What Did Your Brokerage Firm or Investment Adviser Do Wrong With GWG
Published On: October 2, 2020

Chicago-based Stoltmann Law Offices continues to investigate the Vida Longevity Fund. Managed by Vida Capital, the limited partnership invests in annuities and life- and structured settlements. It’s a complex product that has mostly invested in insurance products.

Vida managers had originally promised investors a 10% to 14% annualized return, although in recent years, the fund has been posting negative returns. Managers may have mispresented the investments and risk profile of the vehicle, which is operated as a hedge fund.

Like many investments promising high returns, Vida seemed appealing at a time when savings rates are near rock bottom, especially for federally guaranteed accounts. That’s why companies offering “alternative” products with “non-correlated” strategies have attracted billions in investor dollars. They promise high returns with seemingly little risk.

Actual risk profiles of complex vehicles like life settlement funds may be buried in fund documents and not disclosed by brokers. For example, life settlement funds invest in life insurance policies sold by the policyholders, who sell their plans at a fraction of the “death benefit.” The original holders of these policies sell their interest in the plans to gain instant cash from third parties like Vida, who then market them to investors.

“Life settlements are also a gamble for investors,” warns Eleanor Laise in Kiplingers. “If the insured lives much longer than expected, the investor’s return will plunge. “In one case, a firm allegedly told customers that life settlements were `guaranteed’ and as safe as certificates of deposit, while in fact life settlements offer no guarantees.”

In addition to the often-hidden risks, investing in life settlement funds is expensive. Fees range up to 2% annually, which is onerous when you consider you can invest in low-cost exchange-traded funds for as little as 0.02% in annual management expenses. You can also buy term life insurance directly without paying a commission.

Several lawsuits have been filed in connection with life settlement funds, which allege that promoters misled investors. In a class-action lawsuit filed last year, investors sued Conestoga Settlement Services, LLC.  Conestoga’s “alleged investment scheme was centered around purchasing life insurance policies—typically from elderly or terminally ill insureds—for less than the policies were worth and selling interests in the policies to investors such as the plaintiff,” according to the suit.

The risk of these investments, according to the Conestoga suit, “is that when insureds would outlive their life expectancies, Conestoga would be required to continue paying their insurance premiums for longer than anticipated.” Conestoga represented that the investments were “safe,” “simple,” “predictable,” and “designed to always win.”

The issue of exaggerated promised returns with life settlement funds will continue to surface as more Americans face pressures to cash in their life policies due to the COVID pandemic and for other reasons. Just keep in mind that there are always risks and high expenses involved in these funds, which broker-advisors may not fully disclose to you.

Have you invested with brokers or advisors who have sold you vehicles such as life settlement funds?  FINRA and the SEC have strict rules on disclosing risk profiles on all investments sold by brokers and investment advisers. Firms are also legally required by FINRA to monitor and supervise what their brokers are selling – their investments must be vetted and authorized by the firms – and have an obligation to investors to fully reveal true risk and return information about

If you invested with a broker-advisor and lost money as a result, you may have a claim to pursue through FINRA Arbitration. Please contact Stoltmann Law Offices, P.C. at 312-332-4200 for a free, no obligation consultation with a securities attorney. Stoltmann Law Offices is a contingency fee law firm which means we do not get paid until you do!


The posting on this site are mere OPINIONS and NOT statements of fact in any way whatsoever. The information should not be relied upon and there have been no findings made against the firms or individuals referenced on this site. In addition, this Blog is made available for educational purposes only and incorporates information from the web as well as to give you general information and a general understanding of the law, not to provide specific legal advice. By using this blog site you understand that there is no attorney client relationship between you and Stoltmann Law Offices (161 N Clark Street 16th Floor Chicago, IL 60601). The Blog opinions should not be used as a substitute for competent legal advice from a licensed professional attorney in your state.


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