A suitable match. Producer guide to fixed annuity suitability. For agent use only. Not for public distribution.

Transcription

1 A suitable match Producer guide to fixed annuity suitability For agent use only. Not for public distribution.

2 For agent use only. Not for public distribution. We believe everyone is entitled to a secure financial future and we re committed to making that possible one person, one family and one institution at a time. We re here, each and every day, to help you and your clients envision the future, get organized and take the steps necessary to pursue financial success together.

3 Purpose This guide will assist you in understanding and completing the Suitability Profile form that must accompany all fixed annuity business applications. In addition to the section by section instructions, we have provided an excerpt from the Suitability Regulation at the end of this document to assist you in understanding and explaining to your client why we request the information that we do. It s your responsibility Every recommendation you make must be suitable for your client. A decision to recommend an annuity should be based on a careful analysis of the information you gather from your client. This means that, before recommending the purchase or replacement of an annuity, you must first obtain a full and accurate picture of your client s individual needs, financial status and financial objectives. Annuities can be a valuable component of a diversified portfolio, but may not be right for everyone. You must complete and submit a Suitability Profile form with each annuity application. We may ask you to provide additional details as part of our suitability review. You should do a thorough examination of all of your client s sources of income and expenses to determine if your client can afford to purchase the annuity. You should determine whether the client has sufficient income and liquid assets to reasonably pay current and anticipated living expenses after purchasing the proposed annuity without taking withdrawals or other distributions from the proposed annuity during its surrender period. While you cannot predict the future, your client should have enough income or liquid assets to provide a cushion for any expected or unexpected life changes. You should determine whether your client would have too much net worth in fixed annuities as a result of the proposed purchase, taking into consideration all annuities owned. Every client s situation is different. There is no such thing as a typical annuity customer. Tell us the story The Suitability Profile form allows you to tell us the story of your client and how the proposed annuity meets the client s financial goals and objectives; we understand that Suitability is not one size fits all. The Suitability Profile questions are designed to meet the requirements under the various state regulations. We need your assistance in telling the full story of how the proposed annuity best meets the needs and objectives of your clients. To that end, providing as much information as possible regarding how the proposed annuity aligns with your client s needs and objectives will assist us in our review. This symbol serves as a reminder to tell us the story. As you see items that indicate this symbol throughout this guide asking for additional details, feel free to provide a cover letter and/or use the Producer Acknowledgement section of the Suitability form. For agent use only. Not for public distribution. 1

4 Owner/joint owner information OWNER/JOINT OWNER INFORMATION Owner s name 1 : Current age: Anticipated retirement age: SSN/TIN: Are you actively employed? Yes No Retired Joint owner s name: Current age: Anticipated retirement age: SSN/TIN: Are you actively employed? Yes No Retired How long have you known the Producer? Less than 1 year 1 to 3 years 3+ years For Trust Owned contracts - complete the form based on the Trust information as compared to the Annuitant or Grantor of the Trust. Note: Any death benefit is payable upon the death of the annuitant for Non-Natural Owned Annuity Contracts. FINANCIAL STATUS Make sure to include each owner s name, current and anticipated retirement ages, SSN/TIN and whether the owner is actively employed. If the client is not actively employed and is not retired, please include additional information regarding the client s source of income. If the client is drawing unemployment benefits, please indicate the date those benefits will cease under question 3 in the Financial Status section. If the anticipated retirement age is less than the surrender charge period of the proposed annuity, please provide additional details regarding the impact of the change of income and/or possible change in expenses under question 3 in the Financial Status section. For non-natural owners, including trusts, please indicate N/A for current age and anticipated retirement age. Include a detailed explanation in the Producer s Acknowledgement section of how the proposed annuity is in line with the objectives of the Trust and/or Non-Natural Owner and the relationship of the annuitant to the non-natural owner. You must indicate how long you ve known the client. Financial status FINANCIAL STATUS 1. The first year surrender charge for the Voya annuity applied for is... %. 2. The surrender charge time period for the Voya annuity applied for is... years. Questions 1 and 2 provide an opportunity for you to review important aspects of the annuity with your client in relationship to the proceeding financial information in determining the suitability of the proposed annuity. If you are unsure what the charges are or the number of years the surrender charge is in effect, you can find this information on the product disclosure form under Fees, Expenses & Other Charges. In the example shown to the right, the responses would be: Question 1 = 10% Question 2 = 10 years Example disclosure form surrender charge information 2 For agent use only. Not for public distribution.

5 Financial status (continued) 3. Do you anticipate any of the following changes during the surrender charge period indicated for the Voya annuity? If you answer yes to any part of question 3, please explain. If possible estimate when you expect changes and the amount. a. Signifi cant increase/decrease in living expenses (e.g. housing, medical care, assisted living costs)... Yes No If yes, please explain: b. Signifi cant increase/decrease in income (e.g. retirement, lower pension amount, change in jobs)... Yes No If yes, please explain: c. Signifi cant increase/decrease in liquid assets (e.g. children s education, real estate transactions)... Yes No If yes, please explain: d. Signifi cant increase/decrease in net worth (e.g. bonuses/stock options, inheritance, settlements)... Yes No If yes, please explain: Question 3 is to understand if the client will have any changes in living expenses, income, liquid assets or net worth during the surrender charge period that would require the client to access the funds within the annuity. If you need additional room for explanation, you may utilize the back of page 3 and/or include an additional sheet of paper that is signed by the client and producer. 4. Federal income tax bracket: 0% 10% 15% 25% 28% 33% 35% % Question 4: Provide the owner s federal income tax bracket. If the client has a tax bracket of 15% or less, the tax-deferral features of the proposed annuity will be of limited benefit to the client. If the client is in a lower tax bracket, please include additional details in the Producer Acknowledgement Section of how the proposed annuity provides a benefit to the client. 5. The PRIMARY fi nancial objective or intended use for purchasing this product is: Income now Guarantees provided Growth potential Growth, followed by income Tax-deferred growth Pass on to benefi ciaries Other Question 5: Select the Primary financial objective for recommending the product to the client. You may include additional information in the Producer Acknowledgement Section. Selecting more than one objective/intended use will result in a call for additional information. You may also provide an explanation in the Producer Acknowledgement section. 6. How many years of investment/fi nancial experience do you have? None Less than 1 year 1-2 years 3-5 years 5+ years Question 6: Indicate the client s investment/financial experience by checking the box next to the number of years of experience. If the response is None or Less than 1 year, please include additional details in the Producer Acknowledgement Section to explain how the proposed annuity was selected to meet your client s financial objectives. For agent use only. Not for public distribution. 3

6 Financial status (continued) Monthly household income/expenses MONTHLY HOUSEHOLD 4 INCOME Salary/wages Social Security payments Pension/retirement Annuity payments 1 Interest/dividend income Other (e.g; Rental income, unemployment benefits, please explain) Total income: MONTHLY HOUSEHOLD 4 EXPENSES Rent/mortgage payment Utilities/transportation/food Debt repayment Health care/health insurance premiums Taxes 2 Other (e.g; Dependent support, charitable donations, please explain) 0.00 Total expenses: 0.00 Complete these sections to the best of your knowledge. Household information should include the financial information of the client and of the client s spouse/partner. Detailed breakdown of the income and expenses is required for clients age 65 and older and is strongly encouraged for all ages. Total income and total expenses are required for all clients. Trusts please complete the suitability information on the assets and liabilities of the Trust, not that of the Grantor, Trustee, and/or Annuitant. If the Trust has monthly income and/or expenses, please include those amounts. If there is no income (including interest and/or dividends), please state Non-Natural Owner If the proposed annuity will be owned by a corporation, provide the financial information of the legal entity. For Custodial accounts, provide the information for the annuitant. For UGMA/UTMA, complete the financial information on the minor child. If any values are listed in the Other categories, utilize the space provided to explain those amounts. Important details as provided in the footers for this section: Annuity Payments under the Income section: Do not include income currently earned on money that will be used to purchase the annuity Do not include the value of assets used to purchase this annuity. Taxes under the Expenses section: Include property taxes, income taxes and FICA taxes (if self-employed) Please total the income and expenses columns correctly; it s helpful to use a calculator to do this. This is one of the areas where we frequently identify mathematical errors. Potential red flags for this section are listed below. You should fully review these with your client when determining if the proposed annuity is in your client s best interest. As stated earlier, we realize the suitability of the annuity is based on the totality of the information provided. Monthly income is 2,000 or less a month Negative disposable income Helpful hint: Use FastTrack to complete the application and suitability forms and the FastTrack system will complete the math for you! 4 For agent use only. Not for public distribution.

7 Financial status (continued) Household net worth/liquid assets HOUSEHOLD 4 NET WORTH/LIQUID ASSETS - DO NOT INCLUDE: Primary residence, personal belongings/property (e.g; jewelry, furnishings, vehicles) Estimated premium of proposed annuity HOUSEHOLD 4 NET WORTH Annuities (excluding premium of proposed annuity) 3 CDs Checking/savings/money market Pension/401K Stocks/bonds/mutual funds (other securities) Other (e.g; Cash value of life insurance, real estate, please explain) HOUSEHOLD 4 LIQUID ASSETS Total: Complete these sections to the best of your client s knowledge. Household information should include the financial information of the client and of the client s spouse/partner. List client s financial holdings under Net Worth in the left hand column and then of those holdings list the amount that is liquid in the right hand column. Here are two examples to help with filling out this section. Example 1: The client has 40,000 in annuities that they are not utilizing to purchase this annuity. However, only 20,000 is out of surrender, so to fill out this section, in the left hand column they will note 40,000 and then in the right hand column they will note 20,000. Example 2: The client has 50,000 in several CD s, but only one that is at maturity worth 10,000. In the left hand column it would state 50,000 and in the right hand column it would state 10,000. Detailed information is required for all ages. Liquid Assets refers to funds that can be converted to cash without penalty. For annuities, only include amounts that would not incur a surrender charge. As a general rule we encourage clients to have 3 to 6 months of expenses available in liquid assets. If your client does not have that amount available, please provide additional details regarding the limited liquid assets (e.g. tell us the story) and how the client would address unforeseen financial needs. Potential red flags for this section are listed below. You should fully review these with your client when determining if the proposed annuity is in your client s best interest. As stated earlier, we realize the suitability of the annuity is based on the totality of the information provided. Please include additional details in the Producer Acknowledgment section. Proposed annuity is greater than 50% of the client s net worth Total annuities exceeds 75% of client s net worth Please total the liquid assets and net worth columns correctly. It s helpful to use a calculator to do this. This is another area that is usually incorrect. Helpful hint: Use FastTrack to complete the application and suitability forms and the FastTrack system will complete the math for you! For agent use only. Not for public distribution. 5

8 Financial status (continued) 7. What is your general risk tolerance? (check one) Conservative Moderately Conservative Moderate Moderately Aggressive Aggressive Question 7: Please check your client s general risk tolerance (only check one box). Potential red flag if Aggressive or Moderately Aggressive risk tolerance is selected and the client has a large portion of net worth held in annuities. Please tell us the story of how the proposed annuity aligns with your client s financial goals and objectives. The client may have an overall aggressive risk tolerance with the proposed annuity as a small portion of the client s financial assets to meet a specific goal. 8. What is the source of this annuity s premium? (check all that apply) Life insurance Certifi cates of deposit Stocks/bonds/mutual funds Reverse mortgage Home equity loan Savings/checking/money market Death benefi t proceeds from life insurance/annuity Annuity Employer Retirement Plan (401(k), 403(b), etc.) Other Question 8: Indicate all sources of premium for the proposed annuity. Please note: We do not allow financed purchases as such: Reverse Mortgage proceeds are not acceptable and would be declined Home Equity Loans are not acceptable and would be declined 9. Do you now have or have you ever had a reverse mortgage?... Yes No Question 9: This question is required for California and Minnesota customers under their Suitability Regulation. We encourage you to ask this of all customers. If a client has had or has a reverse mortgage, it is unlikely that an annuity would be a suitable investment for them. 10. Have you replaced or exchanged another annuity/life insurance policy within the past 5 years?... Yes No Question 10: Please answer this question based on any and all replacements the client has had in the past 5 years. Potential red flag if the client has had a replacement in the past 5 years. It is helpful to provide additional details regarding what has changed in the client s financial objectives that resulted in those replacements. 6 For agent use only. Not for public distribution.

9 Financial status (continued) Replacements FINANCIAL STATUS (continued) If the purchase of the Voya annuity is a replacement or exchange you must complete questions 10a through 10n. To expedite processing, please attach a Replacement Comparison or a copy of your most recent statement for each replaced life insurance policy or annuity contract. CONTRACT 1 CONTRACT 2 10a. Type of contract/policy being replaced... Indexed Annuity Fixed Annuity Variable Annuity Life Insurance Indexed Annuity Fixed Annuity Variable Annuity Life Insurance 10b. Is the contract/policy being replaced less than 5 years old?... 10c. If yes, was the contract/policy part of a prior replacement or exchange?... 10d. Is there a surrender charge?... 10e. What is the current accumulation value?... 10f. What is the current surrender value?... 10g. What is the total amount being transferred?... 10h. What is the current death benefi t on the contract/policy being replaced?... 10i. What is the current living benefi t amount on the contract/policy being replaced? (If not applicable, list 0. Include riders and living benefi ts.)... Yes No Yes No Yes No Yes No Yes No Yes No 10j. What is the current interest rate and/or cap rate on contract/policy being replaced?... 10k. What is the Minimum Guaranteed Interest Rate MGIR on the contract/policy being replaced?... % % 10l. How many years of surrender charges remain on the contract being replaced?... 10m. What are the administrative/expense fees on contract/policy?... 10n. Explain why the existing life insurance policy or annuity contract cannot meet your financial objectives. Contract 1 Contract 2 ACCESSING YOUR MONEY When your sale involves the replacement of an existing annuity or life insurance contract, we review to determine if the replacement is appropriate. Surrender charges are viewed within the context of the product being recommended. Questions 10a through 10n pertain to any replacement that will fund the proposed annuity. There is a heightened review for clients replacing an existing life insurance policy or annuity contract if the client is 65 years or older in California or Minnesota Excerpt from CA and MN suitability regulations: the consumer would receive a tangible net benefit from the transaction, and in the case of a person 65 years of age or older, neither a producer nor an insurer shall recommend a replacement or exchange of an annuity that requires the insured to pay a surrender charge for the annuity being replaced or exchanged if the replacement or exchange does not confer a substantial financial benefit over the life of the annuity to the consumer so that a reasonable person would believe the purchase is unnecessary. For all replacements regardless of the client s age, additional details to support how the proposed annuity confers a substantial financial benefit to the client should be included in the Producer Acknowledgement section. You may also include copies of an inforce illustration on the current annuity and an illustration for the proposed annuity that supports the financial benefit to the client. Additional information is required if you indicate that a bonus is offsetting any surrender charges on the existing contract. It is important for you to explain to your client that any bonus can be recaptured if the annuity is surrendered prematurely. If there are more than 2 contracts being replaced, you will need to submit an additional page 3 of the form with the contract information filled in and signed by the client. While not required, we strongly encourage you to include the most recent statement for each contract, policy or account being replaced. % % For agent use only. Not for public distribution. 7

10 Accessing your money Contract 2 ACCESSING YOUR MONEY 11. How do you anticipate taking distributions from this annuity? (check all that apply) Required minimum distribution (IRA only) Systematic withdrawals Annuitize Partial withdrawals Enhanced withdrawal benefi t Lump sum Immediate income None anticipated 12. When do you anticipate taking your fi rst distribution from this annuity? (choose one) Less than 1 year Between 1 and 5 years Between 6 and 9 years 10 or more years None anticipated Question 11: Check all that apply. Note: Annuitize is also referred to as the payments that begin upon the contract s Annuity Commencement Date. Question 12: Indicate when your client anticipates taking the first distribution/withdrawal from the proposed annuity. If the time frame indicated in Question 12 does not align with the response for Question 11, it will create a red flag requiring additional details. Owner acknowledgement OWNER ACKNOWLEDGEMENT By signing below, I understand that if I take money out of this annuity I may incur a charge. I acknowledge that I reviewed the product-specifi c disclosure with my Producer. I understand the costs and features of the annuity I am purchasing. To the best of my knowledge the information I provided is true and complete and no required fields have been left blank. I understand that I should consult my tax advisor regarding tax implications of the purchase of an annuity or the exchange of an existing Employer Retirement Plan, Annuity or Life insurance policy. Owner s signature: Joint owner s signature: PRODUCER ACKNOWLEDGEMENT The client must read the disclosures, sign and date the form. If there is a Joint Owner, have them also sign and date the form. Important: Do not have the client sign blank forms. Producer acknowledgement PRODUCER ACKNOWLEDGEMENT By signing below, I acknowledge that I have completed the product specifi c training and that I believe the annuity for which the owner(s) is applying is suitable, based on the information provided. I have provided all known details at this time. I have verifi ed the identity of the owner(s) and believe that the identity information provided to me is true and accurate. Must be completed: The basis for my recommendation for the proposed annuity is: (If additional space is needed, include additional page(s) or use the back of this form.) Producer s signature: Date: Producer number: Very important: You must indicate the basis for your recommendation of the proposed annuity. If additional space is needed, send in an additional letter or use the back of the form. This is your opportunity to tell us the whole story of why this annuity is the best fit for this client. Sign and date the form and any additional pages. 8 For agent use only. Not for public distribution. Date: Date:

11 For agent use only. Not for public distribution. 9

12 Suitability regulation excerpts Suitability information. Suitability information means information that is reasonably appropriate to determine the suitability of a recommendation, including but not limited to the following: (1) age; (2) annual income and anticipated material changes in annual income; (3) financial situation and needs, including the financial resources used for the funding of the annuity, and including anticipated material changes in financial situation and needs; (4) financial experience; (5) financial objectives; (6) intended use of the annuity; (7) financial time horizon; (8) existing assets, including investment and life insurance holdings and anticipated material changes in existing assets; (9) liquidity needs and anticipated material changes in liquidity needs; (10) liquid net worth and anticipated material changes in liquid net worth; (11) risk tolerance; (12) tax status; and (13) whether or not the consumer has a reverse mortgage. In recommending to a consumer the purchase of an annuity or the exchange of an annuity that results in another insurance transaction or series of insurance transactions, the insurance producer, or the insurer where no producer is involved, shall have reasonable grounds for believing, after a reasonable inquiry, that the recommendation is suitable for the consumer, under the totality of the circumstances based on the facts disclosed by the consumer as to the consumer s investments and other insurance products and as to the consumer s financial situation and needs, including the consumer s suitability information, and that there is a reasonable basis to believe all of the following: (1) the consumer has been reasonably informed of various features of the annuity, such as the potential surrender period and surrender charge, potential tax penalty if the consumer sells, exchanges, surrenders, redeems, or annuitizes the annuity, mortality and expense fees, investment advisory fees, potential charges for and features of riders, limitations on interest returns, insurance and investment components, and market risk; (2) the consumer would receive a tangible net benefit from the transaction; (3) for the particular consumer based on the consumer s suitability information: (i) the particular annuity as a whole, the underlying subaccounts to which funds are allocated at the time of purchase or exchange of the annuity, and riders and similar product enhancements, if any, are suitable; and (ii) in the case of an exchange or replacement, the transaction as a whole is suitable taking into account, among other things, the age of the consumer; and (4) In the case of an exchange or replacement of an annuity, the exchange or replacement is suitable including taking into consideration whether: (i) The consumer will incur a surrender charge, be subject to the commencement of a new surrender period, lose existing benefits (such as death, living or other contractual benefits), or be subject to increased fees, investment advisory fees or charges for riders and similar product enhancements; (ii) The consumer would benefit from product enhancements and improvements; and (iii) The consumer has had another annuity exchange or replacement and, in particular, an exchange or replacement within the preceding 60 months. Voya Financial offers a variety of fixed annuities. If you have any questions about the features of our fixed annuities, our sales support team is here to help. Call the Voya Sales Desk at Annuities are issued by Voya Insurance and Annuity Company (Des Moines, IA) and ReliaStar Life Insurance Company (Minneapolis, MN). Both are members of the Voya family of companies. Fixed index annuities are insurance contracts that, depending on the contract, may offer a guaranteed annual interest rate and earnings potential that is linked to participation in the increase, if any, of an index or benchmark. Neither Voya nor its affiliated companies or representatives offer legal or tax advice. Clients should seek the advice of a tax attorney or tax advisor prior to making a tax-related insurance/investment decision. For agent use only. Not for public distribution Voya Services Company. All rights reserved. CN /13/2015 Voya.com