A Financial Industry Regulatory Authority Inc. panel says that AIG Advisor Group (AIG) subsidiary Royal Alliance Associates Inc. must pay $1.4 million to three retirees who claim that the brokerage firm was negligent when supervising the sales of variable annuities and nontraded real estate investment trusts. The investors, who were former AT & T Inc. employees, claim that ex-broker Kathleen Tarr recommended that they take a lump-sum buyout from the communications company instead of a lifetime annuity. The money was then put into nontraded REIT company Inland Real Estate, as well as different variable annuities.
Tarr’s BrokerCheck record shows that she has been named in about forty customer disputes and complaints. She was let go from Royal Alliance in 2010.
The claimants, who are low-wealth, low income seniors, believe that they should not have been encouraged to take a lump sum and place their funds into non-traded REITs and variable annuities involving an IRA. Even though they did not sustain out-of-pocket losses from the investment recommendations, the retirees purportedly lost out on earnings they would have made if only they had invested their money more reasonably or opted for the lifetime annuity. With the latter, an investor would have given over a lump sum figure in return for a guaranteed payout for the duration of his/her life.
An attorney for the claimants said that according to evidence, supervisors at Royal Alliance were not properly overseeing the brokers involved. This allowed for the application of a “one-size-fits-all” method in which customers were invested in variable annuities and Inland REITs.
The brokerage firm expressed surprise and dismay at the panel’s ruling. Royal Alliance claims that if one were to take into account residual investment value and previous withdrawals, the retirees could collectively see a gain on their investments.
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Royal Alliance to pay $1.4 million over non-traded REIT, VA sales, Morningstar Advisor, July 16, 2015