When Leon Morris, an annuity prospect in his 70s, asked an agent what would happen if he needed to withdraw his money earlier than expected from an equity index annuity, the agent was truthful: Morris would not incur charges unless he withdrew 10 percent or more.
There's just one catch -- the agent never tells Morris just how much that penalty will be - 16 percent -- and, when pressed a second time, he switches the focus to another product.
"But I've got something, too, that we need to talk about also. That would insure that. And that is long term care."
This agent, Rickey Gibbs, is one of several producers featured on the April 13, 2008 Dateline NBC special "Tricks of the Trade." Hosted by Chris Hansen, the show used decoy senior prospects and hidden cameras to reveal what agents say -- and don't say -- when they think they're alone with seniors.
Some were completely honest -- agent Cecil Cheney, for example, who said, "In my heart, I wouldn't buy one (an EIA). So I can't sell one."
Several, like the agent pitching an EIA to Morris above, simply left out information. And still others blatantly lied.
The industry responds
After the hour-long episode aired, a slew of negative responses poured in from organizations industry-wide, including the American Council of Life Insurers (ACLI), the National Association for Fixed Annuities (NAFA), and the Society of Financial Service Professionals (FSP).
According to many outlets, industry professionals were outraged by Dateline's one-sided portrayal of what they characterize as a largely conscientious industry occasionally tainted by the same bad apples that can be found in any other market.
"It is unfortunate that the actions of an unscrupulous few can cast an unfavorable shadow on an entire profession," reads a statement from the FSP. "Their actions fly in the face of everything FSP has stood for over the past 80 years -- in particular, the right of the American public to ethical, competent financial service counsel."
The ACLI in particular pointed out several strides that groups such as the National Association of Insurance Commissioners (NAIC), NAVA (Association for Insured Retirement Solutions), and the National Association of Financial and Investment Advisors (NAIFA) have made to enforce a commitment to high ethical standards.
"The purpose behind these efforts is to help future retirees understand and appreciate the unique role that an annuity can play in their retirement security plans," reads ACLI's response to "Tricks of the Trade." "We know that some may not choose an annuity while others will want the peace of mind that an annuity's lifetime income can provide. No matter what they decide, the industry is committed to providing consumers with the information they need to make the choice that is right -- for them."
While these and other groups did not deny that the agents on tape had committed wrongdoing, several professionals writing in response to the piece bristled at the notion that complex presentations were crammed into a few short minutes and that certain information was possibly taken out of context.
"To say that Dateline was inaccurate would be an understatement," said Jonathan Neal, senior partner of CCG-CAP Consulting in Atlanta. "They went out of their way to take one specific feature of one equity index annuity (EIA) to paint a picture that all surrender periods and charges are excessive, that all EIAs are bad products, and that all salespeople within the insurance and financial planning fields are unethical liars and cheats. The fact that none of those allegations are true doesn't appear to have been taken into consideration."
Terry Lucas, president and CEO of The Advisors Source, agreed.
"The media has once again proved that they are the kings of hypocrisy and half truths," said Lucas. "This piece was a bunch of hot air as they insisted that agents were not providing full disclosure and were using scare tactics."
Battling the problem
According to Neal, an annuity professional should follow a few simple rules of thumb when selling to any client in order to ensure the client has the full story and is comfortable and informed about their purpose.
- Listening is always more important than talking. Give the client the time to fully explain what they are trying to accomplish; ask questions to make sure you understand what they think; and base your presentation on client concerns, not products.
- The client should always end up in a better financial position than they were in before the purchase The proof of this fact has nothing to do with your or anyone else's opinion, but rather on the math.
- A good annuity presentation incorporates commonsense reasoning on all the features of the product, not only as it pertains to taxes and guarantees.
- Documentation is not an option. If you are going to say something in a presentation, back it up in writing. Always leave the client with a copy of your presentation, as well as any notes you make during the call. Also, document your proposal, presentation, and follow-up -- the easiest way to do this is with any number of software programs.
To further help agents stand on the right side of the issue, ACLI's Web site offers several tools, including a tip sheet for seniors considering annuities and information on improving annuity disclosure.
Regardless of what product you're selling, as an agent you must remember to always uphold yourself to the highest ethical standards. Do your homework and make sure you're educating your client completely and clearly -- not just having them sign a piece of paper, but walking them through the process and the stipulations. You owe it to them and yourself if you are to become and remain a trusted advisor on the right side of the law.
Christina Pellett is managing editor of the Agent's Sales Journal. She can be reached at 800-933-9449 ext. 226 or ASJeditor@AgentMediaCorp.com.
