A recent investigation conducted by a U.S. Senator’s office revealed that companies that represent billions in annuity sales offer kickbacks to sales agents and marketing organizations in exchange for selling their company’s products.
Some regulations have been introduced in order to limit these perks, but they are vastly inadequate, as they still leave room for loopholes that allow companies to continue to offer these kickbacks. Disclosing these payments to consumers is also lacking, according to the investigation.
The current rules:
- Do not explicitly prohibit non-cash compensation in exchange for fixed income annuities
- Allow companies to incentivize with expensive vacations, which they promote at “sales conventions”
- Allow companies to compensate third-party marketing companies
- Allow companies to incentivize with non-cash products in exchange for the promotion of that company’s products
When sales agents and marketing agencies get perks in exchange for recommending annuities, it can result in investors receiving bad recommendations. For example, many investors who are nearing or at retirement age can be sold annuities even though that particular type of investment may not match their current financial situation or goals.
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Annuity companies have found holes in state and federal regulations that allow them to continue offering things like vacation giveaways, iPads, and gift cards in exchange for selling their products. These incentives create a conflict of interest, to which The Department of Labor has responded with a proposed rule that would aim to eliminate such practices in the annuities industry.
The new law would prohibit investment advisers from recommending inferior products solely because they would get a kickback out of it. It would also require investment advisers to disclose any such conflicts of interest to their customers clearly and prominently.
If your investment adviser recommended an unsuitable annuity and you lost money as a result, we invite you to contact Meyer Wilson. Our law firm helps investors recover losses caused by investment misconduct. We provide free consultations, so get in touch with us today to learn your legal rights and options.
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