We’ve represented dozens of Ameriprise (formerly known as American Express)and other brokerage firm clients in arbitration claims for unsuitable investment recommendations in variable annuities. Variable annuity sales have been a major source of arbitration claims and lawsuits against the firm and other brokerage firms as well in the last 10 years.
Few products pay as well as variable annuities do. Huge commissions often provide a compelling incentive for financial advisors to jam a variable annuity into a client’s account even when it might not be appropriate. Huge surrender charges and unsuitable, high risk sub-accounts many times lead to financial ruin for the victims who were recommended a variable annuity. Especially problematic are sales where significant concentrations of the client’s portfolio are in a variable annuity.
Ameriprise was recently drilled in a FINRA arbitration claim for variable annuity sales. A Minnesota client was recently awarded $470,000 for sales abuses by an Ameriprise financial advisor? Why? Variable annuity sales. The client was awarded part of his losses, attorney fees and sanctions.
The client alleged the broker sold $2 million of unsuitable and inappropriate variable annuities. A claim in the lawsuit was also made against the brokerage firm for not supervising. As is often the case with variable annuity claims, the client was over the age of 65 (77 years old).
There are very few times when a variable annuity is appropriate for a client who is over the age of 65. Many brokerage firms completely prohibit sales of variable annuities to those over the age of 65.
How did Ameriprise and the broker defend the lawsuit? As is usually the case in FINRA arbitration claims, the firm argued the client was sophisticated and received full disclosure on the risks of the variable annuity. Often in these sorts of cases, the firm will put the client on trial and argue the client should have known better. These defenses were mostly rejected in the arbitration claim.
FINRA arbitration claims involving variable annuities have soared in recent years. According to FINRA own statistics, variable annuity claims have increased from 47 in to 123 in 2009. We expect to see a similar surge in 2010.
Arbitration claims filed at FINRA is the weapon of choice for clients who have sustained losses in variable annuities. To determine if variable annuity losses can be recouped against Ameriprise or other brokerage firms, please contact us for a no obligation consultation.
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