Variable Life Insurance
We all trust our brokers to ensure that our money is being invested in the most prudent manner. For many of us who lack direct experience with understanding investment opportunities and strategies, we have no choice but to put our trust and financial well-being in the hands of a broker. Although many brokers take their duties quite seriously, there are some brokers and firms that take advantage of clients’ trust and make investments based on the financial gains that will result for the broker or the firm—not the client. Los Angeles securities law lawyer Steve A. Buchwalter has over 20 years of experience providing legal counsel to investors who have been burned by their brokers. He is ready to put hisexperience to use for you.What is a Variable Life Insurance Investment?
Variable life insurance, which is similar in structure to a variable annuity, is a complicated investment that can restrict investors from accessing or transferring funds for several years. Numerous investors who purchase variable life insurancequickly find that the broker who advised them made certain misrepresentations about the investment. One of the most common misconceptions that brokers use to encourage investors to purchase variable annuities is the false belief that since these devices are technically a type of insurance, the principal and income are completely secure.
They are also represented as having similar returns as the stock market even though gains are usually capped (lowering returns to investors) and dividends (which account for almost 40% of the market’s return) aren’t credited to the investor (again, lowering returns to the investor).
In reality, variable life insuranceprovide expensive features that are usually not necessary and can reduce the investor’s returns. These charges include administrative fees, mortality and expense risk charges, surrender charges, and investment advising fees. Investors who lack experience are particularly susceptible to believing that variable life insurance is a low-risk investment. Variable life insurance is not an investment and many securities regulators prohibit selling these policies as investments.
Also, variable life insurance is particularly inappropriate for certain types of investors, such as the elderly or individuals who want to be able to access their money. Variable life insurance poses substantially higher surrender charges and long holding periods, tying up the investor’s funds for as long as eight years--or more in some cases.Holding a Broker Accountable for Negligence or Misconduct
There are some brokers and financial advisors, especially those who are employed by a bank, who strongly encourage their clients to invest in variable life insurance. These investment tools may be preferred bybrokers because they typically pay significantly higher sales commissions than traditional investment options like mutual funds, bonds, stocks, or other types of life insurance. This creates a direct conflict of interest between the broker and the client, whose financial goals may not be best served by investing in variable life insurance. Some brokers may even unnecessarily advise investors to transfer their funds between variable accounts (e.g., annuities and life insurance) just to generate more commissions.
In general, a broker owes his or her investor client a high level of care in rendering financial advice. Courts often characterize an investor and broker as having a fiduciary relationship. If a broker fails to adhere to this duty, the investor usually is entitled to receive compensation that can total the difference between the actual value of the investor’s accounts and the estimated value of what the investor’s account would have been worth without the broker’s breach.Discuss a Securities Law Claim with a Los Angeles Lawyer
If you believe that your financial advisor has violated the fiduciary duty toward you, experienced Los Angeles securities law attorney Steve A. Buchwalter can advise you. He has provided legal guidance to investors who have been burned by their brokers in Beverly Hills, Pasadena, Newport Beach, Irvine, Santa Barbara, and other cities throughout Los Angeles, Orange, and Ventura Counties. Call broker fraud attorney Steve A. Buchwalter at 1-818-501-8987 or contact us online to set up a free consultation.