A California producer recommends a 10-year deferred fixed annuity with a 9-year surrender-charge schedule to a 78-year-old client whose only liquid assets are needed for medical expenses within the next 2 years. Under California suitability rules, the recommendation is MOST likely:

Explanation

California Insurance Code §10234.93 (and the NAIC Suitability in Annuity Transactions Model adopted in California) requires the producer to have reasonable grounds to believe a recommended annuity is suitable in light of the consumer's age, financial situation, liquidity needs, financial objectives, intended use, time horizon, and existing assets. A 9-year surrender-charge schedule on a 78-year-old whose liquidity needs arise within 2 years fails the time-horizon and liquidity prongs — the surrender charges would erode principal exactly when needed, which is why the recommendation is unsuitable. The response calling it suitable because tax deferral helps every senior wrongly assumes tax deferral is universally beneficial. The response resting on a signed written acknowledgment fails because an acknowledgment cannot cure a structurally unsuitable sale. And the response resting on the producer's course work is wrong because annuity training (8 hours) is required, but completing it does not validate an unsuitable recommendation.