When FINRA published its 2017 Risk Control Assessment Glossary, it added a term for annuities with structured or buffered options, also referred to as "Structured Annuities" or "Buffered Annuities," which are annuities with embedded options that can protect against downside risk at the cost of limiting upside potential and placing a premium of principal protection rather than rapid accumulation.
In sum, the product is highly complex and uses structured products (as opposed to mutual funds, for instance) as the underlying investment.
This year, complaints are up concerning buffer annuities, described by InvestmentNews as a "sort of cross between indexed and variable annuities." Said one financial professional, "I can't think of two more odious products than a combination of a variable annuity with a structured product."
He went on to describe the pair as "the landing of the Hindenburg on the deck of the Titanic."
Because the product is so complex, the increased volume of complaints concerning buffer or structured annuities has alleged misrepresentations and omissions of material fact as pertains to the product's increased risk.
Additional features, such as lock-up periods and surrender charges, are also the subject of complaints alleging that brokers failed to disclose these key penalties and drawbacks.
Suitability remains a concern with buffer annuities, as these complex products carry risks that may not be suitable or appropriate for investors with more conservative risk tolerances or income-oriented investment objectives.
For instance, Kevin Loffredi, who is a product manager for annuity solutions at Morningstar Inc., admitted that buffer annuities are only appropriate in "niche cirumstances."
Early buffer annuities include AXA Equitable Life Insurance Co.'s Structured Capital Strategies, Allianz Life Insurance Co.'s Index Advantage, and MetLife Inc.'s Shield Level Selector, while firms from Voya Financial and CUNA Mutual to Brighthouse Financial and Members Life Insurance Co. have also jumped on board the buffer annuities train.
If you have invested with a firm, broker, or financial adviser who has sold you structured annuities or buffered annuities without disclosing all features, risk, and drawbacks of these new and complex products, or whose misrepresentations, omissions, or unsuitable recommendations to purchase a buffered annuity has proven harmful to your investments or interests, please call The Law Offices of Jonathan W. Evans & Associates at (800) 699-1881 for an investigation and consultation.