Securities Fraud Attorneys Blog
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.
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.
