Suitability refers to recommending and selecting investments that are sensible or “suitable” given personal factors such age, risk tolerance and overall investment objectives. As an example, if you’re 60 and about to retire, speculative investments and derivative products fail the suitability test. You can’t afford to lose money as you have relatively few years left to recoup the losses. In contrast, a 21 year old at the beginning of a long career can allocate some money to riskier investments that have potentially higher returns. In securities law, certain types of financial advisors such as stockbrokers or registered reps have to observe the “suitability” doctrine which requires that they should recommend only those investments that are “suitable” for their clients. This suitability standard does not imply that the broker must act in the best interest of their client or serve in a fiduciary capacity. A suitability standard is entirely different than a fiduciary standard.

Fixed Annuity Market Challenges

A very good article from Darla Mercado at Investment News discusses the current challenges that insurers face in the


Types of Financial Advisors

Fee Only Advisor

Annuity Distribution Becoming Mired by Additional Suitability Rules and Regulations

The National Association of Insurance Commissioners (NAIC) recently amended its suitability requirements. The amendment makes insurers responsible for ensuring that all types of annuity sales or transactions are suitable. Industry participants are struggling with the increased administrative complexity. As discussed in a recent article in Investment News: “The big change is that it requires a complete secondary review somewhere in the chain of the distribution line up to the company,...
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New Rules for Fixed Annuity Suitability

The National Association of Insurance Commissioners (NAIC) has adopted an amendment that will affect the processes involved in determining the suitability of fixed annuity sales. Much of the supervisory responsibility for fixed annuity suitability will be shifted towards the insurance company . Broker -dealers will likely receive much of their guidelines, materials and recommendations from insurance companies. The result is an increase in compliance burden which will likely have the greatest...

Inflation and Fixed Indexed Annuities

This forum thread is a continuation of a conversation that began as a comment and can be found here:

The comment came from Phillip Hawley and is as follows: