RAA Professional Standards & Competencies 3 — Questions and Answers
Question 1: Under NAIC model regulations, how many hours of annuity-specific training must a new advisor complete before selling annuities?
- 4 hours (Correct answer)
- 8 hours
- 12 hours
- 24 hours
Correct answer: 4 hours
The NAIC Suitability in Annuity Transactions Model Regulation requires 4 hours of annuity-specific training for new sellers.
Question 2: A client with a two-year investment horizon asks about purchasing a ten-year surrender-charge annuity. How should a competent advisor respond?
- Explain that the surrender charges make this product unsuitable for the client's timeline (Correct answer)
- Sell the product and note the mismatch in file documentation
- Recommend the highest-yield option regardless of surrender period
- Defer to the client's decision without providing a recommendation
Correct answer: Explain that the surrender charges make this product unsuitable for the client's timeline
A significant mismatch between surrender charge period and investment horizon is a suitability concern the advisor must communicate clearly.
Question 3: Which document is most critical to demonstrate that an advisor conducted a proper suitability analysis before recommending an annuity?
- A completed and signed suitability questionnaire (Correct answer)
- The client's tax return
- A copy of the insurer's product brochure
- The commission schedule for the product
Correct answer: A completed and signed suitability questionnaire
A signed suitability questionnaire documents that the advisor gathered required client information and assessed appropriateness of the recommendation.
Question 4: What action should an RAA advisor take if a client wants to replace an existing annuity with a new one?
- Complete a replacement disclosure and evaluate whether the exchange serves the client's best interest (Correct answer)
- Process the exchange immediately as the client requested
- Decline unless the new product has a lower surrender charge
- Notify the state insurance department before proceeding
Correct answer: Complete a replacement disclosure and evaluate whether the exchange serves the client's best interest
Replacement transactions require specific disclosure forms and a careful analysis of whether the replacement benefits the client.
Question 5: An advisor's license lapses due to failure to complete continuing education. Which statement is correct?
- The advisor may not sell annuities until the license is reinstated (Correct answer)
- The advisor may continue selling for 90 days under a grace period
- The advisor may sell only fixed annuities during the lapse
- The advisor's past sales become void
Correct answer: The advisor may not sell annuities until the license is reinstated
Selling insurance products on a lapsed license is illegal; the advisor must restore the license before conducting any new business.
Question 6: What is the role of the 'best interest' standard under the NAIC Annuity Suitability Model Regulation updates?
- Advisors must prioritize the client's interest over their own financial gain when making recommendations (Correct answer)
- Advisors must recommend only the lowest-cost annuity available
- Advisors must obtain fiduciary certification before recommending any annuity
- Advisors must disclose all commissions before a client signs
Correct answer: Advisors must prioritize the client's interest over their own financial gain when making recommendations
The best interest standard requires that recommendations place client needs above advisor compensation or other incentives.
Question 7: Which professional behavior demonstrates ongoing competency for an RAA designation holder?
- Completing required continuing education and staying current on regulatory changes (Correct answer)
- Maintaining the same sales volume year over year
- Avoiding complaints by only recommending conservative products
- Passing a refresher exam every 10 years
Correct answer: Completing required continuing education and staying current on regulatory changes
Ongoing competency requires proactive education and awareness of regulatory developments that affect annuity advice.
RAA Professional Standards & Competencies 3
Under NAIC model regulations, how many hours of annuity-specific training must a new advisor complete before selling annuities?