Variable Annuity Loss Recovery
Many customers are sold Variable Annuities with promises of guaranteed income and preserved principal, only to find out later that the costs of the annuity far exceed any benefit it provides. A key issue with Variable Annuities is that in certain circumstances, their deferred tax status can be a benefit. Unfortunately, many brokers are selling customers Variable Annuities in tax deferred accounts (IRAs or 401ks) meaning there is no tax benefit and no reason to incur the significant costs associated with a variable annuity.
If you were sold a Variable Annuity in an IRA or other tax deferred account, or simply feel that it is not delivering what was promised to you, you may have a claim to rescind your investment or obtain damages for the lost market gains eaten by the high fees associated with Variable Annuities.
A variable annuity is a product that combines a security and an insurance contract. Typically the premiums you pay are allocated to an investment portfolio (referred to as "sub-accounts") and sometimes some kind of fixed income portion of the investment. These products are very complex, pay very high commissions to the brokers that sell them, and often the costs and limited benefits are not
FINRA has long taken the position that the sale of variable annuities by brokers or their company's (broker-dealers) is subject to FINRA regulation and its suitability standard. This means your broker is only supposed to recommend a variable annuity if it is appropriate for you.
The factors that FINRA addresses in its Notice To Member 96-86 for evaluating suitability include:
- The customer's inability to fully appreciate how much of the purchase payment is allocated to cover insurance or other costs;
- The customer's ability to understand to understand the complexity of variable products;
- The customer's investment sophistication.
FINRA further points out in its Notice to Members 99-35 that all relevant facts of the variable annuity, including the liquidity issues, surrender charges, tax penalties, expense charges, administrative charges, and investment advisory fees concluding "a minimum holding period is often necessary before the tax benefits are likely to outweigh the often higher fees imposed on variable annuities." FINRA has also expressed concern about the "exorbitant" and "high commissions which drives sales of these products."
If you have been sold a Variable Annuity in a tax free account, had your advisor or broker recommend you switch from one annuity to another, or have found out that the promises made about your variable annuity have not turned out to be true, you may have a claim to recover your money. Contact Us to set up an appointment to discuss your case. We represent investors across the country to further our mission, protecting investors, recovering losses.
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