L-share Annuity – Investment Losses
An L-Share Annuity is a common share class offered by a variable annuity that has a short surrender period but with higher administrative costs.
Typically, with an L-Share annuity, you will pay a higher mortality, expense and administration (MEA) fee and likely get a lower return. A typical Standard Variable Annuity is a 7-year surrender product with a 1.15% MEA fee. This is the MEA fee for the typical 7-year surrender variable annuity recommended through Annuity FYI (without a bonus).
A Variable Annuity L-Share is the exact same product, however it has a 3-year surrender and a 1.65% MEA Investors pay a premium in terms of MEA fees for the privilege of having a surrender period that is 3-4 years less than the less expensive, standard product.
Due to the higher MEA fees on the L-Share, your account value could be quite a bit less than the 7-year surrender product, which is otherwise exactly the same.
Brokerage firms may argue that the shorter surrender period of L shares could benefit clients by allowing them to switch more quickly into a better product if one comes along.
Unfortunately, some financial advisors may recommend L-share annuities because they pay higher commissions than standard annuities. If you intended to hold onto your annuity long term, and your financial advisor was aware of this at the time of purchase, it is likely that the L-Share annuity was inappropriate for your investment objectives.
If it can be proved that a financial advisor recommended a product for the sole purpose of generating a higher commission, he or she may be in violation of securities regulations.
FINRA fines for L-share annuity Supervisory Issues
Recently FINRA has censured and fined several broker-dealers for supervisory failures regarding L-share contracts.
Next Financial Group was censured and fined $750,000 due to alleged supervisory failures related to L-share contracts. Last month, Ameritas Investment Corp. agreed to pay a $180,000 fine in regards to these L-share annuities.
Additionally, Hornor, Townsend & Kent, agreed in November to pay a $275,000 fine due in part to its alleged L-share supervisory deficiencies.
If you have questions about an L-Share annuity or other annuity that you were sold and would like to speak to a securities attorney, please call The White Law Group at 888-637-5510.
The White Law Group, LLC is a national securities fraud, securities arbitration, investor protection, and securities regulation/compliance law firm with offices in Chicago, Illinois and Vero Beach, Florida.
For more information on The White Law Group, please visit our website at http://www.whitesecuritieslaw.com