Variable Annuities Investments

Variable Annuities Continue to Cost Investors, What are the Recovery Options?

October 8, 2020 | by Stoltmann Law Offices

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 Fargo “failed 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.”

Variable Annuities Are Trouble for Retired Investors

June 23, 2020 | by Stoltmann Law Offices

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.

FINRA Fines Securities America $175,000 for Annuity Sales

September 10, 2018 | by Andrew Stoltmann

AdobeStock_35532974-1-300x200 Stoltmann Law Offices continue to investigate Securities America, after it was fined $175,000 by FINRA. Between August 2014 and January 2016, FINRA charged that brokers with Securities America, overlooked or violated suitability concerns with two classes of variable annuities that were sold. During this time frame, FINRA alleged that Securities America received close to $53 million from sales of share class variable annuities, including over $6 million from the sale of 1,904 L-share contracts. These products have shorter surrender periods, and are therefore more expensive. Investors pay a higher fee in exchange for increased liquidity which is unsuitable for many investors. Firms that fail to disclose to investors these risks and fees, are more likely to be confronted with allegations of misconduct in the course of their business.