
National Association of Securities Dealers (NASD) April 26, 2004

Buyer's Guide

Equity-indexed Annuities – A Complex Choice
National Association of Securities Dealers (NASD) January 16, 2002


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An equity-indexed annuity (EIA) is a fixed annuity that is valued by the greater of a published interest rate or by a formula that links the annuity to a stock index. While caps, participation rates and other limitations will keep the EIA from realizing the full growth of the index, there is still the potential for the annuity to grow at a better rate than by a simple interest rate. So long as no withdrawals are made from the annuity during the surrender period or before the consumer reaches age 59½, it is unlikely that a consumer will lose money with an EIA. Because of this inherent safety, EIA are a desired vehicle for retirement planning.

Equity-Indexed Annuities: The Smart Consumer’s Guide is a general reference that provides easy-to-understand explanations of the basic features of this advanced form of fixed annuity. This book does not claim to be a comprehensive product guide, or to compare different equity-indexed annuity products.

This book provides a consumer-level explanation of the basic operation of EIAs.

Chapter 1 introduces the equity-indexed annuity and describes it as a variation of a fixed annuity.

Chapter 2 discusses how the minimum interest rate is credited to the annuity.

Chapter 3 describes how index crediting can provide the maximum return for the annuity.

Chapter 4 talks about the various methods by which the annuity is linked to the index for crediting purposes.

Chapter 5 addresses the various payout options that are available.

Chapter 6 discusses the annuity company and financial ratings.

Chapter 7 discusses suitability issues, including complexity, disclosure, liquidity and withdrawals.

Chapter 8 talks about the portfolio role of EIAs.

Chapter 9 addresses tax considerations and how EIAs should be integrated into estate planning.

Chapter 10 discusses asset protection issues. Finally,

Chapter 11 offers questions that each consumer should ask before purchasing an equity-indexed annuity.

This book is also an excellent resource for agents to provide to their prospective clients so that their clients will better understand what equity-indexed annuities are and how they work. The book contains the full text of publications about EIAs from the NASD, NAIC, and SEC for prospective clients to read.

Few individuals have done more to educate the American public about financial scams than Jay Adkisson. As the creator of Quatloos.com, Jay has helped many thousands of people worldwide avoid being scammed out of many millions of dollars to various investment schemes. The U.S. Senate Finance Committee has twice called Jay as an expert witness on abusive tax schemes. As one of the authors of “Asset Protection: Concepts and Strategies” (McGraw-Hill 2004), Jay has similarly helped thousands of people avoid dubious asset protection schemes.

In his latest book, Equity-Indexed Annuities: The Smart Consumer’s Guide, Jay gives a balanced and objective overview of this advanced form of fixed annuity to better educate consumers of the advantages, disadvantages, and the numerous product options that are available when considering the purchase of this popular retirement vehicle.

This short guide covers all the most important issues that consumers should address before purchasing an equity-indexed annuity, including:

How the minimum interest rate is paid, how the maximum return is linked to the stock index, and how participation rates and caps may limit returns.
How surrender charges may limit withdrawal rights for a period of years after the annuity is purchased, and why the annuity should not be purchased if the consumer will need the cash during this period.
How the annuity payments may be made, and what can happen upon the death of the annuitant.
How annuities benefit from tax-deferral, how taxes are paid upon withdrawal or when annuity payments are made, and tax considerations upon the death of the annuitant.
How the annuity and annuity payments may be protected from creditors in some states, and how in other states they may be protected by proper planning done in advance of claims.

This guide does not claim to address all issues that might arise from the many types of equity-indexed annuities now available to consumers, but it should give enough of a basic overview that consumers will be able to ask the right questions of their agent, and be able to compare the most important features between competing products. This guide should also give consumers the ability to intelligently answer the most fundamental question: Is an equity-indexed annuity right for me?

About the Author

Jay D. Adkisson is an investment consultant and attorney. He is best known as the creator of Quatloos.com which is an internationally famous website that educates the public about financial and investment scams and tax frauds. Jay has twice been an expert witness for the U.S. Senate Finance Committee, and is the author of “Asset Protection: Concepts and Strategies” (McGraw-Hill 2004). Read more at http://www.jayadkisson.com

Some Warnings

Equity-Indexed Annuities are excellent products in the abstract and work for many consumers. For some consumers, however, equity-indexed annuities may not turn out to be a good purchase. These disappointed consumers will be those who discover too late that they needed their money during the surrender period or before they turned 59½, but they could not access it without penalty. These consumers should never have purchased an EIA in the first place, and a purpose of this book is to set out those circumstances in which a person should instead place their money into something that is more liquid so that they can meet their cash needs.

Securities Law Issues

When you should absolutely not buy an Equity-Indexed Annuity

You should absolutely NOT buy an Equity-Indexed Annuity if:

You anticipate needing most of you money from the Equity-Indexed Annuity during the surrender period.
You anticipate needing any amount of money from the Equity-Indexed Annuity prior to the time that you turn 59½.
You are having difficulty understanding the fundamental terms of the Equity-Indexed Annuity being offered to you.

If any of these three conditions apply, then you should absolutely not buy an Equity-Indexed Annuity. Do not allow yourself to be placed into a contract for which your situation is unsuitable.

Particular Things That You Absolutely Must Know

You must understand at least the following contractual terms of the Equity-Indexed Annuity that you are considering buying:

What is the financial rating of the annuity company?
What is the minimum guaranteed interest rate return? What is the participation rate for interest crediting?
How many years will surrender charges be charged? What are the surrender charges in each year?
How is the annuity linked to the index? What is the participation rate for index crediting? Are there caps?
What happens to the annuity if you die? Will the surrender charges be waived? Will your beneficiaries receive any money?
What are the exchange options? Will you be forced to annuitize?
Are there any tax consequences that you should know about?

What are the moving parts to this annuity? What terms or rates does the annuity company have the right to change?