Response: To Attorney Mark Dobin
December 31, 2009 by Sheryl J. Moore
February 8, 2009
Dobin & Jenks, LLP
Marc S. Dobin
140 Intracoastal Pointe Drive, Ste. 207 Jupiter, Florida 33477
Advantage Group Associates, Inc.
Sheryl J. Moore
215 SE Wildflower Court
Pleasant Hill, Iowa 50327
Dear Mr. Dobin,
I wanted to take a moment and follow-up with you regarding our last conversation on indexed annuities. First, let me thank you for the opportunity to speak with you the afternoon of February 3rd. As I mentioned, I am not an “annuity marketer taking [you] to task for blasting this ‘wonderful’ product,” as your blog alludes. I am merely a market research analyst, with a mission to inform individuals about the facts of indexed life and indexed annuity insurance products. I am a licensed agent, but I have never contracted with a single insurance carrier, nor sold a single contract. I made the decision not to get my securities licensure because of the Financial Industry Regulatory Authority’s blind-sighted mission against indexed annuities. I do not have a vested interest in the sales of these products, beyond the fact that I believe strongly in their value proposition. I could do the same thing that I do now for fixed or variable insurance products, but choose not to.
I am the industry’s foremost authority on indexed insurance products. Not only does my company track every single product in the indexed markets, but we also track the sales of the products each quarter, and regularly observe the marketing and sales practices of the individuals and organizations in this industry. We actively work with regulatory entities such as the NAIC, NAIFA, and numerous insurance divisions to ensure proper education on indexed products.
Most notably, we respond to every piece of inaccurate, negative media on indexed products that we come across. Although I personally believe that every person is entitled to their opinion, I don’t believe that people should use their ignorance to negatively influence others. Twice now I have seen you blog about indexed annuities, a topic which you obviously do not know that much about. I’d like to take a moment to respond to you in writing about the misleading statements in your blog regarding indexed annuities.
On your blog dated February 3, 2009, you “wondered aloud how a market-based product could be sold by someone with a securities registration.” I’d like to help you with that. An indexed annuity is fixed insurance product that is regulated by the 50 insurance commissioners of the United States. The funds that back the products are held in an insurance company’s general account. In order to offer the indexed-linked portion of an indexed annuity, the insurance carrier invests approximately 3% of their budget on options. The other 97% of their budget is used to purchase bonds, which cover the indexed annuity’s minimum guarantee. The insurance carrier is the party bearing the risk with this insurance contract. The client has no risk of loss due to market declines because every single indexed annuity has a floor of 0% interest. Not a single indexed annuity owner has every lost a penny as a result of market declines.
You site in your most recent blog on indexed annuities that “They have a website, SEC151a.com, to plead their case.” This website is only one of a handful of websites dedicated to keeping individuals informed of the status of the Security and Exchange Commission’s Rule 151A. Had you taken a moment to review the sponsors, you would see that it is obviously run by organizations that depend on the sales of these products to thrive. However, our website at http://www.annuityspecs.com/SECRuling.aspx provides the most up-to-date, thorough coverage of the SEC’s rule and it is run by individuals that do not rely on the sales of these products. I encourage you to use our site, should the need for information on this matter arise again. Regardless, the website you refer to merely makes a case for insurance agents, who do not sell securities, to get securities licensed “prematurely.” Your blog is very misleading on this matter. Yes, the authors of the site are “discouraging people from the additional oversight that having a supervising broker/dealer would bring.” Would you go out and ask for additional rules and paperwork, just for a business you may NOT ever be involved in? It just doesn’t make good business sense, and I think even you can admit to that.
I find it hilarious that you think the SEC is in a position to ensure “fewer inappropriate EIA sales.” You think that if they catch on to Bernie Madoff after eight tipoffs that they can ensure proper annuity sales? And just how will they do this- with a prospectus that the client will never read? You are obviously out-of-touch with the very business that you actively work in. You know nothing about the level of suitability in the indexed annuity market, and my phone conversation with you solidified my belief that you know nothing of the complaint levels in this market either. I’d take time to education you on the laws that state insurance divisions have taken with regard to suitability by mentioning Standard Non-Forfeiture Laws, Annuity Suitability Model Laws, Marketing and Advertising Laws, and the like. However, I know that you have read about them based on your commentary on this matter; you simply choose to disregard it. Your opinion is based solely on the consumers who come to you, seeking action against an insurance company or agent. Had you an opportunity to work with satisfied customers, maybe you would hear some of the wonderful stories about the millions of consumers who are sleeping soundly, despite the market volatility, because they purchased indexed annuities. Your position on these products is based only on part of the story. It is comparable to making a decision not to fly in an airplane because you only hear about airplane crashes on the news, never about those who arrived to their destination safely. This is simply ludicrous.
Your opinion that “If [one is] selling something that relies on the stock market’s performance to determine the performance of the underlying investment, [one] should be registered to sell securities” made me laugh as well. It is your opinion, but it is misguided. Indexed annuities provide a guaranteed return of principal, plus interest. The excess interest, which is based on the performance of a stock index, is above-and-beyond the minimum guarantee. One does not even have to know anything about the S&P 500 in order to sell an indexed annuity based on the S&P 500. That is because it is an insurance product, not an investment. The client is not directly invested in the index, and this is made abundantly clear in all materials provided to the prospective consumer.
Should you wish to comment on indexed annuities in the future, I make myself available for your fact-checking. I find it unsightly to see a securities lawyer attempting to scare seniors by promoting false or misleading information on retirement income products. I know that a prestigious law firm such as Dobin & Jenks, LLP is vested in providing truthful information to their clients. I’m happy to provide a solid education on indexed products, should you decide to promote accurate information on these products on your blog in the future.
Sheryl J. Moore
President and CEO
Advantage Group Associates, Inc.