Investing for retirement is important, but it’s not always easy to know what your best option is. If you’ve chosen a variable annuity (VA), it’s especially important to investigate your investment options.
MetLife Securities, Inc. (MSI) was recently fined $25 million by the Financial Industry Regulatory Authority (FINRA) for allegedly making misrepresentations and omissions on VA replacement applications for tens of thousands of customers.
Replacing one VA with another involves a comparison of the features of each security, and VA replacements are subject to regulatory requirements to ensure complete and accurate cost comparisons by a firm’s representatives.
FINRA alleged that MSI misrepresented at least one material fact about the costs and guarantees of customer’s previous VA contracts in 72% of the firm approved VA replacement applications. According to FINRA, MSI allegedly:
What is a Variable Annuity?
Generally, a VA is a tax-deferred retirement vehicle that allows you to choose from a selection of investments to be paid back in retirement. The amount paid back is determined by the performance of the chosen investments, compared to a fixed annuity, which provides a guaranteed payout.
VAs may include a variety of fees when you invest in them, including surrender charges which you owe if you withdraw money from the annuity before a specified period; underlying fund expenses which relate to investment options; administrative fees for recordkeeping and other administrative expenses; mortality and expense risk charges which are charged by the insurance company for the insurance risk it takes with the contract; and charges for special features like an increased death benefit or guaranteed minimum income benefit.
Should I Exchange my Variable Annuity?
Because of the growth potential, VAs are more likely than a fixed annuity to outpace inflation, and can be a way to boost savings for retirement. Taking full advantage of the potential a VA provides requires due diligence and comparing such things as fund strategy, investment risk, diversification, and other important factors.
What to Look Out for When Exchanging
Be careful when considering replacement VAs, and be on the lookout for deceptive offers: