A variable annuity is complex hybrid financial and insurance product that offers investors a stream of income, tax deferment and a death benefit. The sub-accounts of an annuity are generally invested in mutual funds, the selection of which will dictate the potential performance of the annuity. While there are benefits of variable annuities, they are often outweighed by the risks and other features.
For example, variable annuities may include high annual management fees, surrender charges, lock-up periods, and mortality charges. In addition, it is commonly misunderstood that variable annuities offer guaranteed investment returns. They do not. Many financial advisors fail to disclose that investment returns may be impacted by market conditions.
Many financial advisors recommend annuities because they generate high sales commissions relative to other financial products. Unscrupulous financial advisors may also engage in annuity “switching,” which refers to the practice of selling one annuity and purchasing another. Often times the “switch” is justified by the financial advisor by suggesting that the annuity purchased has superior features when any such enhanced feature is actually outweighed by the cost of the “switch.”
The Securities Exchange Commission (SEC) and Financial Industry Regulatory Authority (FINRA) have cautioned customers to be aware of “bonus credits” offered to financial advisors for selling certain variable annuity products.
The Wolper Law Firm has extensive experience handling claims involving variable annuities. If you believe that you were improperly sold a variable annuity or have experienced unexpected losses in a variable annuity, please contact the Wolper Law Firm for a free consultation and case evaluation.