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Dec 16, 2016 by |

Financial Advisor Faces Hefty Fine

Investment News reported recently about a substantial fine imposed on Valic Financial Advisors Inc.  (VFA).  VFA is owned by subsidiaries of American International Group, Inc., which is a major insurance provider selling life insurance and annuities, among other products. There are more than 1,350 financial advisers who work for VFA who were incentivized by the VFA payment structure to recommend certain investments to consumers. The fine for this unlawful compensation structure was levied by the Financial Industry Regulatory Authority, Inc. (FINRA) as a result of the fact that the compensation structure had created a conflict of interest.

This case is just one of many in which financial advisors and insurers were engaged in unlawful or unethical business practices. It is vulnerable investors (especially seniors) who suffer when investment advice is based on the best interests of advisors or insurers instead of based on the client’s best interests. Attorney Ingrid Evans and the team at the Evans Law Firm, Inc. is prepared to take on insurers and advisors when this type of wrongdoing occurs.

For more than 15 years, we have helped to bring class actions and individual claims against some of the biggest insurers and advising firms to get justice for investors who lost their hard-earned money.  When you have been affected by bad business practices, call a San Francisco financial elder abuse attorney at our firm to discover more about our strong history of fighting for investors and to discover how we can help in your situation.

Financial Advisors Fined for Conflicts of Interest

According to Investment News, a conflict of interest was created by the compensation structure at VFA that was offered to employees between October 2011 and October 2014. The compensation structure created a financial incentive for registered representatives to suggest their clients move funds into a particular investment type.

The representatives were encouraged to convince clients to transfer their money from Valic variable annuities to a Valic fixed annuity index or to a fee-based platform. In addition to rewarding advisors who convinced clients to make this move, registered representatives were also prohibited from receiving compensation if they moved customers from a Valic product to any non-Valic product. This included variable annuities, as well as mutual funds.

Advisors responded to the financial incentives that were created. They advised their clients to move to the fee-based advisor platform or to move funds into the fixed annuity. There was a “significant” volume of assets that ended up moving from variable annuities to the company’s preferred advisory platform. There was also a 610 percent increase in investments in Valic’s proprietary fixed annuity once the financial incentive was created to get financial advisors and broker-dealers to convince clients to move money into the fixed annuity products.

Financial advisors should be making recommendations based on what is best for the investor, especially if the investor is a senior. Insurers also should not be pushing the marketing of inappropriate investment products to vulnerable older populations. Yet, advisors and insurers do the wrong thing all the time — this is just the latest clear-cut example of it.

Evans Law Firm, Inc. is dedicated to holding insurers and advisors accountable for behavior like this. When you want to take action based on a financial advisor or insurer’s wrongdoing, you need a skilled financial elder abuse attorney with experience. Our long list of major cases and our testimonials from satisfied clients shows we are effective at helping to hold advisors accountable for losses. Give us a call at 415-441-8669 today or contact us online to find out how we can help.

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