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Welcome! Integrity Financial regional meeting April 4th, 2006. Annual Growth Rates. Annual Growth Rates. Annual Growth Rates. What has been causing this growth?. We have seen the greatest percentages of Asset and Revenue growth in: Investment Advisory Direct Investments. - PowerPoint PPT Presentation
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Welcome!Welcome!Integrity Financial Integrity Financial regional meeting regional meeting
April 4th, 2006April 4th, 2006
Annual Growth RatesAnnual Growth Rates
10.73%
11.71%
-0.60% -1.80%
-2.00%
0.00%
2.00%
4.00%
6.00%
8.00%
10.00%
12.00%
2005 2004 2003 2002
ProEquities Growth
Annual Growth RatesAnnual Growth Rates
10.73%12.73%
11.71%
18.93%
-0.60%
5.17%
-1.80%
4.83%
-5.00%
0.00%
5.00%
10.00%
15.00%
20.00%
2005 2004 2003 2002
ProEquities Growth
Large BranchGrowth
Annual Growth RatesAnnual Growth Rates
10.73%
12.73%
4.88%
11.71%
18.93%
-5.11%
-0.60%
5.17%
-11.86%
-1.80%
4.83%
-12.58%-15.00%
-10.00%
-5.00%
0.00%
5.00%
10.00%
15.00%
20.00%
2005 2004 2003 2002
ProEquities Growth
Large BranchGrowth
Small BranchGrowth
What has been causing this growth?What has been causing this growth?
We have seen the greatest percentages of Asset and Revenue
growth in:
Investment Advisory Direct Investments
Direct InvestmentsDirect Investments
ProEquities In the top 5 B/Ds with other
Industry Leaders. Inland
CNL
Atlas
Behringer Harvard
Etc.
- $136 Million invested last year
● How are we and ProEquities helping?
Due Diligence
Education
Support
Investment AdvisoryInvestment Advisory
Options & Flexibility> Fee Based Planning> You decide Comp Structure
Wrap Fee Accounts –CAM With Retail Mutual Fund’s Stocks,
Bonds, Options Institutionally Managed Accts Separately Managed Accts Private Equity Funds
BD Results> 1.2 Billion AUM (+36.6%)
> Producing IARs (+20%)
Training via IA Workshop &
Fee-Based Academy
What Has Integrity Financial Done What Has Integrity Financial Done To Help Get You There?To Help Get You There?
ProEquities Support
• BDU• Coaching Program• Product Road Show•Forefield
Marketing/Branch Development
• Setup Classes to help reps get licensed• Business evaluation with reps•One on One coaching and business development
Supervision Operations
• Internal systems to improve efficiencies to move business faster• Supervisory Program Rewrite
•Began STP Initiative• Software and Hardware evaluation and implementation•VPN integration with network
• And Much Much More
Financial PlanningBusiness and Marketing
Development
•Continuous regional meetings• Evaluate business needs and opportunities of growth• Continue systemizing business• One on One meetings• Work with reps to bring on new reps•Help reps Recruit and train JR reps• Continue bringing new strategies and ideas to grow your business
•Evaluating financial planning software• Integrity Financial web-site•Server to access your business•Assist reps with technology needs
What Else Can We Do What Else Can We Do To help You Grow? To help You Grow?
NEW Technology Directions
•Please: Ask for Assistance
The Ugly part of our The Ugly part of our business….Compliance Statisticsbusiness….Compliance Statistics
Customer Complaints 20 in 2005; 17 in 2004; 32 in 2003; 52 in
2002 Regulatory Inquiries
6 in 2005; 18 in 2004; 29 in 2003; 34 in 2002
Internal Disciplinary Actions (2005) 6 Letters of Caution 2 Fines Totaling $2,750
2005 Settlements $281,000 in total settlement dollars
529 Plans Update529 Plans Update
NASD Began a Sweep in 2005 Fined Ameriprise $500,000 for
Inadequate Supervision of Sales by its Brokers; plus Ordered Restitution of $750,000
Major Points of Regulator Contention Tax Advantages of In-State vs. Out of
State Effectively Evaluate Suitability,
Considering Costs, Plan Fees, Share Classes
Mutual Fund Share Classes UpdateMutual Fund Share Classes Update
Still Seeing Regulatory Actions Latest Action – Merrill, Wells Fargo,
and LPL hit on B and C Shares (Dec 2005)
Collective Fine of $19.4 Million – ML $14; Wells $3; LPL $2.4
140,000 Clients Offered Remediation Regulators Still Emphasizing the Lower
Cost with A Shares as Being More Advantageous to the Client
Variable AnnuitiesVariable Annuities
Remains on Radar Screen of NASD Exchanges; USL Use with Proper
Documentation is Critical Suitability Issues - Elderly Sales, Large
Percentages of Net Worth, Large Transactions – Supervise Closely
NTM 04-45 Has Been “Watered Down”, but Eventually it will become Effective
Equity Indexed Annuities OverviewEquity Indexed Annuities Overview
Uncertainty Whether a Security or Not Private Security Transaction or OBA? Marketing of EIAs as an Investment Do Agents (Reps) Selling EIAs
Understand the Features of the Product?
Supervision – Calling for Firms to Adopt Special Procedures under Rule 3030 (OBA)
Other Suggestions – Run Through Firm; Approved List of EIAs
ProEquities Equity Indexed ProEquities Equity Indexed Annuities Review and Action PlanAnnuities Review and Action Plan
Action Plan Status Survey Reps & OSJ’s Ongoing Obtain Producer Information Ongoing Create Due Diligence Checklist 80%
Complete Review Product Information March/April Make OBA vs. Security Decision April Implement OBA or Security Strategy April/May
Equity Index Annuities Equity Index Annuities Currently Many QuestionsCurrently Many Questions
Is it a Security or Not?
Sales Supervision
Marketing and Advertising Concerns
ProEquities EIA Policy
To be, or not to be…a securityTo be, or not to be…a security
To prevent complication, please note that EIAs may not be marketed primarily as an investment. It is an insurance product and
should be represented as such.
If an EIA is deemed to be a security under the
securities laws (even if it has not been registered by
the issuing insurance company), a sale of the EIA must
run through the Firm or there will be a violation of
NASD Conduct Rule 3040 (Private Securities
Transactions).
Sales SupervisionSales Supervision If an associated person sells a registered
EIA outside of their regular scope of employment with the firm, Rule 3040 requires the sale be treated as a private securities transaction.
The firm must supervise the sale in accordance with the provisions of rule 3040
Rep must notify firm of sale prior to participating Firm must supply written approval to the rep
If the EIA is not registered, it is to be treated as an Outside Business Activity and also disclosed in
writing as such.
EIA Marketing & Advertising ConcernsEIA Marketing & Advertising ConcernsNASD is concerned about the manner in which associated persons are marketing
and selling unregistered EIA’sSales materials that don’t fully describe features and riskscan be problematic. Some statements can be misleading:
“Growth potential without market risk.”
“You lose nothing if the market goes down.”
“A Win/Win investment Vehicle!” “If you’re looking for upside potential and not market downside
look no further than [name of EIA]. This fixed annuity …enables you to make the most of the S&P 500 Index Gains.”
“How your retirement funds can have: security of principal, higher than CD rates of interest, opportunity for growth (no losses).”
EIA Marketing and AdvertisingEIA Marketing and Advertising
Sales materials should reference: Possible surrender charges
Combination of caps and participation rates
If sales pieces are deemed to be broker-dealer
communications with the public, they would be
subject to the NASD advertising rules, therefore they
have to provide a more balanced description of
features and risks of the product.
Under all circumstances, NASD suitability Under all circumstances, NASD suitability
rules apply to any recommendation that a rules apply to any recommendation that a
customer liquidate or surrender a registered customer liquidate or surrender a registered
security for the purpose of purchasing an security for the purpose of purchasing an
unregistered EIAunregistered EIA..
ProEquities’ EIA PolicyProEquities’ EIA Policy
ProEquities’ EIA PolicyProEquities’ EIA Policy
Proper disclosure forms should be signed by the client and submitted to ProEquities any time you recommend or transact an exchange from variable to fixed, or from a fixed to a variable product including:
Universal Switch Letter Proper Acknowledgement Form
Failure to comply could result in disciplinary action or mandatory requirement for all EIA’s to come through the firm to protect against unauthorized exchanges.
Please note…Please note…
As we continue to assess our position on EIAs, our policy
may change or require amendments.
The firm will notify you via Advisor Portal and email alerts well in advance of any policy
or procedural changes.
Univesal Switch Letter IssuesUnivesal Switch Letter Issues
1035s/Replacements Extra caution and information for switches with
high concentration of net worth and or Age Be sure switch letters are completed Pay
attention to details No blanks, especially on existing policy information
such as, Investment Date, Investment Amount, Surrender Charges and Death Benefits
No liquid paper Be sure changes are initialed
Merrill RuleMerrill Rule
Under ProEquities’ policy, reps must register as IAR if any of the following:
Rep is CFP, ChFC Uses the term financial planning or
otherwise holds themselves out as a financial planner or offering planning services
Rep provides financial plans to customers If providing a Financial Plan, rep must
obtain a signed Financial Planning Services Agreement and fee for planning ($100 minimum)
Merrill RuleMerrill Rule
The SEC has issued very little guidance on this Rule. ProEquities has issued the following guidance on what constitutes planning:
Delivering a document with the title, “Financial Plan”
A comprehensive analysis of a client’s financial situation, as compared to an analysis that is limited in scope
Contact the compliance department with specific questions
Merrill RuleMerrill Rule
Risk of conducting planning activities by a Non-IAR:
The rep will likely be deemed by the SEC to be conducting advisory business as an unregistered advisor, which will lead to disciplinary action against both the rep and ProEquities
Mark Your CalendarsMark Your Calendars
Our next meeting dates are:
Tuesday May 2cd
&
Tuesday June 6th.
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