Variable Annuity Investment Fraud

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Skilled Lawyers Representing Victims of Variable Annuity Investment Fraud

Every victim of fraud perpetrated by a financial advisor deserves justice, which we work toward every day at Girard Bengali, APC. But when the victims are senior citizens, as they often are in variable annuity investment scams, the fraud seems even more egregious. Brokers and advisors can use variable annuities to manipulate investors, particularly older investors who are simply trying to secure their retirement income and who may not have become experienced investors over the years because they were hard at work in their own fields of expertise.

What Are Variable Annuities?

Variable annuities are contracts whose value varies over time based on the performance of the underlying mutual funds in which the annuity invests. Because the performance of the underlying funds varies, so does the income the variable annuity investor receives. This makes variable annuities different from fixed annuities, which provide a specific and guaranteed return. The potential advantage of variable annuities is that they could bring a higher return, if the underlying investments do well.

What Are Some Disadvantages of Variable Annuities?

While variable annuities can be advantageous for some investors, they are a poor choice for many. Here are some reasons why:

  • They can be illiquid due to their long-term nature.
  • There are often many hidden fees and expenses, including sales charges, early withdrawal penalties, surrender charges and more.
  • They offer fewer tax advantages than most 401(k)s.
  • They are usually high-commission products, which means brokers/advisors have an incentive to sell them to you even if they don’t truly fit your needs.

When a broker or advisor sells a variable annuity, he/she has a duty to inform the investor of the fee structure and the potential risks. If this duty is not met, and the investor sustains losses, it may be possible to hold the broker/advisor and their firm liable.

Examples of Variable Annuity Fraud

Variable annuity fraud takes several forms, including:

  • Churning/excessive trading: Because variable annuities earn brokers high commissions, they may try to sell new variable annuities or unnecessary replacements in order to generate extra income for him/herself or the firm.
  • Unsuitability: Because they are high risk and there are usually better alternatives, variable annuities are not suitable for many investors, but an advisor may push them aggressively anyway in violation of securities rules which require advisors to make sure investments are suitable for the investor’s unique needs.
  • Switching/twisting: This occurs when an advisor recommends that a client replace an annuity from one company with one from a different company without regard for need or a client’s financial situation, age, etc., in order to generate more income for him/herself.

Often, clients are manipulated into variable annuities when advisors use complicated jargon that the average person doesn’t understand. At other times, advisors fail to disclose the risks associated with variable annuities in order to sell more of them. These unethical sales methods are frequently used to defraud older investors out of their retirement savings.

Remember that financial advisors have a professional responsibility to provide you with investment advice that benefits you, not themselves. If your advisor steered you in the wrong direction to enrich him/herself and you lost money in a variable annuity as a result, you may have a valid legal claim to pursue either through arbitration or litigation. Girard Bengali, APC, handles these cases in all securities arbitration venues (FINRA, JAMS, AAA) and in state and federal courts.

Make an Appointment with an Investment Fraud Lawyer Today

The attorneys of Girard Bengali, APC, have decades of experience representing investors who have been cheated and defrauded. Our team is aggressive in pursuing justice for clients who have lost their savings in variable annuity scams. To schedule a meeting with one of our lawyers in Los Angeles, Newport Beach or San Francisco, please call 866-778-6821 or send us an email.

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