NAFA Response to Malcom Berko Article in Oklahoma
December 3, 2013 by NAFA
Re: Malcom Berko 11/24/2013 “Steer clear of equity-indexed annuities”
Dear Editor:
We respect every person’s right express their opinion about financial and insurance products. And, while Mr. Berko is entitled to his opinion, he ISN’T entitled to altering facts to justify his opinion.
Mr. Berko: EIAs are unregistered investments
FACT: Indexed annuities are insurance products filed with and approved by state insurance regulators. Individuals who sell fixed annuities are heavily regulated by state insurance laws and, depending on additional licenses held, additionally regulated by FINRA, state securities regulators and the SEC.
Mr. Berko: [EIAs] have sales charge of 10-12 percent, annual expenses of up to 5 percent and surrender costs of 25 percent.
FACT: There are no indexed annuities that have fees or charges of 15-17 percent or 25% surrender charges. The cost of marketing and providing the insurance guarantees are paid for by the insurance company the same way all insurance product expenses including fire, home and life are paid – under the general account of the insurance company. Most importantly unlike the financial products Mr. Berko recommends, the annuity buyer’s premium and earned interest (annuity value) is never charged to cover these costs.
Mr. Berko: “[Indexed Annuities] are responsible for the majority of complaints to the SEC in any given year.”
FACT: According to the SEC website in 2012, there were 29,291 filed complaints, contacts, or questions. Comparable data for FY 2010 and prior fiscal years is not available due to a change in reporting methodology. The report can be found at http://www.sec.gov/news/data.htm and of the top ten, the top three complaints were Ponzi schemes, advance fee fraud, and manipulation of securities prices. Indexed annuities are not even mentioned in the top ten.