According to securities industry watchdog FINRA (Financial Industry Regulatory Authority), variable annuities remain one of the leading products driving arbitration claims. In 2012, variable annuities were the only class of securities whose claim numbers increased--to around 220 cases. Last year’s figures, still being compiled, indicate that through November around 165 cases related to variable annuities were filed with FINRA. And while that’s less than the number of the most common classes of securities that are the subject of FINRA claims (stocks and mutual funds), variable annuities affect a much smaller number of customers in general. In other words, variable annuities trigger claims at a much higher rate than almost anything else.
Variable annuities are a type of insurance product that promise future payout in exchange for investing in the account now. And while that quality is true of many investments, variable annuities also offer tax advantages. The problem is, these securities are not only extremely complex but many investors don’t realize that their money will be tied up in them for years. Plus, if investors do decide to withdraw money early, they often suffer significant surrender fees.
Obviously, these qualities make variable annuities unsuitable for many investors. Unfortunately, brokers seeking elevated commissions often recommend variable annuities especially to senior novice investors who do not adequately understand the terms or the liquidity issues involved with the product. As FINRA has repeatedly urged in Investor Alerts and Regulatory Notices, financial advisors must take extra precautions to inform investors before recommending these products.
If you or anyone you know has been the victim of broker misconduct or investment fraud, please contact us for a free consultation at 1-855-462-3330.