1035 Exchange Process Simplified

Could an expedited 1035 Exchange process lead to variable annuity switching?

According to Investment News, annuity providers are finally moving into the 21st century in regards to the way a 1035 exchange will be processed.

A 1035 exchange is a tax-free transfer from one annuity contract to another, and is a typically complex and complicated process.

The exchange process can often take as long as one month to complete, but industry insiders say this process could take a week once advances from technology are implemented.

According to Investment News, there are four primary components in a process that will be expedited by technology: applications, signatures, fund settlement and transaction paperwork between insurers.

Although these improvements will reportedly give valuable benefits to insurers in the way of profitability, there may be added risks for investors. In speeding up the process of the 1035 Exchange, and increasing the volume of sales, it is likely to also increase the odds of account churning, or variable annuity switching.

According to the Financial Industry Regulatory Authority Inc. (FINRA), the regulator says that in recent exam findings it uncovered deficiencies around variable annuities, including recommendations relative to annuity exchanges.

Variable Annuity Switching

The overselling of such products is called variable annuity switching.  Variable Annuity Switching is, very similar to Churning, when a broker sells their client’s annuity to roll into another annuity for sole purpose of collecting the high commissions annuity pays out.

For a client to truly benefit from annuities, it is the long term that pays off. Brokers may not inform their clients that it is possible to have a surrender fee to be released early from an annuity.

Not only does the client lose the income that they were receiving from the annuity that was sold, now they have to pay a surrender fee just so the broker can make extra money for selling another annuity.

If you have been a victim of Variable Annuity switching, you have an option to contact a securities attorney and file a FINRA arbitration case against the brokerage firm that had the responsibility to supervise your broker while the switching occurred.

If you feel you have been a victim of Variable Annuity switching, the attorneys at The White Law Group may be able to help you recover your investment losses. Call toll free (888) 637-5510 for your no obligation consultation.

The White Law Group is a national securities arbitration, securities fraud, and investor protection law firm with offices in Chicago, Illinois and Vero Beach, Florida. You can also visit us on our website at www.whitesecuritieslaw.com.