fixed annuity trends€¦ · secondary review • funding source ... • social media • estate...
TRANSCRIPT
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Fixed Annuity Trends
Kim O’Brien NAFA President & CEO
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SEC Uniform Fiduciary Standards
• Section 913 of the Dodd Frank Act • Expected to “delay” rule: Q3/Q4 2012 • Concern over extending the fiduciary
standard to broker-dealers – Bad precedent
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SEC Uniform Fiduciary Standards
• Suitability Standard more than adequate • Encouraged to be persistent • NAFA Suitability Standard of Care Position
Paper • SEC to testify before Congress concerning
their budget – May provide insight into SEC’s Plans
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DOL Fiduciary Rule
• Hindered by SEC’s Fiduciary Standards Work Slowing
• Effort to obtain more data on IRA’s • Need to gather more cost-benefit-analysis to
support their position • DOL still intent on moving forward
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Federal Insurance Office
• Created by Dodd-Frank Act • Report on Insurance Regulation was expected
January 21st, 2012 • Still unknown what the report will
recommend
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Federal Insurance Office
• When report is released, Senate Banking and House Financial Services Committee to convene
• NAFA actively monitoring
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Also Monitoring
• Consumer Protection Bureau • SWAP Definition • NARAB II
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General Legislative Outlook
• Partisanship expected to increase throughout election year – Delaying Policy Issues to late 4th Quarter
• This allows more time to educate and inform the various channels
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• Pressures to Raise Revenue – Nothing considered “off the table”
• President’s Budget Proposal – Feb 13th • Expiring Tax Provisions • NAFA Position Paper on Retaining Tax
Considerations for Fixed Annuities
Tax Reform
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• Source of Funds • Investment Advice • Designations • Suitability Enactment • Record Retention
State Watch List
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NAIC Model Adoption
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NAIC Suitability Standard of Care Focus • Product Knowledge
– Guaranteed Features – Surrender / Withdrawal Conditions – Income Riders - how they function – Other Riders and Limitations – MVAs – explain them – How features trigger limitations
• Training
NAIC Suitability
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Standard of Care Focus • Secondary Review • Funding Source • Replacements • Post-Sale Review
NAIC Suitability
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0.00%
3.00%
6.00%
9.00%
12.00%
15.00%
Range of Index Annuity Returns By Crediting Method
Blue-APP Red-Trigger Yellow-Averaging Green-Monthly Cap
Data Courtesy of Jack Marrion
2011 Sales Figures
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• New Companies with FIA product • Additional distribution channels in FIA space • Low interest continues – MYGAs • GLWBs • FIA sales continue strong • Contingent Annuities under fire • Annuity Illustration Model • Social Media • Estate Planning and Annuity Structure
Trends Affecting Fixed Annuities
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Comparative Rates – If a retiree was getting $1,000 a month in interest from their 1-year CDs in 2006 they’re now generally getting $112 a month from that same CD. Annuities are still paying 4 times more than CDs. Wall Street's story has crumbled with investors fleeing mutual funds. Income For Life Story – The GLWB message is annuities keep consumers independent in uncertain times. There’s a bit of a fire sale aspect to today’s GLWB with today’s guarantees due to tomorrow’s uncertainties . Retirement Funding Needs with Income Annuities or GLWBs – health care costs, legacy from the grave, maintaining lifestyle The Annuity Industry Isn’t Going Away – Investment grade bond yields dropped to the 3% to 3.5% range from 1945-1955, briefly dipping into the high 2% area in 1946 and at the start of the Korean War in 1950. From 1956 to 1966 bond yields were 4% to 5%. Annuities survived this environment and today’s products are more flexible and other much better benefits.
What’s the Good News?
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NAFA Benefits at Work For You JOIN OR RENEW TODAY!
• Providing you with an ADVOCATE…..Dedicated Washington D.C. Lobbyist, Public Relations Campaign to Take Back the Media.” and Media Responses
• Keeping you UPDATED…NAFA News & Updates NAFAWire , Annuity Alerts, Compliance Bulletins, Quarterly Compliance Matrix
• EDUCATIONAL opportunities…. FREE 4 Hour NAIC Suitability course, Monthly educational webinars, monthly and quarterly Jack Marrion Publications
• Providing you with exclusive SAVINGS and DISCOUNTS……NAFA Smart Savers- discounts on travel entertainment and Life Lock Membership, competitive E&O Coverage, Discounted Software for Suitability Compliance
Contact [email protected] or www.nafa.com
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Kim O’Brien, CFP, MBA President & CEO [email protected] phone : 414-332-9306 888-884-NAFA (6232)
Thank You!