I was reading an article this morning about how the Financial Industry Regulatory Authority (FINRA) has levied a $25 million fine (the largest ever) against MetLife for misleading investors and steering them into high-fee annuities that don't deliver the benefits they promised. It is the largest fine charged against a firm for misconduct involving variable annuities, and the second largest fine FINRA has imposed against a company in any matter.
"Variable annuities are complex and expensive products that are routinely pitched to vulnerable investors as a key component of their retirement planning," Brad Bennett, FINRA's chief of enforcement said in a statement. "Firms engaging in this business must ensure that the information on the costs and benefits of these products provided to customers is accurate and that their registered representatives are sufficiently trained to understand and explain the risks and complex features of what they are selling."
Of course, MetLife settled the case without admitting or denying any wrongdoing.
What I have outlined above is pretty compelling evidence that annuities are not likely the answer to most retirement planning conundrums.
- They typically carry high annual expenses;
- Many have long-term surrender charges;
- They turn capital gain income into higher-taxed, ordinary income; and
- Those that sell them often times do not represent the best interests of those they are selling them to (i.e. not a Fiduciary)
If you have questions about annuities and the potential role they may play in your retirement planning, please contact us. We are glad to help.