COMPLEXITIES OF REGISTERED INDEX-LINKED ANNUITIES DRAW ATTENTION OF SEC, SO HEADS UP, SERIES 65 CANDIDATES!

Several blogs ago, I discussed RILAs, or Registered Index-Linked Annuities. Recall that NASAA's Series 65 Test Specifications specifically list Index Annuities under Section II (M) (1) (1.3), meaning that the Series 65 Exam covers these alternative investments and has questions about them. Today on the SEC website, I see that the SEC is paying close attention to the complex structure and details of RILAs in its SEC OIAD Report on Activities—Fiscal Year 2023. Here is just one paragraph from this SEC publication in regard to RILAs. I intend to present more segments in future blogs from this SEC Report on RILAs.

"REGISTERED INDEX-LINKEDANNUITIES (RILAs) 

"What Are RILAs and How Do They Work? 

"RILAs are tax-deferred retirement savings vehiclesthat advertise potentially reduced market riskrelative to investing directly in financial markets.Like many other retirement savings vehicles,money is first added to the overall vehicle andthen the investor allocates that money to specificinvestments. Unlike many other retirementsavings vehicles, because of their structure,withdrawal penalties, and other features, RILAsare complex, long-term, and illiquid products thattypically require investors to make a significantnumber of complicated decisions with perhapsunintuitive consequences. 

"Investors fund purchases of a RILA contractthrough premium payments; the initial minimumamount required to purchase a RILA variessubstantially from $10,000 to $25,000. Premiumpayments and investment earnings are allocatedby the investor to investment options. Theseinvestment options are shorter-term investmentsthat often last 1, 3 or 6 years (a period typicallyreferred to as the “investment term” or “term”); assuch, these investment options may not individuallylast as long as the RILA contract itself. Thus, theinvestor may need to pick investments several timesover the life of the contract."

"https://www.sec.gov/files/2023-oiad-a..."

From the above SEC discussion of RILAs, one sentence especially bears re-reading:

"Unlike many other retirement savings vehicles, because of their structure, withdrawal penalties, and other features, RILAs are complex, long-term, and illiquid products that typically require investors to make a significant number of complicated decisions with perhaps unintuitive consequences." 

Note that this comment implies that the SEC and other financial authorities will not take lightly the wholesale recommendation of these RILAs to clients.

Candidates for the Series 65 should therefore study the structure of RILAs and their complexity before taking the exam, or recommending them to clients after becoming registered.

Bob Eder discusses RILAs and Indexed Annuities in his Study for the Series 65 Exam.

Here is the link to NASAA's new Series 65 Test Specifications. 

Study for the Series 65 Exam is available from Amazon in both paperback and Kindle e-book versions. Here is the link to Bob Eder's book on Amazon.

For questions about Bob Eder's Series 65 manual,  Study for the Series 65 Exam,  or questions in general about the Series 65 Exam, or about RILAs and Indexed Annuities, feel free to email Bob Eder at bobeder@bobeder.net.

Bob Eder received his Juris Doctor (J.D.) degree from the University of Utah, Quinney College of Law, in 2001. 
See Bob Eder's Author Page on Amazon.com.