Fixed Indexed Annuity Policy

Fixed Indexed Annuities (FIA)s sold by Regal Investment Advisors (Regal) or Regulus Financial Group (Regulus) representatives need to be placed with an affiliated Insurance Marketing Organization (IMO) listed on Appendix A. As long as the proper policies and procedures are followed, FIA commissions do not flow through the Regal or Regulus payout grid and are paid at the “street level” by the appropriate IMO. Regal and Regulus have negotiated remuneration for supervisory and suitability guidelines with each individual IMO based on criteria including, but not limited to, product lineup, corporate culture, corporate vision, and client needs. There are many IMOs that do not qualify for inclusion on our approved list.

Due to changes in industry guidelines, insurance company economics, and changing rules and regulations within the industry, we reserve the right to change this policy at any time. a

FIA’s Suitability Guidelines

The factors that need to be considered in determining suitability of FIA's are similar to any other product that you are considering for a client. These include but are not limited to.

1. Client’s Objective or Goals
2. Client’s Liquidity Needs
3. Client’s Age
4. Client’s Risk Tolerance
5. Client’s Investment Time Horizon & Current Holdings
6. Client’s Best Interest
7. Other Reasonably Available Alternatives

1. Objective
FIA’s should not be positioned as growth or “investment” vehicles. They are most suited to clients whose objective is preservation of capital. While FIA’s can act as an excellent income vehicle for the future, they are not good income vehicles for the near-term, especially for those under age 59 ½. FIAs may be deemed suitable for clients who show growth and income as their objective (or secondary objective) as long as there are growth elements in their overall portfolio.

2. Liquidity
The main liquidity risks related to FIA’s include their relative non-liquidity, IRS penalties for early withdrawals and long Contingent Deferred Sales Charge (CDSC) periods. FIA’s should not be recommended to clients where liquidity needs are anticipated. Clients suitable for FIAs should have sufficient liquid assets to maintain their lifestyle without relying on withdrawals from the FIA that would incur a surrender penalty. Examples of unsuitable FIA sales include but are not limited to.

a) Funding college savings when other, more appropriate, or prudent investments (529 plans) exist.
b) Investing for short term liquidity needs like a down payment on a house where withdrawals will be necessary during the CDSC period or prior to the owner turning age 59 ½.

3. Age
When recommending FIAs, the penalty period for withdrawals and the purchaser’s life expectancy need to be considered. Annuities are not inherently bad for conservative or risk adverse seniors provided:

a) The client has a sufficient source of liquid funds besides the annuity.
b) The client understands the CDSC or other relevant provisions.
c) The contract pays the beneficiary 100% of the account value when the annuitant dies. Deferred beneficiary payouts options are not viewed as being in the best interest of the client.

4. Risk Tolerance
FIA’s are most appropriate for clients with conservative risk tolerance. FIA’s should never be recommended as an investment that provides “stock market returns without the risk”. Clients suitable for FIAs should be looking to supplement their available funds at retirement and unwilling to take market risk. Other clients may wish to purchase annuities for long term care or death benefits if there are other assets sufficient to meet their liquid cash needs. Careful analysis should be done for these clients to ensure that the annuity is a solution that is in the clients’ best interest.

5. Investment Time Horizon & Holdings
Many of the issues regarding the suitability of FIA’s are driven by high, front end commissions and long periods when a Contingent Deferred Sales Charge (CDSC) applies to the funds. Some products with a longer CDSC may be appropriate depending on the client’s long-term liquidity needs. Both Regal and Regulus maintain a 10/10 policy and will not approve annuity products with a CDSC greater than 10% or a surrender period longer than 10 years. Single use exceptions to this policy may be made if sufficient disclosure is made to the client and the supervising principal approves the transaction

It is important to ensure a large percentage of your client’s assets are not invested in one particular product. Thus, before making a recommendation, a representative need to understand how the annuity fits into the client’s overall portfolio. For more details on time horizons, client age and liquidity requirements, please see the Annuity Suitability Guidelines published by Regal and Regulus.

6. Client’s Best Interest
When determining the client best interest regarding the purchase of an annuity, it is important to take into account both the other annuity products you are able to offer the client as well as the other account types and investments you may recommend based on your licensing. If other account types and investment products would also meet the client’s goals, careful analysis must be taken as to the cost and risk of the annuity vs the other options. Regal Advisor Advocates are also able to assist in case design and best interest analysis.

For Internal Use Only Once an FIA is deemed the best option to meet the client’s needs, three other questions need to be answered:

a) Can a product or investment account with greater liquidity meet the client’s needs as well?
b) Is this FIA the best FIA option I have available to meet the clients needs?
c) Is the client aware of the provisions of the policy, especially the CDSC and lack of short-term liquidity?

7. Reasonably Available Alternatives
To ensure the product chosen is in the client’s best interest, Regal and Regulus require their representatives to review their annuity shelf to determine if there is a better option available to the client. An annuity shelf consists of all the FIAs a representative has available to them through their IMO. The IMO can be a useful resource when determining which FIAs are the most appropriate. Regal and Regulus reps also have access to Morningstar Annuity Intelligence for annuity analysis purposes. Analysis should be based on the cost of the annuity to the client, the CDSC % and the surrender period length.

Liquidating Securities to Purchase FIA’s

If a client is liquidating securities to purchase FIA, it must be also determined that the selling of securities is both suitable and in the “client’s best interest.”

FIA Carriers and Products Criteria

The general criteria for carriers and products are outlined below.

Acceptable carriers will:

1. Maintain a minimum rating of A- with AM Best and or equivalent ratings with S&P, Moody’s and Fitch.
2. Be approved to do business in 49 states and/or NY.
3. Meet other requirements based on the Regal and Regulus due diligence review, industry experience and principal analysis.

Acceptable products will:

1. Have surrender charges (CDSC) that do not exceed 10%.
2. Have a CDSC period that terminates no longer than 10 years from the initial purchase date.
3. Not be two-tiered (forced annuitization).
4. Not offer the agent different CDSC exposures based solely on commission payout. If a product falls into this category, the shortest CDSC exposure period is required.
5. Not offer additional incentive compensation or soft dollar remuneration that could create a
potential conflict of interest.


Appendix A

TruChoice Financial Group
400 Highway 169 South
Minneapolis, MN 55426
Michael Bacchus
800-237-0263

Capitas
312 E Wisconsin Ave # 312
Milwaukee, WI 53202
Tim Tollander
800-225-9032
info@capitasfinancial.com

Insurmark / Simplicity
820 Gessner, Suite 970
Houston, TX 77024
Randy Yost
800-752-0207
insurmark@insurmark.net

Financial Independence Group (FIG)
19520 W. Catawba Ave, Suite 200
Cornelius, NC 28031
Jim Cooper
1-800-527-1155
info@figmarketing.com

3D Advisors
52188 Van Dyke Ave, Suite 200
Shelby Township, MI 48316
Jim DiDonato
586-580-8848
https://3dadvisorsinc.com/

Signal Advisors
1555 Broadway St.
Detroit, MI 48226
Joe Waltenbaugh
1-866-7-SIGNAL

Advisor Rescue
503 Winterside Dr.
Apollo, FL 33572
Kevin Ross
(404) 277-0649

Simplicity Financial
124 Hebron Avenue, Suite 3F
Glastonbury, CT 06033
Rob Murphy
(800) 308-5555
www.simplicitydistributors.com

PIMSCO
5700 1st Avenue North
Saint Petersburg, FL 33710
Morgan North
(800) 329-5799
www.pimsco.com

One Resource Group
13548 Zubrick Rd
Roanoke, IN 46783
Todd Stewart
(888) 467-6755
www.orgcorp.com

 

For Questions regarding licensing or available IMOs, please contact the Recruiting and Onboarding Team using the contact information below.

Phone: 616-224-2204
Email: Onboarding@regalria.com

Fixed Indexed Annuity (FIA) PDF