When examining the risks of variable annuities, one finds that this type of investment comes with early withdrawal penalties, lack of liquidity, and high annual costs. This type of investment is inadvisable for many investors, particularly for retirees. If your financial advisor has recommended variable annuities, you’ll want to learn more about them and be careful about purchasing.
If you’ve lost money in variable annuities or another type of investment due to a financial consultant’s unsuitable recommendation, an Ohio financial advisor negligence lawyer can help. A trusted attorney can pursue compensation for your losses and offer more information regarding the risks of variable annuities.
What Is a Variable Annuity?
If you are considering investing in variable annuities or your financial advisor has recommended the investment, it’s important to learn and make an informed decision. Understanding how this type of investment works, as well as its pros and cons, can help you invest your money safely.
A variable annuity is a type of investment product offered by insurance companies that allows investors to allocate their funds into various sub-accounts. The returns you receive from a variable annuity depend on the performance of the investments you choose. As a result, the payouts you receive can vary.Â
While variable annuities offer the potential for higher returns, they come with greater risk than other investment strategies. If you lost money in variable annuities because your financial consultant recommended them despite the fact that you’re a risk-averse investor, you may have grounds for a legal claim.
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Understanding the Risks of Variable Annuities
When you examine the risks of variable annuities, it becomes clear that this type of investment has a handful of downsides. These risks make variable annuities an inadvisable option for investors who are looking for a safe investment without extra costs.
Consider the following risks and disadvantages of variable annuities before purchasing them:
- Market Risk: When you purchase a variable annuity, its value will be tied to the performance of stocks, bonds, or another underlying investment. If these investments perform poorly, the annuity’s value will decrease, leading to financial losses.
- High Fees: Variable annuities can come with expensive management fees, mortality and expense charges, and optional rider fees. Paying fee after fee can take away from your gains and make this type of investment unworthwhile.Â
- Surrender Charges: Making an early withdrawal from a variable annuity can result in a significant surrender charge. This can lead to serious financial losses if you have unexpected expenses that require you to make an early withdrawal.
These are just a few of the risks of variable annuities. If you are considering investing in variable annuities, it’s best to do your research and find out if this investment strategy aligns with your goals. If you’ve taken on financial losses due to bad investment advice, an unsuitability claim lawyer can help you seek damages.
Investing in Variable Annuities Can Be Complicated
Investing in variable annuities can be complex and confusing, especially if you are new to investing. If you aren’t working with an experienced financial advisor who you trust, this type of investment might not be for you. Due to the complexity of this investment, there’s a lot of room for fraud and misconduct.Â
If you suspect your financial advisor is managing your investment in a fraudulent or negligent way, you’ll want to speak with a legal representative. A lawyer can assess your situation, determine if fraud is at play, and take legal action on your behalf.
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How an Attorney Can Help You Recover Losses From Variable Annuities
As you know now, there are several downsides and risks to variable annuities. As a result, financial advisors shouldn’t be recommending these investments to clients who are risk-averse or whose goals don’t align with variable annuities.
If you’ve lost money in variable annuities because your financial consultant made a poor recommendation, you may have grounds for a claim. An attorney can investigate your financial losses and construct a robust arbitration claim on your behalf.
During arbitration, you and your lawyer will meet with the offending financial advisor and a third-party arbitrator. The arbitrator will hear both sides of the dispute, review evidence, and make a final decision. If your case is successful, you could receive compensation for your losses and additional damages.
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Examining the risks of variable annuities can help you avoid making mistakes with your investments. However, it can be difficult to avoid financial losses when you have an advisor who fails to prioritize your best interests. If your financial consultant has pushed a bad recommendation on you or committed fraud, an attorney can help.
At Meyer Wilson, we have over 75 years of combined experience pursuing compensation from dishonest financial advisors. Our firm has recovered over $350 million for investors like yourself. Contact us today to schedule a free consultation with an experienced attorney.
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