At Oakes & Fosher, we can explain why equity indexed annuities are not a good opportunity for investment. If you or someone you know was victimized by equity indexed annuities, contact Oakes & Fosher today for your free consultation.


Types of Annuities

Equity Indexed AnnuitiesAnnuities are investments designed for an individual’s retirement. Essentially, an investor pays scheduled premiums up until their retirement date—at which point they begin receiving scheduled distributions that act as their income during retirement.

Fixed Annuities

Think of a fixed annuity as a supercharged savings account. When you put your money into a fixed annuity, the company you invest with promises to pay you back your money plus interest. The fixed part means that the extra money you get is based on a set interest rate.

If you like knowing exactly how much money you’ll have coming in, you might like this choice. You can predict the payments you get in the future because they’re based on the money you put in and the agreed-upon interest rate.

Variable Annuities

Instead of getting a fixed amount of interest, the annuity will invest your money in stocks or bonds. Think of it as owning a tiny slice of different companies or loans.

Because the value of these investments can go up or down, the amount of money you get back can change, too. If the investments do well, you could get more money in your retirement. But if they don’t do as well, you might get less. This is for those who are okay with a bit of uncertainty and hope for the chance to get more money in return for taking some risks.

Both types of annuities have their place, depending on what you want. If you prefer knowing exactly what you’ll get, you may prefer a fixed annuity. But if you’re willing to take some chances for potentially more money, you may want a variable annuity. It’s all about what makes you feel most comfortable and secure about your future.

What Is an Equity Indexed Annuity?

An equity indexed annuity falls somewhere in between these two. This annuity proves alluring to some investors because it is pitched as a way to see profits on their annuity without actually exposing their principal to risk.

Essentially, the investor receives part of the interest they would have received for a normal fixed annuity. The annuity links the rest of the return to an equities index like the S&P 500. The investor can see returns based on how the index performs over the life of their annuity.

The Downside of Equity Indexed Annuities

The Downside of Equity Indexed AnnuitiesWhat investors are not told is how truly illiquid these products are—even more so than regular fixed and variable annuities. Cancellation fees for these annuities can range up to 20%. The length of the surrender period is longer than with a regular variable or fixed annuity. Because of this, these products should never be recommended to investors with higher liquidity needs.

Many securities brokers ignore their duty of acting in the client’s best interest and recommend equity indexed annuities because of the incredibly high commissions they receive when selling this product. Brokers can receive commissions as high as 10% of the premiums paid when an individual purchases an equity indexed annuity.

Most fixed annuity interest rates are just over 1-2% percent, and the complex crediting formula leads to only small returns in a healthy equity market. This makes it almost impossible for the investor to actually see a profit under anything other than an exceptional performance by the index over the life of the annuity.

Securities brokers utilize the complex nature of equity indexed annuities to push them onto unsuspecting investors. The truth is that these products are not suitable for any investor.

Individuals might save for retirement in better ways. If they are dead set on annuities, then fixed annuities offer greater safety regarding the fees and commissions charged to the investor.

What Can You Do if You Think Someone Misled You About Your Investment?

Securities Exchange Commission (SEC)When you invest your money, you’re hoping it will grow over time. But what happens if things don’t go as planned and you think you’ve been misled?

Thankfully, there are groups whose job is to protect investors like you. Let’s talk about two main protectors: the Securities and Exchange Commission (SEC) and the Financial Industry Regulatory Authority (FINRA).

How Does the SEC Help Investors?

The SEC makes sure everyone plays by the rules and treats each other fairly. If someone tries to cheat or lie to get your money, the SEC can step in. They can investigate companies and people who might not be telling the whole truth about an investment.

If the SEC finds out that someone did something wrong, they can make them pay fines, give back the money they took, or even go to court.

What About FINRA?

FINRA keeps an eye on how brokers and their companies behave. FINRA makes sure they’re treating investors right and not suggesting investments that aren’t a good fit for them.

If a broker doesn’t follow the rules, FINRA can give them fines or suspend their license to work and sometimes even expel them from the industry.

What Can You Do?

If you feel like you’ve been given bad advice or misled about an investment, you have the power to speak up.

Here’s what you can do:

  • Talk to Your Broker: Sometimes, a simple conversation can clear up misunderstandings.
  • Reach Out to the Firm: If talking to your broker doesn’t help, you can contact their company. They might have a way to solve your problem.
  • File a Complaint with FINRA or the SEC: If you’re still not happy, you can tell FINRA or the SEC about your issue. You can do this online. They’ll look into it and see if they need to take action.
  • Consider Arbitration or Mediation: These are ways to solve disputes without going to court. In arbitration, someone neutral listens to both sides and then decides what should happen. Mediation is more about trying to reach an agreement with the help of a mediator.

You’re not alone if you think something’s wrong with your investment. The SEC and FINRA are there to help make sure you’re treated fairly and to keep the investment world honest. Remember, it’s okay to ask questions. Seek help from the securities fraud attorneys at Oakes & Fosher if you need it!

Contact a Securities Fraud Attorney Today

Richard Fosher, Attorney for Equity Indexed Annuities

Equity Indexed Annuities Lawyer, Richard Fosher

Do you believe a securities broker may have misled you? Contact our securities fraud attorneys at Oakes & Fosher today. Call (314) 428-7600 or fill out our online contact form to get started.


Oakes & Fosher, LLC

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St. Louis, MO 63144