FINRA’s 2012 Product ‘Watch List’

On January 31st, FINRA put out a publication intending to highlight new and continuing areas of significance to their regulatory program. As an advisor, I can see why some of these areas may be of concern to regulators as opportunities to either overuse or misuse these products does exist. I also found it interesting that this list includes many of the most popular investment products currently being offered by advisors. The reason for their popularity, at least how I see it, is that these products offer non-correlation to the markets, income protection, speculative potential, or some combination of those elements offered in some kind of complex shell. I applaud FINRA for putting out this kind of publication. In my experience, many investors haven’t taken the proper time to read up on regulatory warnings about financial products so that they understand where the risks of misuse may be. Advisors, broker-dealers, etc, should read these sorts of notes and hopefully will think twice about suitability and appropriateness before recommending something which may be misunderstood by a client, causing a problem down the road.

Continue reading

The Variable Annuity Market is Shrinking

It seems like every time I turn around another variable annuity (VA) provider is closing its doors. Sun Life, John Hancock, AXA, Genworth, and ING are among the companies which have either limited new contributions to one of their VA products, taken some other step to minimize exposure to the VA market, or completely exited the market. Meanwhile, that has translated into more premium dollars for big players like Prudential and Jackson National which have increased market share over the past year, according to Bloomberg Financial. The irony here is that VA sales in Q3 of 2011 hit $8.8B which was the highest level since Q3 of 2007.* One would think companies would want to enter this arena and compete for new dollars, not run the other way.

Continue reading