While overall arbitration filings with the Financial Industry Regulatory
Authority (“FINRA”) increased last year, cases involving variable
annuity sales increased nearly threefold, rising to 123 cases in 2009
from only 47 in 2008.
A variable annuity is a complex, specific type of annuity product that
includes both insurance and securities components. Due to their intricacies,
most clients rely heavily on their brokers in choosing whether a variable
annuity is a suitable investment. And they are often accompanied by a
lot of costly features that are unnecessary for most investors.
Variable annuity sales practices were also the focus of several FINRA
disciplinary actions last year, including a $1.75 million fine against
Fifth Third Securities, Inc. of Cincinnati, Ohio, for a series of violations
related to variable annuity sales and exchanges.
Just a couple years ago, FINRA instituted new suitability rules specific
to variable annuities in an effort to stop the proliferation of variable
annuity complaints. But it appears that variable annuities are still being
sold to uninformed consumers, many of whom are elderly.
Far too often, brokers recommend their clients purchase a variable annuity
due to the high commissions they receive on the sales; they one of the
highest commissioned products a broker can sell. Variable annuities are
unsuitable for most investors, especially elderly ones.
You can also learn more about annuities by watching Attorney Dave Meyer's