Retiree who bought variable annuity in IRA granted recovery of losses, attorneys’ fees and costs (NASD, 2003)
BellSouth retiree Gwen Sims was convinced by a financial planner, who conducted a retirement planning class she attended at a local university, to invest her pension assets in a variable annuity. Brian Smiley convinced a panel of NASD arbitrators to grant her an award of her losses, plus attorneys’ fees and costs. Evidence in the case established that the investment was unsuitable for a retiree’s rollover IRA. It was also established that the insurance company which issued the variable annuity was the parent of both the broker-dealer firm which sold it as well as the company which conducted the seminar. The seminar course book was notable for its subtle effort to paint variable annuities in the most favorable light, while largely overlooking their many flaws such as high costs, commissions, and the likelihood of losing money in declining markets.
Ms. Sims’ victory in the case and the perils of purchasing variable annuities in retirement accounts were the subject of an article in the Communications Workers of America magazine, CWA News, “CWA Retiree’s Investment Nightmare; A Cautionary Tale for Retirees Taking Lump Sum Pensions.”