Variable Annuities Unsuitable for Many Investors, Especially Retirees

by InvestorLawyers on January 28, 2014

in Arbitration,FINRA,Retirement,Variable Annuities

Securities fraud attorneys are currently investigating claims on behalf of investors — especially older, retired investors — who suffered significant losses because of the unsuitable recommendation of variable annuities. Variable annuities are a type of insurance product. With this product, the investor pays into an account now in exchange for the guarantee of a future payout. The investment is tied to a stock index return, making it variable.

Variable Annuities Unsuitable for Many Investors, Especially Retirees

According to stock fraud lawyers, variable annuities typically offer large sales commissions to brokers and, as a result, some brokers make unsuitable recommendations. Furthermore, tax deferrals associated with variable annuities make them particularly unsuitable for retirees if the retirees’ assets are already held in an account that provides tax deferral (such as an IRA).  Reportedly, an arbitration panel recently awarded $112,000 to one investor who was sold variable annuities which then were put into the investor’s tax-deferred IRA account.  This strategy negates or renders irrelevant any tax benefit that would have been provided by the variable annuity.

InvestmentNews recently reported that individuals who invest in variable annuities are facing a risk of forced annuitizations.  If so, the annuitizations will eliminate some death benefits, which are a primary reason many investors have chosen to invest in variable annuities. A report by the Wall Street Journal states that while variable annuity claims lagged in 2013 after surging in 2012, the 2013 claims were still higher than the number of mutual fund and stock lawsuits.

According to securities fraud attorneys, firms have an obligation to fully disclose all the risks of a given investment when making recommendations, and those recommendations must be suitable for the individual investor receiving the recommendation given their age, investment objectives and risk tolerance. Certain characteristics of variable annuities, including high penalties for early withdrawal, long surrender periods and low rate of return, make these products unsuitable for many investors.

Law Office of Christopher J Gray, P.C. attorneys are experienced in handling cases concerning unsuitable recommendations concerning variable annuities.  If you suffered significant losses in variable annuities that were unsuitable for you, you may be able to recover your losses in FINRA arbitration. To find out more about your legal rights and options, contact a stock fraud lawyer at Law Office of Christopher J. Gray, P.C. at (866) 966-9598 or newcases@investorlawyers.net for a no-cost, confidential consultation.

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