Replacing Variable Annuity with Indexed Annuity is an Exercise in Safety

The NASD would have the public accept that indexed annuities are the same as variable annuities, not because they really believe this to be true, but because the NASD currently has partial jurisdictional control over variable annuities, but no authority at all over indexed annuities. This attempt to blur the line between these two products is all part of a methodical propaganda campaign being waged by the NASD to wrestle control of indexed annuities from state insurance departments. Interestingly enough, contrary to the accusations of the NASD about owner complaints and agent improprieties, indexed annuities actually have fewer complaints registered with the NAIC than any other annuity or insurance product, and of the complaints filed; none include allegations of failure of their indexed annuity to perform as expected. Unfortunately the same cannot be said about variable annuities, where numerous complaints have been filed with a number of regulatory agencies, and in one instance, the issuing company has not only pulled their variable product from the market, they are settling a class action lawsuit with the existing policy holders. So, when the NASD cites replacement of variable annuities with indexed annuities as a basis for their fears of lack of suitability, exactly what is the real concern? When an indexed annuity moves the policy holder from a position of risk they had with a variable product, to a position of guarantees and safety available with the indexed annuity, unless the client needs to remain exposed to potential losses, an indexed annuity will ALWAYS be more suitable, especially with the older clients who need to reduce or remove their exposure to market risk. But the differences are so dramatic; we will take time in the following post to examine some key distinctions between variable annuities and indexed annuities.