ATTORNEY NEWSLETTER
Questionable Annuities Sales Tactics
High Commissions Drive Sales
Steep Withdrawal Penalties And Lengthy Surrender Periods
Agents receive substantial commissions for the selling annuities to seniors. Often annuity sales are closed on incomplete information. The consumer may not understand how these complicated contracts work and for seniors this can be especially costly if they need their money back once they sold a contract. Evans Law Firm, Inc. recommends seniors avoid deferred annuities because these contracts are expensive and complicated and tie up a senior’s money for years. Sales of unsuitable annuities to seniors violate the law and may constitute financial elder abuse. Cal. Welf. & Inst. Code § 15610.30 (definition of financial elder abuse); Cal. Ins. §§ 790 et seq. (Unfair Insurance Practices Act) and 10509 (suitability requirement). Any senior victim may be entitled to damages and an award of attorneys’ fees and expenses for bringing a case. Cal. Welf. & Inst. Code § 15657.5. If you are over 60, live in Napa County or elsewhere in the Bay Area or throughout the State of California and own a deferred annuity, call us today at 415-441-8669 (or toll free at 1-888-50EVANS) for a free review of your policy.
Examples Of Unsuitable Annuities
The Financial Industry Regulatory Authority (FINRA) and the U.S. Securities and Exchange Commission (SEC) warn senior consumers to be fully informed about how annuities work before they are sold one. In a recent Investor Alert released by FINRA and the SEC,[1] the agencies provide several examples of unsuitable annuity sales:
- A State agency sanctioned an investment adviser for recommending inappropriate annuity products to seniors. Eight residents between the ages of 72 and 87 invested approximately $1.2 million in annuities recommended by an adviser, resulting in commissions of approximately $98,000. These investment products were not suitable for the clients. In fact, one annuity’s producers had a policy against the sale of the product to individuals over the age of 75.
- FINRA suspended an investment adviser for six months and levied a fine of $28,000 against the adviser when the adviser sold unsuitable variable annuities to seniors.
- FINRA barred an investment adviser from association with any FINRA-regulated securities firm and ordered the adviser to pay more than $1.5 million in restitution to seniors for unsuitable sales of annuities and mutual funds totaling over $6 million.
- FINRA fined a financial services firm, $2.75 million for failing to maintain an adequate supervisory system to oversee annuity sales activities of over 1,000 branch managers. working in offices throughout the United States. In a related action, FINRA permanently barred one of those branch managers because the manager recommended unsuitable annuity products to seniors and made misleading statements to customers in correspondence.
- FINRA fined an investment services firm, $850,000 for supervisory, recordkeeping, telemarketing, and other violations. The firm had failed to implement proper procedures for selling annuities to seniors.
Lengthy Surrender Periods Make Deferred Annuities Unsuitable For Seniors
Perhaps the primary reason deferred annuities are regarded as unsuitable for older consumers is that withdrawals from these contracts incur an insurance company penalty. This can be an especially difficult situation for seniors who may need their money back for emergencies or increased care costs or other living or medical expenses. Withdrawals during a policy’s “surrender period” are subject to penalties. The period can last ten years or more and the charges can be as high as 15% or greater. For senior consumers this penalty can be particularly harsh. A senior policyholder may need his or her money back for an emergency or escalating care costs or the like and a stiff penalty that eliminates any gain in the invested money and cuts into principal is a real hardship. Surrenders are also taxable events such any surrender can result in large tax bills in addition to the carrier’s penalty.
Contact Us
If you are over 60 and live in Napa County or elsewhere in the State of California and have an indexed annuity, we can review your contract for free. You can reach Ingrid M. Evans at Evans Law Firm, Inc. at (415) 441-8669, or toll free at 1-888-50EVANS or by email at <a href=”mailto:info@evanslaw.com”>info@evanslaw.com</a>.
Some significant issuers and distributors of fixed, variable and fixed indexed deferred annuities in California are listed below. We are not in any way suggesting that any of these carriers or distributors has done anything wrong. The list is provided solely as a reference for our readers.
AIG/American General Life Insurance Company
Allianz Life Insurance Company of North America
American Equity Investment Life Insurance Company
American General Life Insurance Company/AIG
American International Group, Inc. (AIG)
American National Life Insurance Company
Athene Annuity & Life Assurance Company
Athene Annuity and Life Company
Athene USA
Aviva Life Insurance Company
AXA Equitable Financial Services, LLC
AXA Equitable Life Insurance Company/AXA US
AXA Advisors, LLC
Brighthouse Financial, Inc./MetLife
EquiTrust Life Insurance Company
Fidelity & Guaranty Life Insurance Company
Genworth Financial, Inc.
Genworth Life and Annuity Insurance Company
Genworth Life Insurance Company
Guggenheim Partners, LLC
Guggenheim Partners/Security Benefit Life Insurance Company
ING USA Annuity and Life Insurance Company
Jackson National Life Insurance Company
John Hancock Life Insurance Company
Lincoln Benefit Life Company
Lincoln Financial Group
Massachusetts Mutual Life Insurance Company
Metlife/Metropolitan Life Insurance Company/Brighthouse Financial, Inc.
Minnesota Life Insurance Company
Nationwide Investor Services Corporation (NISC)
Nationwide Life and Annuity Insurance Company
Nationwide Life Insurance Company
New York Life Insurance Company
Northwestern Mutual Investment Services, LLC
Northwestern Mutual Life Insurance Company
Northwestern Mutual Wealth Management Company
Pacific Life & Annuity Company
Pacific Life Insurance Company
PacLife
Security Benefit Corporation
Security Benefit Group, Inc.
Security Benefit Life Insurance Company/Guggenheim Partners
Security Investors, LLC
Security of Denver Life Insurance Company/Voya
Transamerica Life Insurance Company
Voya Financial Advisors
Voya/Reliastar Life Insurance Company
World Financial Group Insurance Agency, Inc.
[1] You can read the entire Investor Alert here: https://www.sec.gov/spotlight/seniors/elderfraud.pdf
