Expert Witness Blog
Variable annuities expert witnesses may testify on retirement annuities, wraparound annuities, variable annuities, and more. In VARIABLE ANNUITIES: A PRIMER FOR CLAIMANTS’ COUNSEL, John Duval Associates writes on annuities sales practices:
In conclusion, variable annuities are not completely devoid of beneficial features and are not unsuitable for everyone. Yet sales abuses abound, the features of variable annuities have often been misrepresented or not properly explained, and there usually are alternative choices for most investors with lower costs. If you are called upon to review a client matter involving possible misconduct in the sale of variable annuities, the following check lists might be helpful in determining whether the seller has engaged in sales abuses:
1. Age of purchasers. Above 70 is highly questionable.
2. Need for income. If the client’s original objective was for immediate income then the purchase of a variable annuity is definitely unsuitable.
3. Use of qualified funds. It is extremely difficult to justify the higher costs of variable annuities versus mutual funds when investment assets are already tax deferred, especially if income is needed soon via IRS 72-T.
4. High net worth purchasers? Variable annuities generally are not suitable.
5. “Bonus” contracts as a rationale for 1035 exchanges. The exchange is improper if it could result in surrender penalties, even if the bonus is greater than the penalty.
6. Performance “living” guarantees. These are really expensive and the access to the principal is denied if this option is actually exercised.
Read more: John Duval Associates.