Examining the risks of indexed annuities will show you that they come with expensive early withdrawal fees, making them unsuitable for investors who plan to make withdrawals in the short term. Understanding these risks can help you determine if indexed annuities are right for you.
If you’ve lost money investing in indexed annuities and weren’t told about the risks of this investment type, an Ohio financial advisor negligence lawyer can help you. They’ll provide the information you need to pursue compensation for the losses you’ve incurred.
What Are Indexed Annuities?
Indexed annuities, or equity-indexed annuities (EIA), are contracts with insurance providers that offer periodic payments in exchange for upfront payment or premium. This type of investment is tied to a securities market index, like the Dow Jones Industrial Average or S&P 500.
If the index that the annuity is linked to goes up, the annuity’s interest rate will go up as well. If the index goes down, the interest rate will follow. In recent years, indexed annuities have become increasingly popular. Those who sell them, usually insurance agents, can make a significant commission off each sale.Â
As a result, an insurance agent or investment consultant may try to sell their client on an indexed annuity, even if it isn’t the best investment strategy for that particular individual. If you’ve lost money in indexed annuities due to an unsuitable recommendation, you’ll want to hire an unsuitability claims lawyer to help you seek remedies.Â
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The Risks of Indexed Annuities
It’s important to examine the risks of indexed annuities before investing in them. If an insurance agent or advisor has recommended this type of investment, consider the following downsides before purchasing an indexed annuity contract:
- High fees: One of the main downsides of investing in an indexed annuity without examining the risks is having to pay high fees. Indexed annuities can come with 10% tax penalties, 15% to 20% surrender charges, and commission fees up to 13%.
- Complicated investment: Indexed annuities are a highly complicated investment. In fact, some of the agents who sell them don’t fully understand them, which can lead to serious financial losses for the client or investor.
- Lack of regulation: Indexed annuities are also risky because they aren’t regulated as securities. The Securities Exchange Act of 1934 regulates a number of different securities. Since indexed annuities are typically not considered securities under federal law, investing in them is highly inadvisable for risk-averse investors.
Failing to examine the risks of indexed annuities before investing in them can lead to serious losses. If an advisor has sold you on this type of investment without explaining the risks, you could have grounds for a legal claim against them. Reach out to an investment fraud lawyer today to learn more about your options.Â
How a Lawyer Can Help You Recover Losses From Indexed Annuities
If you’ve taken on financial losses because an advisor invested your money in indexed annuities despite you being a risk-averse investor, you could take legal action against them. That said, filing a claim and pursuing compensation can be incredibly difficult.
To give yourself the best chance possible at receiving a fair settlement, you’ll want to work with an experienced attorney. A lawyer can file an arbitration claim on your behalf and fight for the remedies you need to replace your losses and move forward with future investments.
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Understanding the Arbitration Process
To recover the losses you’ve taken on, your attorney will have to bring your case to arbitration. Arbitration is a process where you and your financial advisor will meet with a third-party, unbiased arbitrator. The Arbitrator will hear both sides of the dispute and will come to a resolution.Â
While arbitration may sound like a straightforward process, it can be complicated for those who don’t have a legal background. And, rest assured that your formal financial advisor will be represented by sophisticated legal counsel. That’s why it’s of utmost importance that you hire an experienced representative to make your case.Â
A lawyer can investigate your financial losses, gather evidence, and build a strong argument as to why you deserve a favorable outcome. No matter how complex your situation is or how great your losses are, you can count on a lawyer to represent your best interests during arbitration or a civil trial.
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Examining the risks of indexed annuities is critical if you want to invest safely. That said, some advisors pressure clients into buying these investments because they have high commission fees. If you’ve lost money in indexed annuities due to broker misconduct or fraud, you have the right to seek compensation and justice.
At Meyer Wilson, we understand how frustrating and financially devastating it can be to incur losses due to a negligent or dishonest advisor. Our firm has over 75 years of combined experience handling cases like yours, and we’re eager to put our skills to work for you. Contact us today to schedule a free consultation with a dedicated lawyer and get started on your case.Â
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