FINRA and its predecessor, The National Association of Securities Dealers, has undertaken various enforcement actions to alert the brokerage industry and the investing public that generally, the exchange or replacement of Insurance or Annuity contracts is NOT a good idea. The reasons include the following:
- New charges may be imposed with the new contract, or it may increase the time for which surrender charge applies.
- The charges may be higher under the new contract.
- The costly features in the new contracts may not be needed.
- The sales representative will be getting paid a higher commission on a variable annuity sale than on other investments.
Industry Rules require that before a financial adviser recommends the purchase, sale, or exchange of any variable annuity, the adviser must have reasonable grounds to believe that the recommendation is suitable for this customer in light of his/her needs. Switching from one variable annuity to another that does not improve the customer’s position but simply generates another commission for the broker, is prohibited.
The broker or advisor must be certain he has made an adequate effort to obtain complete customer information concerning the customer’s need for liquidity and retirement income. A similar effort must be made when recommending a variable life insurance policy.
For more information about how to recover assets lost due to misconduct by a financial advisor or brokerage firm, contact Attorney Howard Rosenfield at 860-677-4334 or email firstname.lastname@example.org. Attorney Rosenfield is also available to speak on specific subject matter topics related to investment fraud.