Chapter 6 - California 8 Hour Annuity Training Supplement

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California 8 Hour Annuity Training Supplement
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1.Selling to the Senior Market: Caveat emptor or "let the buyer bewar
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e," is a philosophy often assumed in business situations. It places all
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the responsibility on the shoulders of the buyer to fully understand t
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he products and services being purchased. It assumes the buyer poss
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esses adequate information and knowledge to evaluate sales and ma
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rketing claims and to determine the value of a product or service. W
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hile this philosophy might apply to buying a used car from an online li
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sting, it does not apply to the financial services industry. Federal cons
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umer protection laws and state regulations govern these transactions
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hand that is especially true in the senior market.
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The NAIC's Model 275 Regulation outlines the collective opinion of ins
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urance commissioners from across the country. Financial products an
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d annuity contracts are complicated and difficult to fully understand.
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Reasons include: yh

- Technical terminology that is unfamiliar to the general public
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- Unclearly described product yh yh

- Confusing contracts yh

- Misleading sales and marketing literature yh yh yh yh

- Inadequately trained and/or supervised agents yh yh yh yh

- Sales processes that may favor the seller over the buyer
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- Seller compensation plans may govern product selection -
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to the detriment of the buyer
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The issue of buyer competence is not only an ethical issue for license
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d California agents; it is a legal concern as well. The California Civil C
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ode §38-39 states:
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38.A person entirely without understanding has no power to make a
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contract of any kind, but the person is liable for the reasonable value
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yhof things furnished to the person necessary for the support of the p
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erson or the person's family.
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39. (a) A conveyance or other contract of a person of unsound min
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d, but not entirely without understanding, made before the incapacity
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of the person has been judicially determined, is subject to rescission..
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.
(b) A rebuttable presumption affecting the burden of proof that a perso
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n is of unsound mind shall exist for purposes of this section if the per
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son is substantially unable
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California 8 Hour Annuity Training Supplement
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to manage his or her own financial resources or resist fraud or undu
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e influence. Substantial inability may not be proved solely by isolated
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hincidents of negligence or improvidence.
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2.Other California Specific Regulations and Codes: In certain areas of a
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nnuity regulation, California statutes and laws specifically highlight co
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ncepts that may not be addressed by the NAIC Model Regulations as
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adopted by other states regarding
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California 8 Hour Annuity Training Supplement
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the suitability of annuity sales. With that in mind, the following areas
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are listed here for California agent consideration.
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3.Pre and Post Retirement Planning: Pre-
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retirement planning traditionally takes place years before actual retir
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ement. A 25 year old may begin setting aside some money for retire
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ment from the first paycheck received, focusing on the goal of accu
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mulating money for the future. Pre- yh yh yh yh yh

retirement planning at any age can also include:
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- Actively saving money in bank accounts or establishing a retirement
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account such as a traditional or Roth IRA.
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- Contributing at work to a 401(k), 403(b), SIMPLE IRA, SEP, or other de
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fined benefit plan.
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- Budgeting and managing family finances as life changes occur: marri
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age, children, a mortgage, saving for college education.
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- Managing tax- yh

qualified retirement plan assets if employment changes; workers ra
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rely stay with one job or one employer during a working lifetime.
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4.Pre and Post Retirement Planning: After retirement, planning involves
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hfine-tun-
yhing both income and expenses. Working together, the agent and co
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nsumer should regularly re- yh yh yh

evaluate a retirement portfolio and plan to make corrections or adjus
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t-
yhments as necessary. Just because the working and accumulating yea
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rs are in the past doesn't mean that the retiree is no longer subject
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to the influences of the financial markets. Items to review include:
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- Investments and stock market performance yh yh yh yh

- Bank interest rates and bond market performance
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- Governmental policies involving Social Security and cost of living adj
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stments
- Taxation and changes in tax rates yh yh yh yh yh

- Other economic factors yh yh

5.Contract Provisions: 1) Issue Ages yh yh yh yh

2) Premium Payments yh

3) Indexed Annuity Guaranteed Minimum Interest Rates
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6.Issue Ages: California Insurance Code deals with life or disability ins
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urance or annuity contracts issued to a minor (less than age 16), stipu
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California 8 Hour Annuity Training Supplement
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lating that as long as the written consent of the parent or guardian is
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hgiven, the minor is not to be considered "incompetent" by reason of
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age to participate in whatever needs to be done with the contract.
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"when one of these contracts is issued for benefit of the minor...or fo
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r the benefit of the father, mother, husband, wife, child, brother, or si
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ster, of such minor, or issued to
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