An Economic Analysis of Equity-Indexed Annuities

Date: 09-2008
Author: Craig McCann

At the request of the North American Securities Administrators Association, Dr. McCann authored a White Paper on equity-indexed annuities in support of the SEC’s proposal to provide federal investor protections to purchasers of equity-indexed annuities. Dr. McCann concluded that:
• Existing equity-indexed annuities are too complex for investors to understand.
• This complexity is designed to allow the true costs to be hidden.
• The high hidden costs in equity-indexed annuities are sufficient to pay extraordinary commissions to a sales force that is not disciplined by sales practice abuse deterrents found in the market for regulated securities.
• Unsophisticated investors will continue to be victimized by issuers of equity indexed annuities until truthful disclosure and the absence of sales practice abuses is assured.


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