FINRA Takes a Closer Look at Fixed Annuity Sales

The Financial Industry Regulatory Authority has decided to pay closer attention to the sale of fixed annuities in part because brokerage firms are selling a larger chunk of indexed annuities these days. Regulators want to examine the procedures and policies involving clients giving up or trading variable annuities to place the assets into equity indexed annuities and other products.

According to InvestmentNews, broker-dealers are becoming a force in the indexed annuities era. They were accountable for 11.4% of the market’s share last year, an 8.9% jump from the year before. In a report, the Insured Retirement Institute said that the US annuity industry made $220.9 billion in sales in 2013. Fixed annuity sales for that year was $78.1 billion. Indexed annuities sales hit $38.6 billion.

During this first quarter, reports InvestmentNews, LPL Financial (LPLA), which is the biggest independent brokerage firm, saw a surge in fixed annuities sales. Revenues of fixed income was $46.7 million-70.8% more than during the first three months of 2013.

Other popular annuities include income annuities, market-value adjust annuities, and indexed annuities. A lot of the growth can be credited to sales at big regional firms.

One of the reasons fixed annuities have become so popular is due to their living benefits, which many insurers that issue variable annuities no longer offer. The increased demand may also be because more people are getting loser to retirement.

However, these annuities are also gaining in popularity among younger investors who may now have a different viewpoint about risks in the wake of the recession. Other perks that may result from buying annuities include death benefits, which can go to your beneficiary, guarantee periodic payments (perhaps even for life), and require no tax payments until you take your money out.

Fixed Annuities
With this type of annuity, an insurer promises a minimum interest rate and a fixed amount of payments that are issued periodically. State insurance commissioners regulate fixed annuities. Fixed annuities can go into effect right away or be deferred. If deferred, this is where the interest rates play a part. Immediate ones lead to fixed payments.

Retirees like the set payments from fixed annuities. Fixed annuities tend to be pretty stable.

There are, however, disadvantages. Fixed rates are for a limited amount of time. If the new rates issued after that don’t work for you, you might want to take your money out. This can lead to hefty charges. If you obtained fixed lifetime payments, these won’t change in amount even with inflation. This means that the value of how much you get will decrease over time.

If you think you are the victim of investment fraud because your broker made the wrong recommendation to you or of some other act of negligence or wrongdoing, please contact Shepherd Smith Edwards and Kantas, LTD LLP today. We also represent older investors that were the victim of senior financial fraud.


Fixed annuity sales receiving added scrutiny from Finra, Investment News, May 2, 2014

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Houston, Texas-Based Forethought Financial Group to Purchase The Hartford Financial Services Group’s Annuities Units, Stockbroker Fraud Blog, May 4, 2012
Texas Securities: SEC Says District Court is Mistaken In Not Forcing SIPC to Act for Stanford Ponzi Scam Victims, Stockbroker Fraud Blog, January 19, 2013

Barclays Must Face Shareholder Lawsuit Over Libor Manipulation, Institutional Investor Securities Blog, April 25, 2014