COMPLEXITIES OF REGISTERED INDEX-LINKED ANNUITIES DRAW ATTENTION OF SEC, SO HEADS UP, SERIES 66 CANDIDATES!

Several blogs ago, I discussed RILAs, or Registered Index-Linked Annuities. 

Recall that NASAA's Series 66 Test Specifications specifically list Index Annuities under Section II (K) (1) (1.3), meaning that the Series 66 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 Series 66 blogs from this SEC Report on RILAs.

"REGISTERED INDEX-LINKED ANNUITIES (RILAs) 

"What Are RILAs and How Do They Work? 

"RILAs are tax-deferred retirement savings vehicles that advertise potentially reduced market risk relative to investing directly in financial markets. Like many other retirement savings vehicles, money is first added to the overall vehicle and then the investor allocates that money to specific investments. 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. 

"Investors fund purchases of a RILA contract through premium payments; the initial minimum amount required to purchase a RILA varies substantially from $10,000 to $25,000. Premium payments and investment earnings are allocated by the investor to investment options. These investment options are shorter-term investments that often last 1, 3 or 6 years (a period typically referred to as the “investment term” or “term”); as such, these investment options may not individually last as long as the RILA contract itself. Thus, the investor may need to pick investments several times over the life of the contract."

"https://www.sec.gov/files/2023-oiad-annual-report.pdf"

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 66 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 66 Exam.

Here is the link to NASAA's Test Specifications for the Series 66 Exam. 

Study for the Series 66 Exam is available from Amazon in both paperback and Kindle e-book versions. 

Here is the link to Bob Eder's Series 66 book on Amazon. 

For questions about Bob Eder's Series 66 Manual, Study for the Series 66 Exam, or questions in general about the Series 66 Exam, or about Registered Index-Linked Annuities (RILA), 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.

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