Snarky Snoopy
Posted by Steve Piontek, Editor-in-Chief in companies, opinion, regulationI was more than a little surprised to see Met Life weighing in on the side of the Securities and Exchange Commission regarding the SEC’s move with Rule 151A to regulate some indexed annuities as securities.
Maybe I shouldn’t have been. But truth is I can’t recall one instance in the long life of the Peanuts strip where Snoopy was shown biting someone. This move of Met’s strikes me as being characteristic of quite another animal. Bam! Before you know it the thing’s got its pointy sharp little teeth in your ankle and won’t let go.
Met’s amicus brief, wherein it supported the SEC, said “federal regulation of indexed annuities as securities is an appropriate exercise of the SEC’s rulemaking authority.”
Met notes in the brief that it does not sell equity indexed annuities, but does sell variable annuities, however. Not selling EIAs, of course, gives it the perfect right to opine on their regulation, this being America after all.
Some investors may confuse EIAs with VAs, Met says. ”Inadequate regulation of indexed annuities thus tarnishes the reputation of other annuity issuers, including MetLife and the insurance industry as a whole.”
I don’t want to leave the impression that Met is being negative, however. Further down in the brief it becomes clear that Met’s argument for SEC oversight of EIAs is really based on a feeling of sharing. That is to say, since variable annuities are in part regulated by the SEC, then it is just not fair to deprive index annuities of enjoying the same privilege.
In other words, since my ox has been gored, so should yours.
I don’t know how long Met Life is wedded to Snoopy as its representative icon. But if it ever wants to consider some other Peanuts characters, here are a couple of suggestions coming out of this amicus brief.
Good old Charlie Brown himself might be suitable since, in my opinion, Met really dropped the ball here.
But the character that probably best reflects this bit of opportunistic slamming is, of course, Lucy. A far cry from Mother Met of days gone by, to be sure, but then nothing’s what it used to be.
Tags: annuities, companies, regulation
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The neat thing about America is the agent can vote with their feet, and vote with their premium dollar, just like we vote for our Congress critters.
The right to free speech is a vital right of man, but it is not the most important right. Economic freedom is one of the most vital of all, right after the vital right to self-protection.
Met Life is meddling in the economic freedom of man, both the agent, and the policy owner. Their meddling is wrong and evil.
There are two quotes that came to mind when I read about Met Life’s meddling in the affairs of others:
“The right to be heard does not include the right to be taken seriously.” – by Hubert H. Humphrey
and
“I have always been among those who believed that the greatest freedom of speech was the greatest safety, because if a man is a fool, the best thing to do is to encourage him to advertise the fact by speaking.” – Woodrow Wilson
Intelligent patriots know intuitively that there is both right and wrong; good and evil. Every person should choose a side. Met Life has chosen their side, and it is the wrong side, the evil side.
While their desire to eat shoe leather in public is laughable, it does serve a very valid purpose: Making due diligence on carriers much easier.
Companies that exhibit anti-competitive, anti-agent, anti-consumer, anti-economic freedom behavior are easily removed from the preferred list of carriers.
I encourage other companies to pick a side. Hundreds of thousands of agents, and millions of citizens, would like to know which side each insurance company is on in the constant battle for economic freedom against the totalitarian fascists of the SEC.
Met Life’s position that misery loves company is actually not at all helpful for the SEC. At base, Met Life’s argument is that the SEC should regulate all annuities because otherwise retirement product consumers might be confused.
I don’t think the SEC is optimistic about that approach – the law clearly exempts annuities from SEC regulation – so instead the SEC is making a facetious argument that consumers need to be protected against the risk of earning more interest than they were guaranteed. Hah! Given the SEC’s effectiveness in minding its own store (hello, Madoff Securities!), you’d think they have enough on their plate without reaching for insurance regulation.
The lure of (the lost) fee income remains irresistibly compelling to FINRA, the SEC, their internal budget(s), and those (we know who they are) who would line up at the trough.
MetLife is in many ways too cumbersome an entity to have availed themselves of the common sense, logical appeal of a SAFE annuity product that consumers have embraced – wisely – with their premium dollars.
MetLife’s position on this is not surprising. I feel that their underlying motivation – when revealed – will likely be a nice chunk of "few strings attached" funds from an "as yet to be determined" entitlement initiative, no matter how it’s labeled.
My hope is that this blog ultimately has tens of thousands of agents/advisors add their voice (once again) to this debate. All one has to do is look at the numerous posts on the SEC site to see which way the wind blows on this important issue.
This position Met Life has taken on IAs is self-serving arrogance at its best.
My hope of course is that the insurance industry prevails in the law suits that have been filed against the SEC over this ruling. Because if we do fail the real losers here are the consumers. The additional regulation will likely outweigh the many benefits now available with IAs, so consumers will be forced into buying potentially lower return fixed annuities … or be forced back into the market in an attempt to generate higher returns.
In my humble opinion this entire attempt by the SEC to “regulate” these products is nothing more than a money grab based on 79,000,000 Baby Boomers now retiring at the rate of one every eight seconds. And Met Life simply wants its piece of this pie, too.
Let’s be frank here: The sizzle that sells variable annuities is the living benefits that one can attach to the policy. But are these really in the client’s best interest? As I see it, these VA income riders are expensive now and will likely become more expensive going forward. Further, most companies now limit the portfolio mix as a way of limiting their risk on these riders in case the market again tanks. And when you take out all the fees what’s left? Maybe a 5% net return to the client? My friends, you can get that with an IA with NO downside market risk. And you can get IA income riders based on up to 8% in many IAs today … for a reasonable cost!
Lastly, you can create a portfolio that puts 90% in an IA and 10% in a 1 year options spread on the S&P 500, add the income rider for additional safety, and over time generate potential double digit returns for the client … all the while protecting the client from Black Swan events because you CAN’T lose more than the 10% in the options spread in any given year.
Does this strategy work? You bet it does. Will our firm keep using this strategy if the IA does become a security? Not on your life. We will simply use a fixed annuity that offers a set return and rather that a 90/10 split between the two sides, we will do an 85/15 split, assuming we can get a 5% return on the annuity side. That will give us the same absolute downside risk of 10%.
The saga continues …
Joel M. Diskin, CFP, RFC
President, The WealthSpan Companies, Inc.
Registered Invetsment Advisor
MetLife’s attempt to restrain trade for its own benefit, and to the detriment of American citizens, should be prosecuted. Having said that, I have to admit their case is aided and abetted by the insane vocabulary of our industry. (”Securities” are investments that can lose money? A “broker” is supposed to make you less broke?)
The SEC and FINRA regulate securities. EIAs cannot lose money (if one follows all the rules). In fact, they can guarantee rates of return and income streams. Therefore, they are not securities. And, they accomplish these benefits without the larcenous fees inherent in VAs.