FINRA, the self-regulatory organization for the brokerage industry in the US, has recently announced that variable annuities – insurance/investment products that are often complex and expensive – are to come under increased scrutiny.
According to FINRA’s chief risk officer Carlo di Florio, chief among customer complaints about VAs are disclosure, sales practices, VA exchanges and surrender charges.
In our view, high sales commissions that are generally neither transparent nor disclosed, high ongoing internal expenses, steep surrender penalties and product complexity are all legitimate reasons for investors to be wary of advisors, brokers and insurance agents who pitch annuities as the answer to investing or retirement concerns.
The SEC has an entire page on its website (here) dedicated to warning investors about the potential pitfalls and problems with variable annuities, and yet they remain arguably the largest source of complaints and litigation by investors against brokers.
You can read the entire June 30, 2014 article in ThinkAdvisor here.
Fortunately for investors trapped in high-cost, poor-performing products, there are potential alternatives. Several companies – including Ameritas, Jefferson National and Vanguard – now offer no-commission, no-surrender charge, low-cost variable annuities. Depending on the status of your existing VA contract, you may be able to complete a tax-free exchange into one of these products, potentially saving you money over time.
The Springwater team has helped many clients with these so-called 1035 exchanges. Let us know if we might be able to help you, too.