Articles Posted in Annuities

Stoltmann Law Offices, P.C. is a Chicago-based securities, investor protection, and consumer rights law firm that offers victims representation on a contingency fee basis nationwide. We’ve represented investors who’ve suffered losses in connection with the recommendation to invest in variable annuity products.

One strategy that unscrupulous brokers employ is to switch clients out of variable annuities into other insurance products or mutual funds. This move, of course, generates even more commissions, but may not be in the best interest of their customers. With variable annuities, investors who cash out of them within a short period of time also may incur high “surrender” fees, which are onerous. Variable annuities – the more complex and costly version of low-cost fixed annuities – are often oversold by brokers and advisors. Due to high “surrender” fees, they may lock in investors for a certain period of time. Then they may be paying even more commissions and fees in new investments.

Such practices hurt investors and have caught the attention of FINRA, the securities industry regulator. FINRA recently fined Wells Fargo Advisors Financial Network and Clearing Services more than $2 million for switching 100 clients from annuities to other products.  The regulator found that from January 2011 through August 2016, Wells Fargofailed to supervise the suitability of recommendations that customers sell a variable annuity and use the proceeds to purchase investment company products, such as mutual funds or unit investment trusts.”

Chicago-based Stoltmann Law Offices has represented investors who’ve suffered losses from dealing with unscrupulous investment brokers selling risky variable annuities.

Variable annuities are hybrid products that combine mutual funds within an annuity “wrapper.” As a retirement savings vehicle, you can invest in a variety of stock, bond and other funds that compound earnings tax free. Unlike “fixed” annuities, which pay a set rate of return and a guaranteed monthly payment, variables are not focused on guaranteed income and performance is based on market returns, so you could lose money. Both products provide a death “benefit,” that is, a lump-sum payment to survivors when the annuity holder dies.

The main reason variable annuities are often a bad deal for retirement investors is they are extremely expensive to own. In addition to sales commissions, mutual fund managers levy fees. There are also insurance-related expenses, riders, and other fees that act as a drag on return. Brokers often tout the tax “benefit” of owning a variable annuity, but then sell then to investors in their IRAs, which is a huge problem.

If you lost money with Puerto Rico financial advisor Pedro Gonzalez-Seijo, Stoltmann Law Offices may be able to help you recover these losses. Gonzalez-Seijo, a registered representative of Transamerica Financial Advisors, Inc. from September 1991 through May 2016, solicited clients to purchase variable annuities, but instead deposited their money into his personal bank account. The Securities and Exchange Commission barred Gonzalez-Seijo from the securities industry on July 5, 2019. Through its investigation, the SEC found that he stole $480,813.15 from five clients between 2013 and 2016. He pled guilty to one count of bank fraud in the criminal action that was pending against him in the United States District Court for the District of Puerto Rico on January 31, 2019.

Rather than terminate Gonzalez-Seijo, Transamerica gave him a slap on the wrist when they discovered “unauthorized check withdrawals” in client accounts and permitted him to resign. He did not register with any other broker dealer after resigning from Transamerica in May 2016 and, given the bar imposed by the SEC last week, he will no longer be allowed to work in the securities industry in any capacity. According to his FINRA BrokerCheck Report, Gonzalez-Seijo also sold life insurance and annuities through PGS Insurance, Inc. There are two client complaints disclosed on his BrokerCheck report for this scheme, one has been closed and one is pending.

Stoltmann Law Offices is highly experienced in representing investors who lost money in similar theft and selling away, or “Ponzi” schemes. You can find information on just a few of those cases in which Stoltmann Law Offices successfully recovered their clients’ stolen assets, and in some cases attorney’s fees, costs, interest and punitive damages on our website. “Selling away” is when a broker sells an investment to clients that is either unregistered, or not approved by the brokerage firm. Common forms of these alleged investments are promissory notes, bonds, and limited partnerships. Often times the advisor uses a shell company to misappropriate client funds. In some cases the advisor will even represent that he is investing the money in publicly traded stocks and mutual funds and will go as far as creating phony account statements to hide the theft. If the broker is not properly supervised by his firm, he can engage in this scheme for a long enough time period to abscond with the money, leaving their clients with nothing by the time they discover that the investment was fake.

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