• Question
  • Should I fire my financial advisor?

    Asked on 1/4/2009

    I purchased a variable annuity through my advisor in 2007. The annuity contract guarantees a 7% benefit increase each year despite what my investments earn. My investments in the annuity contract lost 40% of their value last year. Despite several telephone conversations expressing my concern, my advisor did nothing to shift my money to safer investments under the premise that the annuity benefit would keep on rising regardless of the value of my investments and that the market would eventually recover. This was my entire 401K that I earned and now it is worth 40% less. I am retired and 59 years old.

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  • Categories: Financial Advisors, Retirement Planning

Answers

  • NewRetirement User

    70 year old from Rochester, NY

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  • This is a difficult situation and many other people find themselves in similar straits.

    A couple of resources to learn more about your rights and protections as an investor are:

    FINRA - the Financial Industry Regulatory Authority
    http://www.finra.org/index.htm

    SEC - the Securities and Exchange Commission
    http://www.sec.gov/investor.shtml

    You probably should get unbiased and reputable advice before you make any moves with your money - such as from a fee based Certified Financial Planner.

    If you are getting a reliable income stream with a guaranteed 7% increase in payment each year - even if your underlying investments have dropped 40% it may make sense to leave it alone. (Although there is risk around the solvency of the insurance company that sold the variable annuity - hopefully they will remain solvent.)

    It's always worth understanding what the incentives are of anyone who advises you about money - if the person is getting an hourly fee from you and doesn't get paid on commission you are much more likely to get unbiased advice. Many brokers in financial services earn commissions when investors move their money around, so investors need to be careful that they aren't moving money around for the brokers sake.

  • Login to rate this answer:   Answered on 1/7/2009
  • NewRetirement User

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  • Jim,

    Sorry to hear about your variable annuity performance. I agree with the previous answer but wanted to add that you should double check the 7% benefit increase. My bet is that your annuity provides for a 7% Guaranteed Lifetime Withdrawal Benefit, which is something else entirely. If that is what you have, it guarantees that you can withdraw an amount equal to 7% of your original investment every year for as long as you live. So if you invested $100,000, you can withdraw $7,000 per year even if the annuity has no value.

    Variable annuities are generally expensive, and the Guaranteed Withdrawal Benefit is not cheap. I would talk to a CFP or another fee based advisor to get an accurate review of the exact annuity that you purchased.

  • Login to rate this answer:   Answered on 2/19/2009
**All above answers are provided as general information only. No warranty is made regarding the fitness or accuracy of the information provided in this answer. You should seek advice from a licensed CPA, attorney or CERTIFIED FINANCIAL PLANNER™ as to your unique financial situation.