We all want to get better returns that increase our growth, give us added protection, and generate more income. The problem is, some investment products are so complicated that we might not fully understand them.
Variable annuities are one of those investments that most investors have trouble understanding. They rely on their broker or financial advisor to make sense of them. The low-interest rates and the rising stock prices over the last several years are making variable annuities more popular than ever.
The effects are you could face severe restrictions on getting to your money, losses, and see unexplained fees, commissions, and tax consequences. This hurts your ability to meet financial goals such as retirement, creating extra income, or funding your kids’ education.
Things become more complicated when your broker or advisor tells you that variable annuities are guaranteed. This is not true. Variable annuities are not guaranteed.
The securities industry is regulated by the Financial Industry Regulatory Authority (FINRA). FINRA sets guidelines about what practices are acceptable. Rule 2150 states that it is never okay to state that any product is guaranteed. The same thing applies to variable annuities.
These investments have many drawbacks that you don’t realize, and this makes it difficult to understand what is happening. More investors are becoming confused by variable annuities and don’t know what to do when they can’t access their money, experience losses, or realize that these products are not guaranteed.
Situations like this are when you need to call the annuity loss attorneys at the Wolper Law Firm, P.A. at 800.931.8452. We have the knowledge and experience to help you understand what is going on.
What is a Variable Annuity?
A variable annuity is an insurance product that invests in mutual funds to give you added amounts of growth. There is a death benefit that is offered, and many brokers or financial advisors will tell you it is guaranteed. But . . .
- The death benefit can be accessed only if you die, and it goes to your heirs. This is an insurance component that gives something extra to you. The problem is that the death benefit is touted by your broker or financial advisor as a guarantee, to mislead you.
- The situation becomes more confusing when you look at the mutual fund components. These are referred to as the separate account. The insurance company will take your money and invest it into a series of mutual funds. The idea is to give you more growth without having to worry about which mutual funds to select.
- You can choose among different areas such as conservative, aggressive growth, and growth and income. The problem is that these areas are tied to the stock market. This means that when stock prices start falling, so does the value of your annuity.
- Another issue is getting access to your money. Variable annuities have long holding periods, and if you want to get out of them early you will have to pay a surrender fee. These fees can be as high as 10% and will gradually decline each year that you hold the variable annuity. The average time frame it takes for the surrender fees to disappear is 10 years. This means that you must hold onto the annuity for at least 10 years to avoid having to pay these fees.
- Tax implications are a problem because if you purchase the money with after-tax dollars you will pay higher capital gains rates. This hurts any returns and makes it difficult to cover the taxes when you need the money the most, such as during retirement.
- Brokers and financial advisors like to sell variable annuities because they make high commissions. These commissions can go up to 8%. The more complicated the investment product, the higher commission the broker or advisor will earn.
- These commissions are higher than what you would pay for a mutual fund or a stock. FINRA rule 2121 sets the maximum commission that can be charged to you at 5% for stocks, bonds, and mutual funds. This does not apply to variable annuities, as they have an insurance component to them. Brokers and financial advisors like to sell variable annuities because of the higher commissions.
Variable annuities are a complex product, and you must receive full disclosure from your broker or advisor before buying them. FINRA rules state that you must be told about the possible tax implications, surrender charges, fees, and market risk before buying them.
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 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.
If your broker did not explain this to you, you could be entitled to compensation and should call our variable investment fraud attorney at the Wolper Law Firm, P.A. at 800.931.8452.
You must be given full disclosure of the possible risks and implications of investing in variable annuities. Failing to let you know about them is a violation of FINRA rules. Our variable fraud attorneys can help.
Why Choose Us?
The Wolper Law Firm, P.A. is the preeminent variable annuity investment fraud attorneys. Our founder, Matt Wolper, is quite knowledgeable about securities, trial, and arbitration law. He started the firm to level the playing field for investors.
Matt spent 14 years representing the big Wall Street firms and knows their tactics to defraud you. He understands the most complex investments and how the law applies to them. His knowledge makes him an outstanding variable annuity fraud lawyer. He can look into your situation and will identify what is happening and why the broker or financial advisor sold the annuity to you.
We are results-driven and focus on getting you the money and justice you deserve. The Wall Street firms have deep pockets, and they hire some of the top lawyers to protect their interests. When cases of fraud arise, they will try to scare you and make you the scapegoat. They will claim that you knew about the investment and are only acting like you were uninformed.
These lies don’t hold up with our team of variable annuity investment fraud lawyers. We have a 99% success rate in taking on the biggest Wall Street firms, regardless of their lawyers. We know how to apply the law and successfully make a case so you can recover the money you lost, the commissions, fees, surrender charges, and punitive damages. No one knows securities law like we do.
Our firm has five-star reviews from our clients for the results we get. We will look at any investment and can tell you what options are available. Contact us now at 800.931.8452 and get your free no-obligation consultation. Don’t take things lying down when you can call on a successful annuity loss attorney to look out for you. Time is of the essence, and you want to act fast so that we can hold your broker, financial advisor, and their firm responsible. You have nothing to lose and everything to gain.
The Tactics with Variable Annuities
Your broker and financial advisor have an incentive to recommend variable annuities to you and use certain tactics to hide the facts. These include
- Not disclosing the 8% commissions they receive for these products: One of the reasons that variable annuities are recommended by financial professionals is the high commissions they pay. These commissions may be hidden from you and not disclosed to you. Your broker or financial advisor has a legal obligation to let you know what they are and how much you are paying.
- Switching variable annuities: This tactic is designed to hide a loss and generate another large commission for the broker or financial advisor. You will take a loss, pay the surrender costs, and fees just to go into another variable annuity.
- Not telling you everything: Sometimes, your financial professional will not tell you everything about these investments. They will state that the products are guaranteed and there is no way you will lose money. This violates FINRA rules. Failing to give you the full disclosure of the risks, fees, tax consequences, surrender charges, and commissions is violating the most basic tenets of securities industry rules.
The big commissions and a desire to hide the facts from you are why they will use these tactics.
If you are in a variable annuity and losing money, contact the variable annuity investment fraud attorney. We will evaluate your situation for free and apply the law to hold your broker, advisor, and firm accountable. Contact us now at 800.931.8452 and get your free consultation.
What Should You Do If You Own a Variable Annuity and Suspect Fraud?
If you are unhappy with the variable annuity and believe your financial advisor or brokers engaged in fraud, we recommend doing the following:
- Create a timeline of events: List what happened and what you were told about the variable annuity.
- Gather all information: Collect any information you were sent about the variable annuity, including illustrations, prospectuses, statements, and confirmations. Sometimes, your financial professional will state that these products will go up faster than the markets and are guaranteed. The illustrations cannot exceed the projected gains of 12% a year. They must make a reasonable basis to show that these gains are realistic. Anyone that tells you more than this is engaging in fraud.
- Collect any phone calls: An excellent way to collect evidence is to casually call your broker or financial advisor and record the conversation. You never want to let them know you are upset; just ask about what the benefits are of holding the variable annuity. Let them talk and ask them directly whether the investment is guaranteed. Getting this information recorded makes your case stronger, and it shows that you are the victim of fraud. You are legally allowed to record the call and don’t have to disclose to your broker or financial advisor that you are doing so.
- Contact an Annuity Loss Attorney: Contact us immediately at 800.931.8452. Our free consultation lets you tell us what happened, show us the information, and discuss your options. Annuity fraud is a real problem for investors, and you have rights. Let us protect them.
Doing these things will make it easier to show that your broker or financial advisor broke rules. This helps us to recover your money and hold them responsible. Contact us now at 800.931.8452 and let us help you.
FAQs for Our Variable Annuity Fraud Attorney
The biggest risks are the changes in the stock market, high commissions, illiquidity, and fees. Your broker or advisor should go over all of these with you to ensure it is a suitable investment for you.
The mutual funds inside a variable annuity are tied to a separate account. The separate account invests in the stock market. This means that if we are in a period where the stock market is down you could lose your principal. Bear markets are common and can negatively impact the performance of mutual funds.
The death benefit is the amount that goes to your beneficiary. It is the total amount you have invested in the variable annuity minus the payments you received or the higher contract value.
At retirement, you can select different payment options that depend on the performance of the separate account with the mutual funds. These payments can change during those times of financial distress when the economy and stock market are not performing well.
If you have any additional questions, call the Wolper Law Firm, P.A. today. Our team of variable annuity fraud attorneys will get to the bottom of everything.
Contact a Variable Annuity Investment Fraud Attorney at the Wolper Law Firm, P.A. Today
Your broker or financial advisor has a legal obligation to disclose the facts. The complexity of variable annuities means that they must tell you everything. Failure to disclose the facts violates FINRA’s rules, and you are entitled to compensation.
Call us now at 800.931.8452 and get your free consultation. Time is of the essence, and the faster you act, the quicker we can help you to get your money back.