InvestmentNews has reported that brokerage firm Voya Financial Advisors (Voya) changed its variable annuity selling policies by restricting the sale of contracts known as “L share” annuity contracts if the contract include riders. The change comes due to increasing pressure from regulators concerned about the products’ suitability for investors. The firm has 2,200 brokers that would be effected by the new policy.
Voya stated in the article that “We feel strongly that it is in the best interests of our advisers and their clients to make this change to Voya Financial Advisors’ suitability policy.” The firm stated that the product has been scraped “in order to best serve the retirement readiness and long-term planning needs of our customers.”
L-shares charged higher ongoing fees in exchange for a shorter time frame for withdraw penalties, known as surrender charges. However, the L-shares when combined with riders that come with even extra costs that make the product even more expensive. The riders are added for a variety of reasons including to reduce market risk or modify death benefits.
The move came after Voya received guidance from the Financial Industry Regulatory Authority Inc. (FINRA) that L-share variable annuities with riders are presumptively unsuitable. Part of FINRA’s concern is that L-share variable annuities for clients with an expressed long-term time horizon would be unsuitable.
Variable annuities are complex financial and insurance products. In fact, recently the Securities and Exchange Commission (SEC) released a publication entitled: Variable Annuities: What You Should Know encouraging investors to ask questions about the variable annuity before investing. Essentially, a variable annuity is a contract with an insurance company under which the insurer agrees to make periodic payments to you. The investor chooses the investments made in the annuity and value of your variable annuity will vary depending on the performance of the investment options chosen. The primary benefits of variable annuities are the death benefit and tax deferment of investment gains.
However, variable annuities are often unsuitable for investors because the benefits of variable annuities are often outweighed by the terms of the contract that include exorbitant expenses such as surrender charges, mortality and expense charges, management fees, market-related risks, and rider costs.
Investors who have suffered losses may be able recover their losses through securities arbitration. The attorneys at Gana Weinstein LLP are experienced in representing investors who have been inappropriately placed in variable annuities. Our consultations are free of charge and the firm is only compensated if you recover.