TRENTON – The Senate Commerce Committee approved legislation today sponsored by Senator John H. Adler that would provide consumers with the tools needed to protect themselves from deceptive practices used by unscrupulous insurance brokers and financial planners.
“Seniors in New Jersey and across the country are repeatedly targeted by less than honest insurance brokers looking to sell unnecessary annuities to retirees,” said Senator Adler, D-Cherry Hill. “This bill takes aim at the latest scams – using impressive-sounding, but otherwise meaningless titles to make it seem like they have expertise in financial planning. Instead, they only jeopardize the financial security of their clients.”
Senator Adler wrote the bill in conjunction with New Jersey AARP, who first alerted him to the growing problem of retirees being unfairly targeted by financial planners and advisers looking to sell expensive annuities. According to the AARP, these financial planners often use impressive sounding, but virtually meaningless titles like “registered financial gerontologist” and “certified elder planning specialist” to steer seniors into financially unwise investments.
“The seniors these ‘specialists’ target are understandably reassured by the ‘credentials’ they are shown. Unfortunately, they don’t realize that anyone willing to shell out the money can get these credentials with almost no work,” explained Senator Adler.
The bill, S-1165, would amend and supplement the existing insurance producer and unfair trade practices statutes to provide consumers with several protections from unethical business practices by “insurance producers” – agents, brokers and financial consultants.
Specifically, the bill would prohibit insurance producers from using any certification or title in business cards or other marketing materials that is not specifically issued or recognized by the State. Additionally, insurance producers would only be allowed to obtain education credit towards licensing or licensing renewal from courses of study that are approved by the Commissioner of Banking and Insurance.
“The goal here it to make sure that New Jersey residents can be assured that the credentials used by brokers and financial advisers really denote true expertise in a field,” explained Senator Adler.
The bill also provides two new tools for consumers to use in determining if an investment product is financially sound. First, insurance producers would be required to produce a one-page suitability form that outlines the terms and conditions of any annuity they offer a client. Second, purchasers of annuities would have a 10-day rescission period to get a second opinion or change their mind and get their money back if they decide the annuity is not in their best interest.
According to Senator Adler, an annuity is an insurance contract where an individual pays an insurance company a set amount of money in return for guaranteed periodic payments until death.
“Annuities are complex financial arrangements and it’s always best to seek out a second opinion before fully agreeing to one,” said Senator Adler. “People need to have an opportunity to cancel an annuity if they find out that it’s not in their best interests.”
Finally, the bill would establish a private cause of action for any person aggrieved by a violation of the law against the insurance producer and, in appropriate circumstances, the insurance company as well.
The bill passed the Committee by a vote of 5-0 and now goes to the full Senate for consideration.