Liquidating or Exchanging Annuities May Be Unsuitable for Investors

Annuities are insurance contracts that make routine payments to customers either immediately or at some point in the future.  This insurance contract allows investors to protect and grow their retirement savings while providing them with guaranteed income.  Some brokers and financial advisors recommend selling or exchanging annuities for “better” investment opportunities.  However, liquidating or exchanging an annuity comes with a high price– commissions, tax implications, and the loss of benefits associated with the original annuity.  For these reasons, liquidating or exchanging an annuity without very clear financial reasons may be  unsuitable for customers.  The securities fraud lawyers at Rich, Intelisano & Katz, LLP (RIK) have recovered millions for investors who suffered from annuity-related losses.

When investors sell or exchange their annuities, it comes with a heavy price.  First, when customers sell their annuity, they are subjected to costly fees and penalties.  For example, the customer may incur surrender charges and high cancellation fees.  Second, customers will lose all benefits associated with the annuity, such as legacy protection which is a death benefit to help provide a legacy for your loved ones.  Third, the customer forfeits expected benefits from the annuity– the customer will no longer have guaranteed income.  Fourth, taxes may become immediately due on the proceeds.  Lastly, there are often high commissions associated with the sale of annuities.

Regardless of the costs and losses associated with selling or exchanging annuities, brokers and financial advisors sometimes recommend such actions to customers in order to generate commissions for themselves.  Essentially, liquidating or exchanging annuities could potentially be a scheme for your broker or advisor to take money out of your savings and put it into their pocket.  What’s worse is that the broker or advisor will use your money from the sale of the annuity to purchase another annuity or other investment products further increasing commissions and fees.  Just like with any scheme to take advantage of customers, this is ill-suited and exceedingly improper.

The Financial Industry Regulatory Authority (FINRA) has sanctioned many brokers and financial institutions for the inappropriate sale and exchange of annuities.  For example, Richard Wesselt, a broker, was barred from the industry for recommending customers take early withdrawals from their annuities while receiving massive commissions for the sales (see FINRA’s Disciplinary Actions January 2021); Transamerica Financial Advisors, Inc. had a multi-million dollar fine for failing to reasonably supervise and provide adequate training to its employees regarding annuity recommendations (see FINRA’s Disciplinary Actions February 2021); Timothy Pandekakes and Paul Zakhary were suspended and fined thousands for recommending unsuitable exchange annuities (see FINRA’s Disciplinary Actions February 2021); and Wells Fargo Advisors Financial Network, LLC paid millions for failing to supervise recommendations to switch from annuities to investment company products to approximately 100 customers (see FINRA’s Disciplinary Actions November 2020)

If you suffered losses or incurred high fees from the sale of annuities, we are here to help. RIK’s investment fraud lawyers have extensive experience successfully representing customers in annuity-related cases. Please contact us to discuss the opportunity to recover for your financial losses.

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