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I’ve been predicting for some time now that Equity-Indexed Annuities and the sales practices associated with them will be the Next Big Scandal of the financial services industry. And now my predictions are coming

According to USFDA, a combination product is one composed of any combination of a drug and device; biological product and device; drug and biological product

true.

After a chorus of complaints, the National Association of Securities Dealers (NASD) and the Securities and Exchange Commission (SEC) are finally taking notice. In a recent securities conference in Chicago

; or drug, device, and biological product and fixed dose combination would include two or more combinations of drug.

Examples of combination products may in

, NASD officials pointedly warned brokerage firms that they are opening themselves up to civil liability where equity-indexed annuities are concerned.

The NASD also clearly asserted its authority to oversee the

lude drug-coated devices, drugs packaged with delivery devices in medical kits, and drugs and devices packaged separately but intended to be used together.

suitability of transactions involving equity-indexed annuities. “Whenever unsuitable recommendations are made, we have jurisdiction”, said Jim Shorris of the NASD.

This is good news for investors and bad news fo

here is enormous increase in the number of combination products entering the market in the recent years. Combination products have proven advantages but fixe

r the charlatans that have been using this product to milk seniors out of thousands and thousands of dollars. Now, those investors can turn to the NASD for help. The actions of the NASD also increase the potentia

d dose combinations are still in the process of convincing regulatory authority on their advantages over the single ingredient formulations.

Combination pro

l success of civil lawsuits brought by investors.

It’s not just the NASD that is taking notice. Recently, I was invited by the Financial Planning Association to participate in a conference call with several SEC

ucts have become life saving products for the pharmaceutical companies who doesn’t have many innovative molecules in their product pipeline and have been inc

officials. The SEC had looked into equity-indexed annuities several years ago but failed to take action. Let’s hope that this time it will be different.

You might not think that NASD or SEC involvement is all th

easingly used in the product life cycle management. Even the companies having product patents are trying to extend their product life cycle through the combi

t revolutionary, but it is. Let me explain. Brokers who are licensed to sell investments are regulated at the Federal level. The NASD and SEC police their actions.

Equity Indexed Annuities, though, are not regul

nation products and maximize the revenues. But the companies involved in this practice are overlooking that they are burdening the patients both economically

ated at the federal level, but by each state’s Insurance Commissioner. Even though Equity Indexed Annuities are technically an insurance product, they are being marketed as an investment. But all an agent has to

and physically. They need to rightly judge the benefits of the combination products and they have to even look at the risks involved when combining the produ

do to be able to sell them is sit through a five-day course and pass a simple test on health and life insurance.

It used to be that Equity-Indexed Annuities were mainly sold by independent insurance agents. Now,

ts. Some of the combination products were well accepted by physicians while others suffered. Companies involved in development of combination products are fi

they are being sold by brokers who work for the larger brokerage firms. The high commissions these products pay are simply too enticing. Worse, these brokers aren’t selling them under the umbrella of their firm.

ding difficulty in defining their combination products and facing various challenges from selecting a combination to marketing it.

Following aspects would a

They are selling them as what is termed an ‘outside business activity’.

That means that even though you are talking to a person that works for a big brokerage house and that person is recommending you sell your

dd to the challenges in developing combination products:

Which markets to tap where the combination products can do fairly well?
Which combination prod

variable annuity, pay a penalty and move the money into an equity-indexed annuity, the firm is not policing that transaction. Every other trade done by the broker must meet strict compliance and regulatory stand

cts are meaningful and rational?
Which therapeutic categories to select?
Which Combinations can address unmet needs of the patients?
Do combin

ards. The sales of equity-indexed annuities do not.

If an advisor were to place 100% of a client’s investable assets into a variable annuity or a single stock or mutual fund, they would likely face fines and pos

tions increase the patient compliance?
What would be the developing cost?
How to tackle the risks encountered during combination product developmen

ible revocation of their license. At the very least, they would be opening up themselves and their firm to potential lawsuits. Yet, I often hear of advisors telling a client that they should put 100% of their mon

t?

As combination products don't fit into the traditional categories of drugs, medical devices, or biological products, the USFDA is in the process of devel

ey into Equity Indexed Annuities.

Under federal regulation, an advisor can’t recommend a client pay a 7% penalty to get out of one annuity and move then move that money into another high commission product. That

ping new procedures for reviewing their safety, efficacy and quality.

Professional from academic institutions, pharmaceutical industries, health care indust

’s just like a stockbroker getting you to constantly buy and sell stocks so they can earn a commission–it’s called churning. Yet, I see advisors using the ‘bonus’ offered by some Equity Indexed Annuities to do ju

y and representatives from various regulatory agencies are working out to design the regulatory requirements for manufacture and sale of combination products

st that.

Now that the NASD has clearly stated that these advisors can no longer sell equity indexed annuities outside of their firm’s regulatory umbrella, hopefully some of these unethical sales practices will b

.

As there is an increasing trend of the combination products companies manufacturing such products should be able to tackle the problems involved in the de

e put to a stop. But investors need to beware! The high commissions these products offer, sometimes as high as 13%, are just too tempting for many advisors to ignore. Don’t expect them to change their ways overni

elopment. They need to be wiser in analyzing the market trends and the regulatory requirements.

Companies that provide selfless information through particip

ght.

The increased scrutiny of equity-indexed annuities can only be good for the investor. Carefully research this and any other investment before you buy. Otherwise, it might be an investment you quickly regret

tion in industry events and feedback to regulatory authorities would be able to face the challenges and will be successful in developing combination products

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A person might wonder just exactly what it is that a pharmacist does or how to begin earning a pharmacist degree? The answers are easy to find. Finding a school that offers pharmacy courses is the first thing you need to do.

What does it take to run a successful business? Possessing several characteristics places you ahead of the game.

At the last AdSense webinar, one issue that barely raised its head above the parapet was Smart Pricing. It was mentioned. But little more than that. That’s a shame because Smart Pricing is probably the most underrated issue concerning AdSense. Few factors have greater influences on our earnings... and few are as tough to track or as hard to control.

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