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Beware of Annuity Exchanges!

Beware of Annuity Exchanges!

Beware of Annuity Exchanges

by Scott Starr

Annuities are some of the highest commission products available for an insurance agent or a stockbroker to sell.  Many times, annuities are more beneficial for the salesman than they are for the client.  That is because in addition to the hefty commissions the stockbroker or insurance agent earns for selling these investments, the annuities themselves frequently have very high expense ratios which come off the top before an owner receives any benefit.  Furthermore, annuities are typically extremely illiquid meaning that they are very difficult to get out of or cash in without paying a hefty penalty.  Because of these things, some insurance agents and stockbrokers have a tendency to sell annuities to investors who not only don’t need them, but worse cause the investor harm.

Because annuities pay such huge commissions to stockbrokers or insurance agents, some bad advisors or stockbrokers will convince their client to trade in, exchange, or switch the annuity the investor currently owns for a new and different annuity.  Many times, this is done for the purpose of enriching the bad stockbroker or insurance agent by giving him the opportunity to earn an additional commission.

An article recently published by Law360 entitled “FINRA Sanctions Fifth Third 6M on Variable Annuity Claims,” authored by Ed Beeson, notes that FINRA found that Fifth Third Securities Inc.’s stockbrokers and investment advisors were causing their customers to switch annuities “without a reasonable basis to believe these transactions were suitable for the customers.”  In other words, Fifth Third’s agents were enriching themselves at the expense of their clients.

Starr Austen & Miller has represented many clients who were sold bad and unsuitable annuities by unscrupulous insurance agents to stockbrokers.  Unfortunately, this conduct is not limited to Fifth Third.  If you and/or a loved one has experienced such an unfortunate turn of events, contact us for a free consultation to discuss whether you might have a case for broker or insurance agent misconduct.


The team of investment fraud lawyers at Starr Austen & Miller LLP fights for the protection of investors and handles cases involving securities arbitration misrepresentation, overconcentration, broker fraud, negligence and breach of trust.