Articles Tagged with variable 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.

Were you victimized by financial advisor William A. Glaser, formerly a broker with National Planning Corp, in purchasing Everett Builders LLC related investments?  If so, those investment losses are potentially recoverable against National Planning Corp.  The firm was required to reasonably supervise Glaser’s activities while affiliated with the firm.  Usually there are red flags that should have alerted the firm to his conduct.

A former infirm U.S. Navy veteran lost more than $400,000 after Glaser convinced him to lend his life savings to a home builder involved in a criminal investigation by federal authorities. Glaser had convinced the veteran to sell annuities he owned and rack up $45,000 in surrender charges to invest in two promissory notes with Everett Builders LLC, a company run by Paul Everett Creager. Glaser allegedly had the client liquidate two variable annuities in 2016, costing him $19,000 in surrender charges in order to invest $235,000 in a promissory note with him. The client never reclaimed $263,000, which he was supposed to. Then, in November 2016, Creager had the client sell another annuity, which cost him $23,993 in surrender charges. In all, the client lost $361,000 in the promissory notes and $45,632 in surrender charges and fees.

We’ve represented dozens of Ameriprise (formerly known as American Express)and other brokerage firm clients in arbitration claims for unsuitable investment recommendations in variable annuities. Variable annuity sales have been a major source of arbitration claims and lawsuits against the firm and other brokerage firms as well in the last 10 years.

Few products pay as well as variable annuities do. Huge commissions often provide a compelling incentive for financial advisors to jam a variable annuity into a client’s account even when it might not be appropriate. Huge surrender charges and unsuitable, high risk sub-accounts many times lead to financial ruin for the victims who were recommended a variable annuity. Especially problematic are sales where significant concentrations of the client’s portfolio are in a variable annuity.

Ameriprise was recently drilled in a FINRA arbitration claim for variable annuity sales. A Minnesota client was recently awarded $470,000 for sales abuses by an Ameriprise financial advisor? Why? Variable annuity sales. The client was awarded part of his losses, attorney fees and sanctions.

According to Financial Advisor Magazine, the Financial Industry Regulatory Authority (FINRA) is again targeting those firms that engage in “excessive and short-term trading of long-term products,” including variable annuities (VAs). With brokers continuing to tout these long-term investment vehicles as short-term ones, in order to generate larger, back-end fees for themselves, many customers are being forced to pay commissions and fees that they would not necessarily, otherwise. This is also against securities rules and regulations. VAs are long-term products and should not be held for less than five years. If a VA is held for less than five years, chances are, the broker and/or investment firm is not doing its due diligence on the investment vehicle and could be taking advantage of the customer. Below, Andrew Stoltmann discusses some of these issues with FA Magazine today at the link below:

http://www.fa-mag.com/news/finra-targets-va-sales–again-30734.html

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