If you have not heard, the SEC, FINRA and some State insurance departments are after seminar promoters that target seniors. Could your whole marketing approach disappear? While the regulators cannot ban freedom of speech, they can make your disclosures so onerous that you will not be able to attract attendees. For example, the State of California requests that insurance agents disclose on their invitations:
“[an]advertisement for an event where insurance products will be offered for sale may use the terms “seminar,” “class,” “informational meeting,” or substantially equivalent terms to characterize the purpose of the public gathering or event unless it adds the words “and insurance sales presentation” immediately following those terms…”
Here are tips on how to give a clean presentation so that the public is served and regulators are satisfied:
1. If you are a FINRA licensee, realize that the FINRA regulates your behavior, not just products. So even if you give a presentation about fixed annuities, your presentation must meet the FINRA guidelines as fair and balanced and provide adequate disclosure. You cannot say “fixed annuities are guaranteed.” You must add “by the claims paying ability of the insurance company.” You cannot say “You cannot lose money” because it is possible to lose money when surrender charges are subtracted. Note that the presentation materials provided you by an insurance company do not necessarily meet NASD guidelines so don’t automatically use slides, presentation materials or seminar invitations until you have had these reviewed by your broker dealer.
2. If you use visual aids (e. PowerPoint), it is not sufficient to provide the necessary disclosure as a hand-out. The disclosures that the NASD requires must be on the slides: annuities have surrender charges and fees, they are illiquid (the NASD requires this even though it’s not accurate), there is a penalty for withdrawal prior to age 59 1/2, annuities are long term commitments. If you miss any of these disclosures on your visuals, you risk regulatory problems for you and your broker dealer. Do not even think about giving a presentation that has not been reviewed by your broker dealer even if securities are not mentioned.
3. Do not mention securities if you are not a FINRA licensee or registered investment advisor. What you believe may be a harmless comment like “many seniors want to get away from the volatility of mutual funds and that’s why fixed annuities are a good choice” could be construed as the solicitation to transact securities without a license. Therefore, an unregistered person should omit mention of stocks, bonds, mutual funds, variable annuities or any security.
4. Don’t be one sided. Always mention the pros and cons of every opportunity (you’ll get more appointments that way also as the public is not interested in a one-sided sales person; they want a consultant). For example, if you speak about immediate annuities, then explain that this would be a good choice for someone who wants to maximize their income during their lifetime and not a good choice for someone who wants to leave the maximum amount to heirs. Also make clear that there is nothing left at the end of the annuity term. If you try and hide what you perceive as a “negative” feature, you could lose your license.
5. Know the definition of a security which includes “investment contracts”: an investment contract is defined as: [1] a contract, transaction or scheme whereby a person invests money, [2] in a common enterprise, [3] and is led to expect profits [4] solely from the efforts of the promoter or a third party. The following items are investment contracts in most states and if you don’t have a securities license, you cannot offer them: promissory notes, automatic teller machines, pay phones and viatical settlements.
6. Regulators look for suitability. Are you making a presentation and using your seminar to make suitable comments and recommendations? Bank of America was forced to refund investments in variable annuities to people age 78 and higher. To my knowledge, no state has a rule about age limits on products and you might wonder why the regulators don’t just make a rule so you don’t need to guess what is “suitable.” It’s a good idea to make the following comment at the beginning of your presentation and also supply a hand-out:
“NOTHING IN THIS PRESENTATION IS DESIGNED TO BE A RECOMMENDATION. WE CANNOT MAKE RECOMMENDATIONS BECAUSE WE DON’T KNOW YOUR CIRCUMSTANCES AND ANY FINANCIAL TRANSACTION CAN BE RECOMMENDED ONLY BY A KNOWLEDGEABLE PROFESSIONAL WHO KNOWS AND UNDERSTANDS YOUR FINANCIAL SITUATION.”
Such a disclosure won’t get you off the hook if your presentation is still a sales pitch.
7. Don’t give a product presentation. The best type of seminar is conceptual-ideas for saving taxes or increasing income. Its okay to mention product categories e.g. fixed annuities, but don’t mention product names or company names. That crosses the line into a sales pitch for a specific item which may not be suitable for many members of your audience.
8. Don’t bait and switch. Don’t get involved with a living trust seminar that’s really designed to get you in the back door to sell an annuity. Professionals use the front door.
Think like a regulator that makes and enforces rules to protect the public and is under political pressure to do so. Get out of your mindset of what you believe to be right. Yes, you may think the regulators are sometimes off course but do what complies and you’ll keep your license.
