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Feb 9, 2018 by |

Santa Clara County and California Financial Elder Abuse and Annuity Attorneys: Annuity Replacements


Beware of Surrenders, Churns, Replacements, Twists, and Switches

Whenever an insurance salesman or financial advisor recommends you replace or exchange an annuity you own, be sure to get a second opinion. Annuity replacements (also known as churns, exchanges, twists, or switches) often result in surrender penalties, new commissions, and possible tax liability.  The salesman may be only “churning” or “twisting” your account, similar to the stock broker who buys and sells the same stocks over and over in a brokerage account.  Churning is prohibited by the Financial Industry Regulatory Authority (FINRA), the independent agency that regulates America’s financial industry.  Despite the FINRA prohibition, churning still occurs in the annuity industry.

The Santa Clara County and California annuity and financial elder abuse attorneys at Evans Law Firm Inc. represent clients who have suffered surrender charges and tax liabilities[1] as a result of improper annuity replacements or exchanges by commission-driven brokers.  If you or a loved one has been a victim of securities fraud or financial elder abuse, or are headed toward a FINRA arbitration with your broker or financial advisor, contact the Santa Clara County and California annuity and financial elder abuse attorneys at the Evans Law Firm at (415) 441-8669, and we can help. 

Commission-Driven Recommendations

Since producing agents and brokers receive big commissions on new sales, in a replacement or churn the broker induces a client to replace or exchange an existing product for a new one. The broker then receives a commission on the “sale” of the new or replacement product.  Some replacements qualify as so-called “1035 exchanges” where the IRS does not tax the surrender of the existing policy as long as that policy is exchanged for a similar one and the policyholder does not withdraw cash from the exchange.  A 1035 exchange requires extra paperwork and can result in delays as far as commission payments are concerned and brokers often do not elect 1035 treatment so that their commission is paid sooner.  Instead the agent “conceals” the replacement and the application is treated as a new purchase application.

In two fairly recent enforcement cases, FINRA discovered that the clients had been put into new, unsuitable annuities with higher fees, had incurred large surrender charges on surrender of their existing policies, and had incurred tax liabilities because the brokers had not elected 1035 treatment for the exchanges. FINRA suspended the two brokers responsible and ordered one to disgorge nearly $186,000 in commissions he had been paid on the abusive transactions.  Commissions on annuities and life insurance are always sizeable and are paid up front.  In any insurance purchase you consider remember that it will take a long time for you to earn back your money paid out for commissions.  FINRA is keeping a close eye on replacement activity and you should too.

Contact Us

If you or a loved one has been a victim of securities fraud or financial elder abuse contact Santa Clara County and California annuity and financial elder abuse attorney Ingrid Evans and the other attorneys at the Evans Law Firm today at (415) 441-8669, or by email at <a href=””></a>. Our attorneys have experience with complex securities cases, FINRA arbitrations, and mediations; and complicated financial contracts and large insurance companies.  We can help guide your case through a jury trial, FINRA arbitration, or toward an equitable settlement.  We also handle cases involving physical and financial elder abuse, other types of qui tam and whistleblower cases, nursing home abuse, whole life insurance and universal life insurance, and indexed, variable, and fixed annuities.

Some of the major annuity and life insurance providers in Santa Clara County and throughout California are listed below. We are not in any way suggesting that these carriers have been involved in any wrongdoing whatsoever.  Rather, the list is provided solely for our readers’ reference.

Allianz Life Insurance Company of North America

Allstate Life Insurance Company

American Equity Investment Life Holding Company

American General Life Insurance Company

American National Life Insurance Company

Ameriprise Financial/RiverSource Life Insurance Company

Athene Annuity and Life Company

AXA Equitable Life Insurance Company

Bankers Life Insurance and Casualty Company

EquiTrust Life Insurance Company

Fidelity & Guaranty Life Insurance Company

Forethought Life Insurance Company/Global Atlantic Financial Group

Genworth Life Insurance Company

Global Atlantic Financial Group/Forethought Life Insurance Company

Guardian Life Insurance Company

Guggenheim Partners/Security Benefit Life Insurance Company

ING USA Annuity and Life Insurance Company

Jackson National Life Insurance Company

John Hancock Life Insurance Company

Life Insurance of the SouthWest/National Life Group

Lincoln Financial Group/The Lincoln National Life Insurance Company

MassMutual/Massachusetts Mutual Life Insurance Company

Metlife/Metropolitan Life Insurance Company

Midland National Life Insurance Company

Mutual of Omaha/United of Omaha Life Insurance Company

National Life Group/Life Insurance of the SouthWest

New York Life Insurance Company

Northwestern Mutual Life Insurance Company

Pacific Life Insurance Company

Principal Life Insurance Company

Pruco/Prudential Life Insurance Company

RiverSource Life Insurance Company/Ameriprise Financial

Security Benefit Life Insurance Company/Guggenheim Partners

Transamerica Life Insurance Company

United of Omaha Life Insurance Company/Mutual of Omaha

Unum Life Insurance Company of America

Voya/Reliastar Life Insurance Company

[1] Evans Law Firm Inc. does not give tax advice but our lawyers represent clients who have suffered tax losses on annuity surrenders, replacements, and other transactions.

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