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Sheryl Moore

“1035 exchanges are about to get easier. Is that a good thing?”

This title is not original. It is the title of an article written by Greg Iacurci in InvestmentNews’ January 21, 2019 edition. It is an interesting piece about the effort to use technology to speed up the 1035 annuity-to-annuity transfer on a tax-free basis. Whenever I see 1035, I think replacement and when I think replacement, I think about Regulation 60 in NY. When I read this article, I kept thinking how likely it is to lead to Reg 60 violations and fines.

While not mentioned in the article, I am hopeful that those working on this streamlining effort are familiar with Reg 60 and its mandates. The article states “Annuity products are often derided as being expensive, complicated products, a criticism that’s compounded by cumbersome industry infrastructure that often creates a month-long exchange process. Technology can reduce the time line substantially, executives said, likely to within a week, start to finish.” That does not appear to be enough for all that is required by Reg 60.

Sheryl Moore, CEO of Moore Market Intelligence does point out that it is possible that “more bad actors would get missed” due to the streamlined process, and that is certainly true, but my concern is a compliance one. I do not see how it will be possible to comply with the disclosure requirements of Reg 60 within that process. So perhaps NY is outside the scope of these efforts? Perhaps once the rest of the country has successfully expedited the replacement process, pressure can be brought to bear on the NY DFS to revise Reg 60 to increase the speed of these transactions.


However, that seems a long shot given recent experience with Reg 60 procedures filings. In most cases, if not all, an expedited process for replacements requires revisions to a company’s DFS-filed procedures. Those filings are reviewed in granular detail and changes are often requested along with every screen shot of an electronic process. If changes are also required to the application to accommodate a new process, the slowdown at DFS is dramatically increased. Both the policy form reviewers and Reg 60 reviewers hold these types of changes to an extremely rigorous scope of review, far in excess of anything that exists in the review of paper processes. The chance that 1035 exchanges will get easier in NY seems remote.

Jumping on the FIA Birthday Bandwagon

There has been a small flurry of publicity around the 20th birthday of fixed indexed annuities. (e.g., InsuranceNewsNet, February 2015, p. 6 Editorial, “Happy 20th Birthday Indexed Annuities!”  and “Fixed Indexed Annuities Celebrate 20 Years”)

I read the first in this list, Mr. Morelli’s editorial, yesterday. The lead is that “Fixed index annuities want what any 20-year-old desires: Acceptance and Respect.” The piece acknowledges the “bad boy taint from years past” but then appears to suggest that the taint may not be as far in the past as that line suggests: “Sometimes those [marketing] messages and products have gotten a little too creative.” “Some companies were trying to delivery on an impossible promise.” “Aggressive marketing.” “Aggressive selling to prospects in their 70s and 80s and you had the makings for public revulsion.”

There is a mention of “uncapped” strategies that are the latest marketing concern he correctly notes that this marketing is getting attention from regulators. See Iowa Bulletin 14-02 dated September 15, 2014. Morelli says that analysts such as “Sheryl Moore of Moore Market Intelligence say that those products are built so they will have the same result as pretty much any other FIA.” If FIAs do want acceptance and respect, then the “aggressive” and “creative” marketing has to stop.

To “shake the bad boy rep,” FIAs have to be marketed in a fair and balanced way, making clear what they can and cannot do, what they offer protection from and what the costs of that protection are. The bad boy rep can, perhaps be turned around, but it will mean that those who create the “aggressive” and “creative” marketing material have to stop and they have to let the product become boring. If bad boys do change, they may be perceived as boring. But it isn’t only the products that have to shake the rep, it is the people who sell them. If the product is going to get real respect in the next 20 years, the people who create marketing materials about FIAs and the people who sell FIAs are going to have to come to terms with a little boredom.

Morelli concludes: “How will the FIA be taken seriously as a retirement vehicle? The same way in which any 20-year-old shakes a bad rep: Make clear promises that they keep, time after time, year after year.” That is true for the products and also for the insurance producers selling the product, though I would modify it a bit: Give real information that is fair, balanced, complete and accurate, time after time, year after year. Then perhaps the FIA will grow into a mature and respectable adult.

With our deepest sympathies . . .

From all of us at Currin Compliance Services, we would like to extend our deepest sympathies to the family and friends of A.J. Betts…especially to his mother, Sheryl Moore. We are deeply sorry for your loss.

 From LifeHealthPro:


Bullied to death

In Passing: A.J. Betts (1997-2013)