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NAFA responds to Dateline investigation

The National Association for Fixed Annuities responds to press release announcing hidden camera investigation

TO: Steve Eckert, Dateline Producer

FROM: NAFA, the National Association for Fixed Annuities

RE: Statement regarding Sunday, April 13th Dateline Broadcast

NAFA is in receipt of Wednesday’s press release announcing the Sunday Dateline broadcast.  NAFA strongly opposes fraudulent, deceptive and unscrupulous sales tactics used to sell individuals of any age fixed annuities and particularly older Americans who may be more vulnerable.  If there is evidence that some sales people have used unacceptable methods and have taken advantage of older consumers to make sales, that evidence should be brought to the attention of state regulators and the appropriate law enforcement agencies.  The fixed annuities industry deplores the sales methods employed by unethical agents and is taking steps to police its agency force.  It is also important to point out that these practices are not “widespread” as the press release suggests but are confined to relatively few of the thousands of agents who help Americans prepare for retirement. 

NAFA is concerned with the consequences the story could have on the thousands of consumers for whom fixed annuities are a perfectly sound, sensible and prudent component of their retirement planning portfolio.  Consumers may erroneously be left with a negative view of fixed annuities or all sales people based upon the deceptive sales practice of a few sales people.  As a result, they could react in a way that would be harmful to them especially in today’s economic environment.

The financial markets are as volatile and unsettled as most consumers have ever experienced.  Treasury Secretary Hank Paulson and Federal Reserve Chairman Ben Bernake, among others, are trying to help financial institutions strengthen their balance sheets and restore confidence with investors. The stock market is extremely volatile, and the bond markets are fragile with very little activity and questions about the actual market value of many securities.  The Bear Stearns debacle underscores the uncertainty that exists in today’s market environment.

Also, many annuity policyholders are in the same demographic group that buys certificates of deposit, which are FDIC insured but with only $100,000 of FDIC protection. They need more security since they are not typically stock market investors. Fortunately, annuities are covered by most state guaranty funds, although the industry is not allowed to advertise that fact. One of the biggest issues with investors and savers right now is where to safely put money. There is a myth that money market funds are guaranteed but most aren't. The bond mutual funds are difficult to price in some cases. Stocks are always volatile investments and are more so now.

Seniors are particularly vulnerable to harmful consequences that could result from overreaction to your story because they no longer have the ability to earn income necessary to compensate for investment missteps.  It is important that consumers are aware of the benefits of fixed annuities as well as to be cautioned about sales practices that could lead them to an unsuitable or inappropriate product.  Annuities generally provide all of the insurance coverage of traditional insurance products, including death benefits, withdrawal options, payout options and benefits triggered by disability or incapacitation. This protection alone does not mean that the product is suitable for all consumers or even all of a consumer’s savings, but an annuity is and can be suitable for some retirees or some of a retiree’s savings.