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Response: The Safety Trap (a.k.a. My 52-Point Correction to Lisa Gibbs)

January 5, 2011 by Sheryl J. Moore

PDF for Setting It Straight with MONEY


Ms. Lisa Gibbs,

I am an independent market research analyst who specializes in the indexed annuity and life markets. I have tracked the companies, products, marketing, and sales of these products for over a decade. I used to provide similar services for fixed and variable products, but I believe so strongly in the value proposition of indexed products that I started my own company focusing on IAs and IUL exclusively. I do not endorse any company or financial product, and millions look to us for accurate, unbiased information on the insurance market. In fact, we are the firm that regulators look to, and work with, when needing assistance with these products.

I recently had the occasion to read an article that you wrote, “The Safety Trap.” Quite honestly, Lisa, it ticked me off. Inaccurate reporting of indexed annuities is nothing new: I’ve been combating it since the products were first developed February 5, 1995. However, your article reads as if you made up your mind that “no indexed annuity is suitable for anyone” before you even drafted the piece! How can you paint an entire industry with one broad brush? Indexed annuities are not BAD. They are a valuable retirement income tool, that like any financial instrument, is at times used in the course of bad salesperson behavior. I appreciate that you attempted to do your homework. I see that you reached-out to several people that I work with at the National Association of Insurance Commissioners (NAIC). However, a lot of your data is incorrect. I believe that in order to maintain your journalistic integrity, you need to take note of the mistakes you made in your article. A correction to this piece is not only warranted, but would also help Money to maintain their integrity. So that you can have access to accurate information on indexed insurance products in the future, I thought I’d reach-out to you and clarify some mistakes, inaccuracies, and misleading statements in your article. I know this email is long, but I did not feel that I could address some of your errors and ignore others. Therefore, please see below my itemized list of issues I took with your article:

1. You have the value proposition of indexed annuities all wrong. They do not “promise you’ll share in the upside of stocks with no downside.” Indexed annuities are promoted as ‘allowing the purchaser to have LIMITED participation in the market’s upside, while avoiding the downside risks associated with the market.’ You see, all gains on indexed insurance products must be limited through the use of a participation rate, cap, or spread. Perhaps it would help if I first started with a brief overview of how indexed insurance products work. Because indexed annuities are a “safe money place,” they should be compared against other safe money places. Investment products such as stocks, bonds, mutual funds, and variable annuities subject the purchaser to both the highs and the lows of the market. It is inappropriate to compare any safe money place, such as an indexed annuity, to risk money places and it is most certainly not appropriate to compare safe money places to the market index itself. Indexed annuities are not intended to perform comparably to stocks, bonds, or the S&P 500 because they provide a minimum guarantee where investments do not. Indexed annuities are priced to return about 1% – 2% greater interest than traditional fixed annuities are crediting. In exchange for this greater potential, the indexed annuity has a slightly lesser minimum guarantee. So, if fixed annuities are earning 5% today, indexed annuities sold today should earn 6% – 7% over the life of the contract. Some years, the indexed annuity may return a double-digit gain and other years it may return zero interest. However, what is most likely to happen is something in between. Were the indexed interest NOT limited, the insurer could not afford to offer a minimum guarantee on the product, and THAT is a variable annuity- not an indexed annuity. On the other hand, the client is guaranteed to never receive less than zero interest (a proposition that millions of Americans are wishing they had during that period of 03/08 to 03/09) and will receive a return of no less than 117% worst-case scenario on the average indexed annuity. In addition, no indexed annuity owner has ever lost a penny as a result of market downturn. This is a strong value proposition that cannot be offered by any securities product with unlimited gains.

 2. Every financial product has, at one time or another, been the instrument of bad agent behavior. An indexed annuity is not a bad product simply because some insurance agents in Illinois decided to use them inappropriately.

3. Every indexed annuity pays the full Account Value to the designated beneficiaries upon death. No rider is necessary to provide this benefit, despite what may have been implied in the Cline’s case.

4. The average indexed annuity commission as of 4Q2010 is 6.37%. This is a far cry from the commission you cite in your article. And while you are technically correct that commissions can be “9% in some cases,” the spirit of your communication is unappreciated. Commissions can also be as low as 1.5% on indexed annuities. So interesting that you didn’t mention that… Keep in mind that this commission is paid a single time, at point-of-sale, and yet the insurance agent is expected to service the contract for life. Compare this to the generous, consistent commissions that are paid on products such as mutual funds, and I think you’ll agree that indexed annuity commissions are fair.

5. The average first-year surrender penalty for indexed annuities as of 4Q2010 is 10.77%. (Note that this penalty is even lower for older-aged purchasers.) Again, this is a far cry from the surrender penalty you cite. Technically, you are correct: there is an indexed annuity that imposes a first-year surrender penalty of 20%, which is the highest first-year penalty in the industry. However, first-year surrender penalties can also be as low as 5% in the first year. Your disingenuous insinuations are not appreciated, Ms. Gibbs. A 20% penalty is not representative of the average indexed annuity.

6. Premium bonuses are not bad and are typically a highly desired feature on annuities. Note that all annuities, fixed, indexed, and variable, offer premium bonuses. The vast majority of premium bonuses on indexed annuities are credited and received on the day the contract is issued, contrary to what you suggest. Very few annuities offer bonuses that the client may possibly not “actually collect.”

7. Indexed annuities are not as complex as most perceive them to be. They are just fixed annuities with a different way of crediting interest. Furthermore, complexity is relative. Some would say that fixed annuities, which are the simplest retirement income product offered by insurance companies, are complex. However, if someone can understand that they have the ability to deposit their money with an insurance company, defer taxes on the monies until they begin taking income, receive 10% withdrawals of the account value annually without being subject to penalties, and have the ability to pass on the full account value to their beneficiaries upon death- then they can understand nearly every indexed annuity sold today. As far as the indexed interest crediting is concerned, 98.4% of indexed annuities offered today have crediting methods based on the simple formula of (A – B)/B. My grandmother didn’t even attend college, and she understands indexed annuities for goodness sake.

Note that the perceived complexity of indexed annuities stems from the historical practice of offering numerous, complex, unique crediting formulae on the products. Historically, there have been as many as 42 different ways of calculating indexed interest on these products. However, since hitting that high point in the year 2000, the number of unique crediting methods on indexed annuities has declined annually and sits at 12 today. Of these twelve different methods, nine use the calculation (A-B)/B to calculate the gain.

8. William Reichenstein has no basis for suggesting that indexed annuities “don’t even deliver attractive returns.” Has he looked at any inforce policyholder annual statements? I highly doubt it. Not only do I own many indexed annuities, but I have collected policyholder annual statements over the past twelve years. Indexed annuities have consistently outperformed fixed annuities and certificates of deposit (CDs). On the high end of the spectrum, I have actual policyholder annual statements on my desk, showing one-year gains on indexed annuities as high as 47.65%. Are indexed annuities intended to return this much on a consistent basis? No. However, sometimes purchasers do “hit a home run” with these products. For a more realistic review of general gains on these products, I believe that you should consider a study that was recently done by Jack Marrion. Sure, the study has its flaws (i.e. small sample size), but this “Real World Returns” study is compelling. The study looked at actual returns of inforce indexed annuities and shows that from 1997 to 2007, the five-year annualized returns for actual indexed annuities averaged 5.79%. Interestingly, this is precisely the expected return for products over this period. I find it hard to believe that anyone would shun an average return of 5.79% following a period when the market declined nearly 50% in a single year. Keeping in mind that fixed annuities are currently averaging a mere 3.15% interest, I think that this return is respectable. Personally, one of my indexed annuities returned a gain of just over 7% this year, while my grandmother’s variable annuity had a loss. You must remember- indexed annuities are primarily purchased by those more concerned with principal protection, not unlimited potential for gains. Mr. Reichenstein’s assertion that indexed annuities “almost always underperform” is based on faulty logic: they are not intended to perform favorably against securities products.

9. While I can appreciate the data that 16 states sent to you about annuity-related complaints, it appears that your data is still skewed. The consumer complaints on indexed annuities do not indicate there are “problems with indexed annuities”. In fact, they illuminate that the indexed annuity market is much more “suitable” than many other markets. See data below from the National Association of Insurance Commissioner’s Closed Complaint Database on annuities:





Based on our research, this results in average annual complaints as follows:





So, not only have complaints on these indexed annuities declined annually for the past three years, but the average has declined consistently for the past four years. Conversely, variable annuity complaints (which are overseen by the Securities and Exchange Commission) have always been greater than the number of indexed annuity complaints, and have risen in recent years. Certainly, we do strive for 100% customer satisfaction in the insurance market, but I would contend that an average of only 3.29 complaints annually, per company, is quite reasonable and not indicative of “problems with indexed annuities.” Perhaps you should double-check the source of your data, as I have found that numerous state securities divisions combine their indexed and variable complaint data when reporting it publicly. So, while a state may be reporting that 30% of all annuity-related complaints involve indexed and variable annuities, it is likened to “babies and serial killers” accounting for the most heinous crimes in our nation.

10.  While Florida’s indexed annuity complaints may be higher than the other states you compared it to, you must also keep in mind that more than 9% of all insurance complaints originate in that state alone. The scope of this comparison must be taken into perspective when evaluating your statements.

11.  Indexed annuities account for 15% of all annuity sales and 39% of all fixed annuity sales.

12.  You fail to understand how surrender penalties on annuities work. An annuity owner has no reason to be concerned with the penalty on their annuity, unless they plan on withdrawing money during the surrender charge period. Even then, the annuity owner has the freedom of taking out 10% every year without penalty. Some indexed annuities even allow as much as 50% of the annuity’s value to be withdrawn in a single year! In addition, 9 out of 10 indexed annuities provide a waiver of the surrender charges, should the annuitant need access to their money in events such as nursing home confinement, terminal illness, disability, and even unemployment. Couple this with the fact these products pay the full account value to the beneficiary upon death, and I think that you’ll see that consumers have tremendous access to their cash value when they purchase indexed annuities. These are some of the most liquid retirement income products available today!

13.  Your explanation of how insurers invest the purchaser’s money on an indexed annuity is deceiving. You make it sound as if the insurance company makes more money on indexed annuities when there is a decline in the index. You fail to recognize that the insurance company still has to make good on the minimum guarantees on the annuity. In an interest rate environment where insurers are lucky to earn 3% on their monies, paying-out these guarantees can be a costly proposition.

14.  Sales of indexed annuities were actually greater than $30 billion in 2009. Sales that year hit a record of $30,114,497,035 in sales.

15.  Indexed interest on indexed annuities must be limited, or the insurer would not be able to provide a minimum guarantee on the contract. So, while you see the limitation of indexed gains as a detriment, it is actually what protects the annuity purchaser from the risk of losing money. In order to offer unlimited gains on an annuity, you must also pass-on unlimited risk. This is why variable annuity purchasers risk losing their principal in the event of a market downturn. Ultimately, if a consumer were looking for unlimited gain potential, an indexed annuity would not necessarily be an appropriate product to fulfill their needs.

16.  I find it interesting that you suggest a “common cap right now is 4.5%.” While it is true that there are products with caps of only 4.5%, there are also products with caps of 10.85% or more. So, was this just a way for you to deceive your readers without making a boldfaced lie? I’m not sure if you are getting bad information or trying to twists the facts.

17.  Caps have far exceeded 20% in the past decade! So, while your statement that caps have “been as high as 13%” in the past decade is correct, it is again misleading.

18.  While insurance companies reserve the right to change the rates on indexed annuities in years two plus, that does not mean that they actually change them, much less change them adversely. Have I seen companies reduce the rates on annuities in years two plus? Yes, but I have also seen companies increase the rates in years two plus. What you must understand is that the guarantees of the contract are clearly spelled out on fixed, indexed, and variable annuities and can never change once the annuity is issued. However, non-guaranteed elements, which are clearly disclosed to the purchaser, are sometimes subject to change in years two plus of the contract in the event of a volatile market (the current interest rate on a fixed annuity, the current cap on an indexed annuity, or the current fees on a variable annuity). I personally feel much more confident that the companies offering these products today will be able to make good on their claims-paying ability, considering such flexibility in the event of unforeseen circumstances. If the press actually understood this feature, I think that they would appreciate it as well.

19.  It never ceases to amaze me how people like you can so misunderstand the concept of dividends being excluded from the crediting calculation of indexed annuities. You comment that dividends are excluded from the indexed calculation on indexed annuities as if it were a detriment; it is not. The insurance company never receives the benefit of the dividends on the index on an indexed annuity, because the client is never directly invested in the index. The insurance company invests the indexed annuity purchaser’s premium payment in the general account, which protects them from declines in the index. The premiums are never invested in a pass-through account, which would provide the benefit of the dividends, but also expose the client to risk should the market decline. For this reason, the dividends cannot be passed on to the consumer. By not directly investing in the index (which would pass-on the dividends), the insurance company is protecting the purchaser from losses. So, you see- this is a benefit to the indexed annuity purchaser, not a disadvantage. And while it is true that your readers will not “benefit from dividends in an indexed annuity,” they also won’t risk losing their money as a result of market volatility.

20.  While your comparisons of indexed annuities and bond funds, Treasury bills, and stocks are amusing, they are disingenuous. It is inappropriate to compare risk money places, such as stocks and bonds, to safe money places, such as indexed annuities. It is most appropriate to compare indexed annuities to instruments such as CDs and fixed annuities. The average 5-year CD rate is currently 2.23% (according to bankrate.com) and the average fixed annuity rate is currently 3.15%. I would say that having the potential to earn as much as 10.00% or more annually on an indexed annuity, while deferring taxes and guaranteeing lifetime income, is a VERY attractive proposition as compared to CDs and fixed annuities. Bear in mind that the investments you compare indexed annuities to cannot provide tax deferral or an income that cannot be outlived either.

21.  Only 54% of indexed annuity sales are qualified as of 3Q2010. And you fail to realize that although additional tax advantages may not be realized on qualified funds, the combination of protection/potential and the guarantees of indexed annuities cannot be matched by any other retirement income product available today.

22.  It is absolutely insincere for you to suggest that there are “other ways of getting guaranteed lifetime income.” An annuity is the only financial services product that can provide an income that cannot be outlived.

23.  While you are quick to note that CDs are backed by the FDIC, you fail to mention that insurance companies are backed by the State Guaranty Fund Association in a similar manner. Since the market crashed in 2008, 330 banks have failed. Very few insurance companies did so over that same period.

24.  While it is true that you can lose principal in an indexed annuity if you “cash out too soon,” that is true of all annuities, and even of CDs. The surrender charge on a fixed, indexed, or variable annuity is a promise by the consumer not to withdraw 100% of their monies prior to the end of the surrender charge period. This allows the insurance company to make an informed decision on which conservative investments to use to make a return on the clients’ premium (i.e. 7-year grade “A” bonds for a seven-year surrender charge annuity or 10-year grade “A” bonds for a ten-year surrender charge annuity). Investing the consumer’s premium payment in appropriate investments allows the insurance company to be able to pay a competitive interest rate to the consumer on their annuity each year. In turn, it also protects the insurance company from a “run on the money” and allows them to maintain their ratings and financial strength. Keep in mind that annuities are intended to be long-term savings vehicles and purchasers should not place 100% of their savings into any one instrument, including indexed annuities. That being said, indexed annuity purchasers do retain outstanding liquidity on their contracts, in the event that they need access to their funds.

25.  Where on earth did you do your fact-checking for this article? You have so much information wrong. The average first-year penalty on indexed annuities as of 4Q2010 is NOT 12.5%, it is 10.77% and even lower for older-aged purchasers. The average first-year penalty on fixed annuities as of 4Q2010 is 9.69%, not 7.5%. While you are quick to point-out that indexed annuity surrender charges can extend for as long as 16 years, I see you fail to mention that they can be as short as three years. You also fail to mention that fixed annuities can have even longer surrender charges than indexed annuities do. Do your readers a favor next time and verify that your data is accurate, please. Your misinformation has the power to sway in a manner that might put your readers’ retirements at risk.

26.  I have news for you: independent agents are not the only type of insurance agents that are not employees of the insurance company. Your understanding of what an independent agent appears to be incomplete. Where a career agent would only be permitted to sell the products of the company they are appointed with (with very few exceptions), an independent insurance agent can sell the products for any company they choose. There is no difference in the suitability standards for either of these distributions; both types of agents must act in their clients’ best interests. So, while you believe being an independent agent is a disadvantage to the client, it is actually a tremendous advantage. Independent agents can offer their clients whatever product is best for them, regardless of which insurance company offers it.

27.  Surrender charge waivers for terminal illness and unemployment have existed on indexed annuities since they were first developed in 1995, this is not some new development in light of perceived recent complaints. Also consider that there are annuity provisions that waive surrender charges in the event of disability and unemployment as well. These benefits have ALWAYS been available on indexed annuities!

28.  It sounds like you do not properly understand how a premium bonus works. Bonuses are offered on fixed, indexed and variable annuities. A premium bonus of 5% would immediately increase a purchaser’s $100,000 annuity’s value to $105,000. In order to offset the risk that the purchaser would buy such an annuity, merely to earn a 5% return and cash surrender, insurance companies must extend/escalate the surrender charges on annuities with premium bonuses. This is no secret, in fact it is plainly disclosed in the materials that are provided to the purchaser that “bonus annuities may include higher surrender charges, longer surrender charge periods, lower caps, higher spreads, or other restrictions that are not included in similar annuities that don’t offer a premium bonus feature.” You see, a bonus is merely a choice that the consumer can choose to take or not, depending on their needs and desires. Every company that offers an indexed annuity with a premium bonus also offers indexed annuities with no premium bonuses. It is not as if the purchaser is forced into longer surrender periods against their will, in order to obtain the benefits of an indexed annuity. However, bonuses can be a particularly attractive feature for long-term savers that want a jump-start or have recently lost money due to market declines.

29.  I understand that you feel there are “too many moving parts,” but indexed annuities are simpler than you perceive. Let me explain. The indexed annuity purchaser can choose to have their interest linked to the performance of one or more of 17 different indices (S&P 500, NASDAQ-00, etc.). Although most companies offer only the choice of the S&P 500, there are a few companies that offer more than one index selection. The annuity purchaser then has their choice of one of 12 crediting methods (calculations) for their gains. Again, most companies merely offer only an annual point-to-point crediting method, but several companies offer more choices. Then, there are three ways in which an insurance company may limit the interest credited to these products: use of a cap, participation rate, or spread (also referred to as a margin or asset fee). All three of these pricing levers are merely a way to limit the indexed interest on an indexed insurance product; they all do the same thing. Regardless of whether the interest is limited by a cap, participation rate, or spread- all indexed annuities are priced to return the same amount. Ultimately, the index used, the crediting method utilized, and the choice of a cap or participation rate are irrelevant. All indexed annuities are priced to return 1% – 2% greater interest than traditional annuities are earning today, over the life of the policy (regardless of index, crediting method, and pricing lever). All of these different features (index, crediting method, pricing lever) merely give the marketing organizations that distribute these products an opportunity to promote why their product is “different” or “better” than their competitors’ products, to the agent. They do not actually make any one product better than another. Yes, some designs will perform better than others in some years. However, over the life of the contract, they will be about even keel.

30.  I have news for you about Met Life and New York Life: they sell variable annuities. When the stock market declines, sales of variable annuities drop overnight. Conversely, when the market declines, indexed annuity sales increase. I would hardly consider companies that compete against those selling indexed annuities to be a credible source of information on the products, Ms. Gibbs.

31.  Interestingly, you might question those companies further as both of them allow their registered representatives to sell indexed annuities that are available from other insurance companies. I find it hard to believe that they feel so strongly that there is “a high likelihood that clients could misunderstand what they were getting and possibly end up being disappointed,” and yet they feel it is okay to allow their licensed producers to sell the products via other companies. It would lead one to believe that there is another reason that they don’t sell indexed annuities…their distribution model doesn’t work, their administrative systems would need overhauled, they don’t feel they have the talent to develop a product on their own, etc. Sounds to me like “some large insurers” just used you as a way to say “don’t buy those bad indexed annuities, buy OUR annuities!” Again, your source’s credibility is an issue here.

32.  All annuity purchasers are permitted to “cancel the deal” and get their money back if they are not satisfied with their annuity purchase. This is referred to as a “free look provision,” and each state’s insurance commissioner determines the standard on how long after the purchase is made the client has to receive a refund. Generally, the free-look is from ten to 30 days, depending on state.

33.  Although it is sad to hear what happened to the Grubicy’s, the client does need to bear responsibility in understanding the paperwork that they sign. Fortunately, the NAIC requires plain-language disclosures, which are used on all indexed annuity sales. In addition, the average indexed annuity contract is only 26.7 pages long, making it much easier to decipher than the average 200+ page variable annuity prospectus. Ultimately, however, the client needs to ask questions if they do not understand. Would you sign mortgage paperwork that you didn’t understand? A divorce decree? A vehicle loan? Likewise, an annuity is a contract and should be read prior to signing/purchase.

34.   I hardly think that Karrol Kitt is in a position to judge whether, or not, insurance agents understand indexed annuities- she is an educator at the University of Texas at Austin, not an insurance professional. Insurance agents must pass a rigorous exams and attend regular continuing education. Insurance companies selling indexed annuities have meticulous training as well. In addition to many states requiring annuity-specific continuing education, some states have continuing education requirements that are specific to indexed products. I am a licensed insurance agent and a continuing education provider. I have never contracted with any insurance company or marketing group in order to maintain my credibility as a third-party expert. However, I must attest that over my many years of continuing education (on many types of products), I have NEVER attended a course that instructed “how to sell,” as Mr. Tony Bahu suggests. It sounds like Mr. Bahu is trying to create fear in consumer’s hearts, so that they will seek him out to evaluate their annuities “for a fee!” Again, we go back to the question of credibility in your sources, Ms. Gibbs.

35.  The average commission information that was provided to you is inaccurate. Advantage Compendium doesn’t even track products and commissions. If you look, they cite my firm’s data. AnnuitySpecs has product information for every single indexed annuity available today. In addition, Beacon Research focuses on fixed annuities that are distributed through banks and broker dealers. So, not only do they not have indexed annuity product information for all of the products available today, but the fixed annuity product information they would provide you with would be skewed. Indexed annuities are distributed by independent agents and the products that are developed for this distribution are very different than those developed for banks and broker dealers (i.e. banks and broker dealers’ products are generally shorter-term with no bonuses and different compensation structures with trails, etc.). For these reasons, the data that they provided you with is not credible as it relates to this article.

36.  The incentive to replace annuities with other annuities is not as big as Mr. Birnbaum would lead you to believe. First of all, all insurance companies must track such activity and report it to their local insurance division. All insurance companies have policies on such replacement activity and they are quick to terminate agents that systematically replace their clients’ annuities. Also keep in mind that many indexed annuities have levelized commission structures, which pay out commissions over several years. This encourages servicing of the contract and provides a disincentive to replace the contract.

37.  The statement you make regarding MONEY’s study on replacement activity is skewed. My firm receives gross and net sales, so we can break out what percentage of indexed annuities are a replacement and it is much lower than the figure that you provided on all annuity replacements from 25 states.

38.  Only a thorough suitability review can determine what is/is not right for the customer, regardless of what Kim Shaul says. Considering that a suitability review is required on every annuity sale, it would be relatively easy to spot an unsuitable sale before an annuity contract is even issued. Also consider that product development has brought numerous new and valuable benefits to the indexed annuity market since 2006. In light of these new benefits, I would find it hard to argue that “annuity replacements aren’t right for the customer” in all cases. I am currently considering the replacement of one of my own annuities due to new product innovation, so this can hardly be the case.

39.  The insurance companies are ultimately responsible for the training of the insurance agent. Even if they delegate this responsibility to a marketing organization, the insurance company is diligent in assuring that the marketing organization is doing a good job, or the insurance commissioner will be coming after the insurer for deficiencies. Therefore, the perception that marketing organizations are having a free-for-all with the independent insurance agents of our nation is disingenuous. Most marketing organizations do a very good job; they are essential in the distribution of insurance products. The marketing organization is able to provide necessary functions, that the insurer would typically perform, in a much more efficient manner. This is why today’s insurance distribution has shifted from a career/captive system to the independent agent distribution.

40.  Marketing organizations are not paid by insurance agents. They are always paid by the insurer, but they are paid based on the agent’s sales.

41.  I resent your insinuation that insurance agents are a bunch of crooks. The majority of insurance agents are good people that are doing their clients a tremendous amount of service. Note that the Texas insurance division could have experienced four complaints and seen a 36% increase. What number is that 36% increase based on? The manner in which this information was presented is not appreciated.

42.  You are quick to cite how many securities licenses have been revoked recently, but you failed to post the same information about insurance licenses: why? Insurance commissioners revoke insurance agents licenses and impose fines the same way that FINRA does. Interestingly, many states’ securities divisions are right in their insurance divisions’ offices, so I am perplexed on your research that yielded results of registered representatives not losing their insurance licenses. Perhaps there is more to this than meets the eye.

43.  I laughed aloud at your conclusion that “16% of those people…are free to sell indexed annuities!” In general, registered representatives HATE indexed annuities and are quick to sell AGAINST them. Even if a former registered representative were to contemplate selling indexed annuities, you must consider the fact that only 8% of licensed insurance agents even sell indexed annuities. That drives your percentage down tremendously, Ms. Gibbs.

44.  Your insinuation that lawyers can only pursue securities firms in litigation is not true. Lawyers can bring lawsuits against any marketing group and such groups have been named in lawsuits in the past.

45.  You assert that “a chorus of complaints about indexed annuities led the SEC to try to reclassify them as investments. Yet, the SEC said directly in their Rule 151A that the basis for their rule was not (a lack of) complaints, but RISK. (As the purchaser runs the risk of receiving back only their premiums paid plus interest. This too is laughable.)

46.  The regulatory regime of the SEC is not supreme to the regulation provided by the NAIC. Let me enlighten you with an overview of financial products’ regulation. Investments (products where consumers risk the loss of principal AND gains) such as stocks, bonds, and mutual funds are regulated by the SEC and the Financial Industry Regulatory Authority (FINRA). Indexed annuities are fixed insurance products; similar to fixed annuities and whole life insurance. These fixed insurance products never put the purchaser’s principal or gains at risk due to market volatility. Indexed annuities, like other fixed insurance products, are regulated by the 50 state insurance commissioners of the United States. Together, they form the National Association of Insurance Commissioners (NAIC).

The insurance commissioners regulate indexed annuities with rigorous standard non-forfeiture laws, advertising guidelines, suitability regulations, and other rules. The states hold the authority to take sanctions against insurance agents including, but not limited to, license revocation, penalties and fines. An interesting comparison of state and federal regulation exists relative to annuity complaints specifically. If I need to make a complaint on an indexed annuity, the state insurance division has to respond to me within ten days; and I incur no cost in my efforts to resolve the problem. Compare this with the exhaustive complaint process on the securities side; delays, lawyers, and a lot of my money spent. Yes, SEC regulation is different, but it most definitely is not better than insurance regulation.

Most that perceive insurance regulation to be lacking have an inappropriate frame-of-reference. They see that the SEC regulates products such as variable annuities, and in these transactions the NAIC is responsible for the insurance company’s solvency. Therefore, they assume that with insurance products, there is no regulation- only a regulator ensuring company solvency. They do not understand that with non-registered products, the NAIC performs the same functions that FINRA and the SEC do on the securities side: market conduct regulation, suitability enforcement, etc. If more people understood the state regulatory structure, such a misconception would not persist.

47.  Iowa is not “home of five big indexed annuity sellers.” SEVEN indexed annuity insurers are domiciled in Iowa and collectively these companies’ sales account for 38.62% of all indexed annuity sales.

48.  Senator Tom Harkin’s amendment to the financial reform bill was intended to protect Americans from future financial hardship. Indexed annuities are the only retirement income product that can guarantee Americans an income they cannot outlive, while still providing a minimum guarantee and protecting from loss as a result of market volatility. In light of this, I think you can see why Senator Harkin’s amendment was quite appropriately attached to the financial reform bill.

49.  The NAIC’s most recent annuity suitability model act mirror’s FINRA’s Rule 2821. So, if consumer advocates are critical of our model on the insurance side, why aren’t we hearing complaints about the securities market’s version of the model? That’s interesting.

50.  Why on earth would someone want to EMULATE an indexed annuity, when it is so much easier to just purchase one? It just doesn’t make sense for someone to subject themselves to the market’s risks if they are unwilling to tolerate such risks. If someone is saving for retirement, and wanting to outpace traditional fixed money instruments while still preserving principal and gains, an indexed annuity is their best bet.

51.  I am curious to know why didn’t you publish any commentary from insurance agents that sell indexed annuities? You appear to have requested comments from financial planners; individuals who belongs to a group that generally compete against insurance agents that sell indexed annuities. Financial planners generally sell investments, Ms. Gibbs. You need to speak with someone who actually sells indexed annuities to receive credible feedback on their value.

52.  Lastly, but perhaps most importantly, why would ANYONE ever advise someone who is risk averse enough to seek out an indexed annuity that alternatively they should invest in index funds? This is not only ignorant, but it is reckless. The consumer risk profile for someone purchasing securities such as stocks and bonds is someone looking for “risk money places”- where they can have the potential to earn 20% at the cost of having a chance of losing 20%. The consumer risk profile for someone purchasing insurance products like fixed and indexed annuities is someone looking for a “safe money place”- where they can have a guaranteed preservation of principal plus limited interest. Indexed annuity purchasers are more concerned with the return OF their money than the return ON their money. I’m certain your readers would GREATLY appreciate this difference be taken into consideration in your reporting of these products.

Lisa, indexed annuities have so many good features and they are a wonderful product solution for millions. Would you just open-up to the possibility that there is more here than just “a juicy story?” You are hurting your readers when you position these products in a bad light. They need credible and reliable information on financial services products now, more than ever. Did you know that indexed annuities have many benefits including (but not limited to):

1.      No indexed annuity purchaser has lost a single dollar as a result of the market’s declines. Can you say the same for variable annuities? Stocks? Bonds? Mutual funds? NO.

2.      All indexed annuities return the premiums paid plus interest at the end of the annuity.

3.      Ability to defer taxes: you are not taxed on annuity, until you start withdrawing income.

4.      Reduce tax burden: accumulate your retirement funds now at a [35%] tax bracket, and take income at retirement within a [15%] tax bracket.

5.      Accumulate retirement income: annuities allow you to accumulate additional interest, above the premium you pay in. Plus, you accumulate interest on your interest, and interest on the money you would have paid in taxes. (Frequently referred to as “triple compounding.”)

6.      Provide a death benefit to heirs: all fixed and indexed annuities pay the full account value to the designated beneficiaries upon death.

7.      Access money when you need it: every indexed annuity allows annual penalty-free withdrawals of the account value at 10% of the annuity’s value; some even permit as much as 50% to be withdrawn in a single year. In addition, 9 out of 10 fixed and indexed annuities permit access to the annuity’s value without penalty, in the event of triggers such as nursing home confinement, terminal illness, disability, and even unemployment.

 8.      Get a boost on your retirement: many indexed annuities provide an up-front premium bonus, which can provide an instant boost on your annuity’s value. This can increase the annuity’s value in addition to helping with the accumulation on the contract.

9.      Guaranteed lifetime income: an annuity is the ONLY product that can guarantee income that one cannot outlive.

PLEASE be conscientious in your future reporting of financial services products, especially indexed annuities. (As there is no excuse for the perpetuation of inaccurate information in this market- I am always available to validate information.) And if you should ever have a need for information on indexed insurance products, I humbly extend an offer to assist you with your fact-checking needs. Thank you.

Sheryl J. Moore

President and CEO



Advantage Group Associates, Inc.

(515) 262-2623 office

(515) 313-5799 cell

(515) 266-4689 fax

Originally Posted on January 5, 2011 by Sheryl J. Moore.

Categories: Negative Media
  • Kevin Siffermann


    Thanks for the article. I just recently got free-looked on a policy because a broker just flat out lied about American Equity 4.5% rider. The broker stated to the client your agent is lying to you and you are paying fees for this rider. Also, the broker stated you would be better off with Prudential’s Red Zone. Then the broker when on to tell the client AE is a B rated company not an A-. After doing a complete analysis, the clients #1 concern was to preserver her principle from loss. The client was told by the broker that you can never lose your principle in the Prudential Redzone income rider. As I explained to the client this is for income only, and you absolutely can lose your principle. Sheryl, Is there anything that can be done when a broker/agent misrepresents there, or your products? I’m totally disgusted over the last year as I have lost deals because of my honesty.

    • http://sheryljmoore.com Sheryl J. Moore

      First let me encourage you that if you are fully-disclosing the products you present to your clients and representing this industry with “honesty,” then you are doing the right thing! Please don’t feel discouraged. Your honesty will ultimately reward you ten times over.

      Is there anything that can be done about brokers that misrepresents product? Yes. Prove them wrong. They lose instant credibility. How do you get to that point?

      Earnestly, my best piece of advice is to earn your clients’ trust from day one, by educating them on products, and why the products that you chose together are going to meet their goals and objectives. Then, when someone else steps-in, and makes misrepresentations in an effort to replace your business, the client will come back to YOU, and disclose the situation and ask for your thoughts. This puts you in a supreme position as a “trusted advisor,” as opposed to a “product peddler.”

      The thing that burns my hide the most on this issue is that people who are not knowledgable on these products are being misled, and making product choices that could be completely wrong for them! Let’s just hope that we get a ton of feedback on this post, and that we can get someone’s attention with it. sjm

  • Sam A. Messina

    Hello Sheryl. My spouse and I just got out of the stock market and purchased three separate fixed index annuities from three insurance companies. My policies advise me to “read my contract carefully”. After doing so I am more confused than ever regarding riders, loss of principal, maximum values, beneficiaries, surrender value, etc. Our agent worked very hard with us on the above but I still have misunderstandings on some terms. I don’t want him to think we distrust him for that is not the case. Should we go directly to the insurance companies with our questions or address them with our agent.
    Sam A. Messina, retiree

    P.S. Your article was very informative and substantially increased my faith in “indexed annuities” We were desperate to exit the stock market recently and probably did not have time to do a concerted research before purchasing. However, $30 billion in sales says a lot for us! Thanks again.

    • http://sheryljmoore.com Sheryl J. Moore

      Thanks so much for your message. Email me at sheryl.moore@annuityspecs.com and I will see if I can help you understand the terms.

      P.S. looks like you got out of the market just in time!

  • Bob Coon


    Just wanted to comment. Thanks so much for what you do! As I read the article originally I was making many of the same notes in the margin as I read. The thing was sooo skewed from the get go, it was like where do I start. Without getting into all the detail of the many ways she bashed the sales of indexed annuities, like idicting the practice of offering a free lunch or dinner, I had to laugh as I was munching on the left overs of a FREE Ruth’s Chris steak dinner my wife brought home provided by one of those evil drug companies trying to seduce her hospital into buying their product, imagine that! Then I was listening to a Fifth Third Bank ad which advocated you should trust them with your savings because one of their employees volunteers at a local soup kitchen…. better be careful, next they’ll be buying someone lunch and trying to trick them into buying an indexed annuity. Imagine it, the audacity to conduct business while breaking bread. Sounds downright un-american doesn’t it!

    • http://sheryljmoore.com Sheryl J. Moore

      Your post gave me quite the chuckle! Thanks so much for your participation and support. If I can ever assist you or your business, just let me know. Thanks again. sjm

  • Paul Swetland

    I am a consumer considering safe income products. I stumbled onto Lisa’s article while researching indexed annuities. I greatly appreciate your learned rebuttal as I was moving away from these products. One question. I am primarily interested in the guaranteed income phase of the annuity, so Lisa’s point that one can get a better annual income return from a fixed annuity (verified thru immediateannuities.com)was disturbing. For example, a 62 yr old can get $577/mo w/ a fixed annuity w/ principal returned to beneficiary, but an indexed annuity w/ bonus guarantees only $543/mo. Can you explain why this is so. or just another inaccuracy?

    • http://sheryljmoore.com Sheryl J. Moore

      I can’t comment on what you are referring to, as there are several different ways to receive an “annual income return” on annuities: via annuitization, via rolling-it over into an income annuity, via using the guaranteed lifetime withdrawal benefit. Unfortunately, I don’t use immediateannuities.com, as it is owned by a man that makes money selling annuities; it is a source of leads for him. I do not feel confident that I am getting third-party, apples-to-apples comparisons there (although I have no reason to question the owner’s credibility). I am just saying that I prefer to get my information directly from the insurance companies. What you need to consider is that if you are taking lifetime income via annuitization or an immediate annuity, there are several payouts to choose from (life annuity, life with period certain 20 years, joint survivor, etc.). It is important to make sure that you are comparing apples-to-apples.

      If I had more details on what you are comparing, I could comment. However, I don’t even know if they are assuming that only the guaranteed values are annuitized, or if the current values are taken into consideration.

      Ultimately, all things being equal, an indexed annuity should provide a higher account value (for annuitizing, or rolling-over) than a fixed annuity. On the other hand, annuitization would also provide a higher lifetime income amount than utilizing a guaranteed lifetime withdrawal benefit rider (which is very popular on indexed annuities today). The reason for this differential is because the GLWB rider allows you to maintain flexibility in your payments (stop income, continue income, change income amount, etc.). So essentially, you are paying for flexibility with the rider.

      I hope this helps. If it doesn’t please feel free to email me or call. My contact information is at the top of the website. Thanks! sjm

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  • Kevin Wedmore – A2Z Annuity Marketing, Inc.


    Thank you for taking the time to address Lisa’s fallcious article. Between her and the other media darling, Suze Orman, it’s a wonder anyone works with someone other than their local broker . . .and there is a reason they call them ‘brokers’.

    Your timely and accurate response deals with many of the misconceptions about fixed indexed annuities in a way that many will be able to understand. It is important for people within our industry to know the products, how credited rates are determined, understand the client and their needs, and to recommend a suitable product for each given set of facts and family dynamics. Failure to do these things brings on the scrutiny of publications such as Money and TV personalities such as Suze Orman.

    The vast majority of agents representing the many companies offering fixed indexed products are honest, hard-working people who are suffering lower commissions, a bad economy, and poor press coverage. In spite of these things, the public’s confidence in our products is growing due to the failure of the securities industry to communicate with and protect clients from the dismal markets. How many brokers called their clients as the market went through its last two downward spirals only to wipe out the retirement savings of many older Americans. And they say ‘we’ have a suitability problem!

    When the SEC tried to perform its end run around the courts in order to establish control over our business, I was pleased to join hundreds of other marketing company executives in Washington, DC in order to lobby against its implementation. The support that I saw from companies, agents, agency heads, and other related interests was extremely encouraging. And as everyone knows by now, it was also successful. We now need the same sort of rallying cry to combat the nonsense the media is spewing (whether they are trying to intentionally misrepresent the product due to alliances with the brokerage community as some have stated, or because they are so inept that they do not complete the investigation of the story nor confirm the so-called ‘facts’ that have been fed to them) and feeding to the public over the airwaves and through the press. Every time one of these types of articles is released, we should be bombarding the media with our rebuttals.

    I only ask that those who read this board pick up their pens or sit down at their computers and make their thoughts known to Lisa about her misguided interpretation of indexed annuities. Perhaps a steady flow of information from those buying and selling these products will cause her to re-exam her story. Of course, if she would just read your reply, she would learn that her information is both tainted and slanted and that a fair comparison of all costs and risks would undoubtedly favor our products. It doesn’t take a rocket scientist to understand that an 83 year widow cannot withstand the loss of 40% of their principal while taking out money to live on. Preservation of money is much more important than accumulation of assets.

    One further note that may help some of our fellow professionals in relating the true cost of our product versus that of a variable annuity or mutual fund: While our industry credits interest on 100% of the amount invested, our competitors may not be so quick to do so. In fact, most of their products only have the net amount after acquisition costs earning whatever credits may be available. And, while they like to speak of severe surrender charges for withdrawing the money early, we are aware of the free withdrawl options as well the elimination of them should the client need money for a variety of reasons. Even more important, however, is that these charges disapear over time. When compared to the maintenance and management fee a typical securities product could contain, our surrender charge schedules look extremely attractive. For example, while our surrender charge schedule of 10% declining over 10 years eventually declines to zero, their product contains real annual charges of up to 2.75% of the asset value as maintenance and management fees, and that, of course, doesn’t include any transaction fees that may have accrued as a result of any trades or reallocations. So, with the market staying flat for the 10 years period, our product would have zero charges remaining, would pay some return based on minimum guarantees, and would provide all of the other benefits of a traditional annuity, their product would have been reduced by 27.5% plus any transaction fees. Comparable? Hardly.

    Thanks again for responding and for providing a forum for us to communicate with one another. You are a true champion of our industry and are greatly apprectiated.

    Kevin Wedmore
    A2Z Annuity Marketing, Inc.

    • http://sheryljmoore.com Sheryl J. Moore

      Thanks so much for being a part of our community! I sincerely appreciate your comments and kudos. Realizing the things that you have mentioned, I sometimes feel desperate that the media is led by Wall Street. How will consumers get access to the financial information that they need? We have to keep-on trucking!

      I hope our readers do as you advise, and let MONEY know that Lisa Gibbs has it all wrong. Thanks again for your contribution. sjm

  • David Ogleton


    Thank you for the timely response to this article. Many of these magazines and media outlets are so quick to try and beat down these products without doing the research. Seniors and retirees need these products. Most agents who do their job correctly know this. Thank you for taking the time to set the record straight.

    • http://sheryljmoore.com Sheryl J. Moore

      Thanks, David. We started the “Setting the Record Straight” campaign right after the Wall Street Journal started publishing blatently inaccurate information about indexed annuities. I’m happy to say that we’re not stopping either! sjm

  • Steve Ross

    Thank you.

    We need more people like you to get the truth out.

    We are always on the defensive. Let’s go on offense.

    Your article was great!

    • http://sheryljmoore.com Sheryl J. Moore

      Thanks so much, Steve! sjm

  • Brian Gray

    I stumbled across your rebuttal while searching for the online story that I read this morning because I wanted to write directly to Lisa and Money for an editorial or option to publish the positives to our industry. As you know the press likes to sensationalize a couple events and make it sound as though it is wide spread with the product or industry. Thanks for taking the time to publish your rebuttal. I want to touch on a couple things.

    My practice is using insurance products to help with retirement planning solutions. Fixed indexed annuities are 90% of the annuities that we sell with the other 10% being immediate annuities for the right situation. Annuities are not right for everyone. We are firm believers that even if one of our clients were out of their surrender period that they should not be placed into another annuity and start a new surrender period. We also believe that if there are any remote plans to use the money in the annuity during the surrender period then we tell our clients that the product is not for them or to keep that money set aside.

    The article leads us to believe the seminars are paid by the Marketing organizations which is not entirely true. We have found that is very rare in our industry. Our main marketing is through seminars and we have found Dinner seminars are a very expensive way of marketing. It is successful for us and we find that commissions vary by product and age but it is all part of our business model. What the article fails to mention that commissions drop dramatically for those above 75. We also find the higher commission products aren’t always the best for our clients. They also fail to mention that if a client dies in the first year that we have to pay back our commissions. That happened to us this year.

    Also most broker dealers will not allow their agents to sell indexed annuities as it doesn’t fit their income model. (Annual fees for managing the money) Most advisors will then sell a variable annuity. When you compare the commission’s paid over time on a variable annuity it is far greater than that of that paid once on an indexed annuity. Also surrender charges are not much different in term or amounts. Often Variable annuities are held beyond the surrender period making the commissions in the 8-9% range. The commission is actually greater in a rising stock market because the asset is growing. That fee actually is charged to the policy holder in fees.

    Most of our clients become clients after meeting with us for 3 or more meetings in reviewing their plan. Most complaints about our industry come from people who buy at their first meeting. We call that Malpractice. It takes time to review a client’s current plan and make sure they are suitable for the product.We embrace the new NAIC suitability rule effective January 2011 and have practiced that well before the model was adopted.

    The article as makes mention to an equivalent risk portfolio of 85% 1 month T-bills and 15% large-cap stocks. I have yet to see any current portfolio to meet that. Also most people seek higher yields and do so with a longer bond maturity and a 1 mo T-bill is unrealistic. Unfortunately that leaves them exposed to a reduction on principal when inflation is recognized.This would be a penalty to their principal if the bond needs to be liquidated in a rising interest rate environment. We look at that as an equivalent to a surrender charge.

    The article doesn’t mention the ability to use a GLWB rider that will guaranty income for their lifetime and any remaining money in their account balance will be passed on to their beneficiaries upon their death.

    Thanks for what you do and you provide a valuable resource for our community.

    • http://sheryljmoore.com Sheryl J. Moore

      Thank you for taking time to respond to my correction. I am pleased to see that you make several valuable points and I thank you for bringing them to light for my readers. I will address the fact that the reason I did not mention GLWB riders is because an income annuity will almost always provide a greater payout than a GLWB. When I first developed GLWBs in the fixed and indexed market, I knew that they would be under fire for this attribute. I don’t want to add fuel to the fire. What many fail to realize when criticizing this aspect of GLWBs however is that the GLWB gives the client the ability to maintain flexibility in payments, where an income annuity does not.

      Thanks again for being a part of our community! sjm

  • David Gray


    Great job, thanks for fighting the fight! There is so much negative press out there about annuities in general (and indexed annuities in particular) that this battle has to be fought head-on. I’ve seen articles where the reporter didn’t even know or mention the difference between fixed and variable annuities.

    I’ve written letters to the editor, etc. in response to some of these articles myself; However, having someone like you (who has access to all of the data) address such misleading articles is invaluable. Thanks again, and keep up the good work!

    – David

    • http://sheryljmoore.com Sheryl J. Moore

      Thanks so much for your encouragement! Rest assured that I will keep up the good fight! sjm

  • Steve A. Bailey

    Hi Sheryl!

    Ray Ferro, my associate, urged me to read this article. I have 31 years in the “biz” and Annuities I didn’t like for about 26 of those years. I even wrote an article in April of 2000 speaking against the annuities…primarily on the double taxation for Estate and Income taxes combined for certain individuals (wealthy).

    I also didn’t like them in the 80’s when you purchased some annuities and they came back showing $96,000 on a $100,000 contract. Who wants that? And other issues of the time bothered me.

    NOW, I see the light. If I had a Million dollars right now (I’m almost 66 – but still work full time) I would not hesitate to put that money, all of it, in an FIA … and would KNOW beyond any reasonable doubt, that I had a better deal than I could find anywhere on purpose and maybe accidently. Your article will become one of the few “tools” I need to present to clients. And, I could do it with just this article!

    Regards, Steve Bailey 619-253-5517 (free to publish this if you like).

    • http://sheryljmoore.com Sheryl J. Moore

      No other comment has made me as happy as yours; I am so glad I could help you “see the light!” Indexed annuities are not necessarily right for everyone, but I do think they are right for more people than traditional fixed or variable annuities are. You have done my heart good. Thank you so much for relaying your sentiments. Please let me know if I can ever assist you in your quest for more information on indexed annuities. (And a big THANK YOU to Ray Ferro!) sjm

  • Gerry Stellwagen, CFP, CPA/PFS, CLU, ChFC

    Like Mr. Holland, I provide investments and insurance products. Working primarily with seniors, I couldn’t do a credible job without including fixed annuities in the mix. In Florida, it is OK to put a risk-averse senior into a volatile stock and bond portfolio, but the last Florida CFO wanted to limit surrender charges to 5 years and 5%; we were lucky to get the “10/10” rule. The authorities don’t realize that the potential “surrender charge” (based on market volatility) on investmentes has been as high as 40% and it actually increases–in dollar amounts–as the account grows. The surrender charge on fixed annuities is much smaller, is guaranteed and decreases over time to zero.
    Publications like Money are driven by advertising and it’s obvious that they cater to the securities crowd.
    Keep up the good work.

    • http://sheryljmoore.com Sheryl J. Moore

      You are right; we worked hard to get 5/5 off the table in Florida. Although I was disappointed in the 10/10 rule being adopted there, I was relieved. No insurer would be able to offer annuities in Florida if the surrender charges were limited to five years/5%. With the current interest rate environment being so low, most carriers have pulled all of their products that have a surrender charge of less than seven years! The result? Over 20% of our nation’s seniors would be sold mutual funds for their safe money solutions; what a crock!

      Thanks for your feedback and protecting your clients with indexed annuities! sjm

  • Jean Casagrande

    Sheryl, thank you for such an excellent response to this article. Our industry is lucky to have you. Thank you for all you do.

    • http://sheryljmoore.com Sheryl J. Moore

      Thanks, Jean. It is my honor to set these folks straight! sjm

  • John W. Bernard

    Sheryl, again, another great response to an an article filled with errors and misconceptions and designed to hurt our industry. I wish Money Magazine would print at least exerpts from your response so the truth could get equal time, but their magazine articles are paid for by the equity industry so we will never see that happen, “Money” is for money not truth. You are our “David” in the war against the many Goliaths we face. Thank you so much for your work.

  • Jeff dixson

    It is an honor to have someone as intelligent, competent, and eloquent representing our Industry. You hit the nail right on the head, and made each point clear. I think a stronger point can be made of the real world returns of indexed annuities over the past decade, when comparing them to market returns. People are sick and tired of taking so much risk, paying so much in fees, and if they’re lucky they may have broken even. The fees being paid in stock,bond, mutual fund, and variable annuities are staggering over a ten year period, and do not go away when the market is losing ground! Overall per year fees paid in the form of commissions on index annuities are minimal by comparison to traditional forms of investing. Our industry needs to stand up to the one sided media that is being used by Wall Street to spread false and misleading information to the public by using people like Lisa Gibbs who have absolutely NO CLUE as to what they are talking about! Keep up the good work! You are awesome!

    • http://sheryljmoore.com Sheryl J. Moore

      Right back at you, Jeff! sjm

  • David Holland


    Your educational rebuttal is simply outstanding! Thank you for providing a truly fair and balanced report on the proper use of fixed index annuities as part of the consumer’s retirement plan.

    As a Certified Financial Planner who works in the real world helping real people with real needs, I can personally attest to the tremendous value that fixed index annuities offer consumers. I am both a licensed insurance agent and an investment adviser. When building a customized retirement plan for my clients, I routinely recommend fixed annuities AND fee-based money management. From what I consider to be an unbiased position, I believe fixed index annuities are a very good choice for many consumers who want a portion of their retirement assets protected to provide a guarantee of lifetime income in the future.

    Money magazine, if they have a shred of integrity, should publish your rebuttal verbatim and apologize to insurance companies, marketing companies, financial planners, insurance agents and, most importantly, to their readers. If they don’t correct their gargantuan blunder with Ms. Gibbs’ article in a meaningful way, then we will know them to be nothing more than a step-and-fetch-it for their advertisers. I count 15 ads for the securities industry (mutual funds, variable annuities, or stockbrokers) in the February 2011 magazine where Ms. Gibbs’ article appears. No one should have any doubts about why Ms. Gibbs may have started with the conclusion of fixed index annuities being “bad.”

    We will continue to see ads like Ms. Gibbs’ not because journalists are lazy or ignorant, but because there is a true war going on between the securities industry and the insurance industry to win clients today and tomorrow. 10,000 baby-boomers will retire every day for the next 19 years and both industries know it. Both industries also know that baby-boomers need lots of help planning their retirements and that they stand to inherit trillions of dollars. The securities industry wants them to keep that money in the market while the insurance industry thinks that safe money products will do a better job of securing baby-boomers’ retirements.

    The securities industry is terrified that the current $30 billion in annual fixed index annuity sales will become $300 billion…so they will continue to slam, any way they can, fixed insurance products. Now is time for the insurance industry to stop playing defense. It is time for the consumers to know about the war and the media’s biases, misinformation, and outright lies.

    Thank you again!

    – David

    David D. Holland, CFP, CPA/PFS, CLU, ChFC
    Certified Financial Planner Practitioner

    • http://sheryljmoore.com Sheryl J. Moore

      All I can say is “right on!” Thanks so much for your contribution. sjm

  • Mike Mastowski

    Sheryl, wow!!! Great job responding to an article that is so beyond subjective journalism. Might I suggest that all parties involved not only allowed all if the mis-information but actually encouraged it. Let’s not forget who is carrying MONEY and most other similar publications. The securities side lost the 151A battle and are looking for any way possible to drag us down. I really think the $30B in sales is not what is scaring them, but the potential for that number to go to $300B or even more. Thank you for championing the cause of seniors all over our great country.

    • http://sheryljmoore.com Sheryl J. Moore

      Thanks so much for your comments! It is because of “reporters” not being held accountable for their misreporting that we ended-up having the 151A mess to begin with. A few years ago I noticed that NOBODY was calling-out the media on their flagrant inaccurate reporting. I felt that I had to do something about it. And that, my friend, is how I ended-up here! Thanks for your support. Let’s continue to let the press know that it is NOT okay to print inaccurate information on financial services products! sjm

  • Cliff Torban

    Sheryl, kudos to you for an outstanding response to Lisa Gibbs’ article. For too long, the Securities industry, and FINRA,have run a campaign of misinfortmation, aided by the media. It is shocking that there is not a louder protest from the fixed side of the industry. Too often, we feel that if we make too much noise, it will draw more negative attention. To the contrary, it is our duty, our responsibility, to negate any inaccurate information and unbalanced approach while we offer safe, secure products to our clients! If memory serves me correctly, people like Bernie Madoff were supposed to be supervised by the SEC and/or FINRA…..hmmmmmmmm

    • http://sheryljmoore.com Sheryl J. Moore


      I could hug you. I couldn’t agree more! Just when I feel like I am alone in this fight, I get messages from folks like you. I appreciate your encouragement and support so much. It is what keeps me going!

      The misinformation that Americans are being fed on financial services products is enough to make me throw-up! Thanks for joining me, my friend, and assuring that your clients will have access to accurate information on annuities. sjm