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Avoid Variable Annuity Fraud

Financial planners, various finance regulatory institutions, and savvy investors are unanimous on one feature of financial fraud – the challenge to investors from increasingly complex and confusing investment frauds will be on the rise with time. Once a type of fraud is checked, another design will evolve. In 2004, the North American Securities Administrators Association’s (NASAA) made a survey of the state securities enforcement officials and regulators and came up with a few interesting finding and suggested relevant solutions. The then president of NASAA and director of the Connecticut Division of Securities, Ralph A. Lambiase, said that apart from the new fraudulent ways, “many of the age-old scams still work to cheat victims of their hard-earned savings as well. It pays to remember that if an investment opportunity sounds too good to be true, it usually is.”

Variable annuity is one important source of fraud, confirmed NASAA. They ranked, on the order of prevalence and seriousness, a series of scams and scandals as follows:

  • Ponzi Schemes
  • Senior Investment Fraud
  • Promissory Notes
  • Unscrupulous Broker/Dealer Representatives
  • Affinity Fraud
  • Insurance Agent Securities Fraud
  • Prime Bank/High-Yield Investment Schemes
  • Internet Fraud
  • Mutual Fund Business Practices
  • Variable Annuities

As the sales of variable annuities have increased dramatically over the past decade, so have the complaints and fraudulent cases involving them, found NASAA. Often the annuity contracts or promotions do not explicitly state the high surrender charges, high costs of offering the variable annuity benefits such as – tax-deferral and death benefits, and several other deciding clauses. Investors are misled with the promise of guaranteed returns whereas returns from variable annuity are actually not guaranteed and depends on the market reactions or volatility of the stock market.

It is advisable to remember that variable annuities often do not fare well for retirees, who usually benefit through a stable, secured, guaranteed return offered by a fixed or an equity-indexed annuity. Variable annuities may be suitable for investors who are willing to make fast bucks and have the financial strength to invest in risky propositions.

To avoid variable annuity fraud, NASAA and the experts at AnnuityLibrary.com suggests that you:

Study the annuity contract well before investing
Shop well and compare every aspect of every offer before settling for the final
Judge whether the annuity offers the benefits you need most
Control greed – annuities luring with huge returns may not actually guarantee returning a fixed minimum amount every period – which is what you actually need
While deciding on a financial planner or annuity dealer, interview at least three of them, obtain and study their registration and disciplinary history. Avoid those with a wrong history. Keep a note of all the conversations.
Are the potential planners sounding too polite? Warning!!
Avoid professionals with a record of disciplinary actions, negative arbitration decisions and/or civil litigation judgments

For advice, consult the team of annuity specialists at AnnuityLibrary.com. For more tips to avoid variable annuity frauds and annuity information, Click here or call 1-800-998-4056 toll-free.

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