Suitability Change – Regulators Targeting Income Rider Replacements

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If the DOL wasn’t enough,  I wanted to bring you up to speed on some suitability changes due to regulatory pressure on Income Rider Replacements. 

The regulators have been targeting sales on Income Rider replacements to accumulation products.  They are more specifically looking at clients that have been paying a rider fee for a long time and are giving up a large Income Base Benefit.

In the past, Athene has been one of the most liberal companies in accepting this type of business.  As long as the sale was in the best interest of the client, the client has sufficient retirement income, and they no longer need the income rider we would accept this sale as suitable.

Going forward Athene will continue to allow Income Rider Replacements to Accumulation products with the following the following rules:

  • The transaction must be in the best interest of the client.
  • Maximum Income Rider/Benefit Base Loss of 75% Variance (See Below)
  • Variance = Current Income Benefit Base – (Surrender Value + Bonus)   /   (Surrender Value + Bonus)
  • The regulator is looking for what has changed since they first purchased the annuity and as to why the income is now no longer needed.
  • Client must explain specifically on PCW what has changed since they originally purchased the annuity contract with the income rider.  
    • Examples:  
      • I/We thought we needed income in retirement when we purchased the original policy but now that we are in retirement, we have more than enough income from SS and pension.
         
      • My income has increased substantially since we originally purchased the annuity w/ Income rider and we no longer have an income need in retirement.
         
      • I received a large inheritance/sold a business and our financial situation has changed dramatically since I originally purchased the annuity with an income rider.  I no longer need the income nor do I want to pay for a rider I will not be using.
         
      • We weren’t sure if we needed income when we originally bought the contract.  Now that we are finally in retirement, we have sufficient income to meet our expenses and our needs have changed to accumulation and legacy.
         
      • Since I purchased the original annuity, my expenses have dramatically lowered.  I now have enough income from Rental Income/Pension Income /Social Security to sufficiently cover my expenses.