In the first week of the new year, the Financial Industry Regulatory Authority issued its annual statement of priorities for the foreseeable future. Among the problems it's focusing its sights on: "excessive and short-term trading of long-term products," including variable annuities (VAs).

"Finra has had a target on the backs of VA peddlers for a really long time, but this is a shot across the bow -- a sort of reminder to VA firms that Finra is watching you," says Andrew Stoltmann, a Chicago-based attorney who says he's been involved in some 150 VA-related legal disputes over the past 15 years. He knows the territory.

The problem, essentially, is that VAs are designed to be long-term investment vehicles. But some brokers are inappropriately convincing clients to trade them on a relatively short-term basis, so the brokers can pocket back-end fees. Needless to say, this premature trading is not generally in the client's best interests.

"Finra is concerned about VA suitability from a sales-recommendation standpoint," says annuity expert Stan "The Annuity Man" Haithcock, in Ponte Vedra Beach, Fla. "Transparency, simplicity and full disclosure will be the driving themes for the annuity industry going forward, and that’s good news for the annuity consumer.”

Good news, that is, if Finra's warning has any teeth. "The threat is very real," says Stoltmann. "Every single year we see VA cases. It is a target-rich environment, and brokers are getting stung all the time."

Yet now that the brokers have been warned, is this wrongful activity likely to stop? Stoltmann says no. "The number of enforcement actions tends to decline when the markets are going up," he acknowledges, "but once the markets decline 10 percent or 20 percent, Finra will crack down. Finra wields a pretty powerful weapon."

Given that, how can advisors prepare? "Just remember the common-sense things," he suggests. "First, remember that VAs are long-term products and shouldn't be held for less than five years. Second, when allocating client assets in VA subaccounts, do so in an appropriate and well-balanced manner, especially for seniors."

Of course, there's a new administration coming to D.C. and a new SEC chairman. Finra, says Stoltmann, takes its "de facto marching orders from the SEC." Like others, he anticipates a less aggressive, less prosecutorial regulatory environment than we've seen over the past eight years. "So I'd be shocked if we don't have a major pullback on enforcement actions against brokerage firms," he says.

But that doesn't stop Finra from warning the industry to mind its p's and q's. "There will be a push by Finra," insists Haithcock. Even if regulations loosen, brokers are on notice to "adhere to fiduciary standards by showing all annuity choices that match a client's specific and stated goals, and not just the agent or advisor’s 'favorite' product or carrier," he maintains. "The go-go days of steering clients to annuities that aren't actually in their best interests are hopefully over. If Finra can achieve just that, the consumer wins."

The FINRA letter can be found here: http://www.finra.org/sites/default/files/2017-regulatory-and-examination-priorities-letter.pdf