FINRA Official Says Variable Annuity Sales Top Investor Complaint List

According to Financial Industry Regulatory Authority chief risk officer Carlo di Florio, variable annuities continue to among the products named the most in customer complaints. He spoke at the Insured Retirement Institute’s Government Legal & Regulatory conference in D.C. on Monday.

Di Florio, who is also the head of strategy at the self-regulatory agency, said that some variable annuities are taking on features similar to complex structured products. This includes caps that restrict how high returns can reach during market rallies and buffers that place a limit on how much annuities are allowed to fall when the market drops.

Annuities that have caps and buffers are different from the more conventional annuities in that the two make a product even more complex by varying market volatility exposure. FINRA wants to make sure that investors know what they are getting involved in when they purchase any kind of variable annuity.

Complaints by investors have mentioned dissatisfaction with sales practices, disclosures, and surrender rules. When asked by a conference participant why FINRA hasn’t established a rule on when variable annuity weight is too much in a portfolio, di Florio said that “facts-and circumstances {review}” was a factor and a client’s goals also play a role. Di Florio said that it was essential that brokers discuss all of this with a client before placing the customer’s money into a complex variable annuity.

Di Florio said that FINRA is also monitoring other complex products, including exchange-traded funds and interest-rate sensitive products.

Variable Annuities
While variable annuities can be good investments, there are risks and costs involved. Variable annuities may be accompanied with high expenses, including an upfront fee, a surrender charge if you want your initial investment back, an annual rate for mortality and risk, a contract fee, an administration fee, and investment fees. All of this, along with inflation, can cut into income from the annuities.

It is important that investors are apprised of all of the risks and costs involved so that they know what you are getting involved in. If you think you may have been the victim of variable annuity fraud, contact our securities fraud lawyers today.

Variable annuity sales raising concern: Finra official, Investment News, June 30, 2014

Variable Annuities: What You Should Know, SEC
Variable Annuities a Top Source of Customer Complaints: FINRA, Think Advisor, June 30, 2014

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