Annuity Expert Witness Comments on Unethical Sales Practices by Financial Adviser


Annuity Expert WitnessThis case involves Plaintiffs who were allegedly taken advantage of by a financial adviser based in Georgia. The Defendant is the president of his own firm, which sold various annuities and other investment products to the Plaintiff trust. The three Plaintiffs involved in the trust were all of considerable age.  The Defendant was both a broker and agent of the Defendant corporation, as well as a representative of a larger life insurance company. The Defendant sold the Plaintiffs investment products through the Defendant corporation despite his knowledge that those entities were not in good standing in two states. It is alleged the Defendant sold the Plaintiffs numerous unsuitable investment products, including deferred annuities that matured after their actuarial life expectancy. The defendants made fraudulent misrepresentations and omissions concerning those investments, including but not limited to, disclosing the risks of purchasing deferred annuities that mature after the actuary life expediencies. It is alleged the defendants also engaged in the flipping and churning of plaintiffs annuities and that they profited by commission on each new annuity sale.

Question(s) For Expert Witness

  • 1. Do you have extensive knowledge of the flipping or churning of annuities?
  • 2. Are you familiar with the tactics that brokers use in order to profit by commission on each new annuity sale?

Expert Witness Response E-008960

I am quite familiar with the tactics of flipping and churning annuities. I had a client myself who was victimized by an annuity salesman – I assisted him in finding representation and he was eventually compensated. Additionally, depending on the particular contract in question, there may or may not be charge-backs to the salesman when an annuity is surrendered in the first 12 months. If a broker is pursuing a strategy of churning annuities, they will sell one, wait out the chargeback period, and find a good sales story to replace it with another annuity. Each time, the broker is paid a new commission that can range from 2% or 3%, or potentially as high as 10%. Again, depending on the contract in question, the customer may be assessed a surrender charge for surrendering a contract. Surrender charges will range from 2% to as high as 15%.

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