2019 - Page 2 of 2 - Law Offices of Robert Wayne Pearce

May 1, 2019

Variable Annuities and Equity Indexed Annuities

Variable and equity indexed annuities are another form alternative investments involving mutual fund type and/or insurance products which occupy a large portion of the attorneys at The Law Offices of Robert Wayne Pearce, P.A. caseload. Variable annuities are mutual funds with insurance contracts with a variety of features that have hidden costs. They are not wise investments for many investors. According to Attorney Pearce the suitability of variable annuities for elderly investors and those on the verge of retirement or those seeking to make investments in 401(k) Plans, IRAs or pension plans is highly suspect. Sales of equity-indexed annuities (EIAs) have grown considerably in recent years with the promise of expensive guarantees. EIAs are anything but easy to understand; one of the most confusing features of an EIA is the method used to calculate the gain in the index to which the annuity is linked and there is not one, but several different indexing methods. Because of the variety and complexity of these annuity products, many investors are duped into buying something they don’t need, cannot afford and do not understand. Representing clients throughout Florida and nationwide Variable annuity investments are becoming popular among senior investors who are close to retirement. While a variable annuity can be an appropriate investment under the right circumstances, investors should be aware of their restrictive features and tax consequences. Investors should also be concerned with sales pitches. Before purchasing a variable annuity, investors should carefully investigate the product they are considering as well as the salesman. Investors should start out by reading the prospectus, which contains important information about the annuity contract terms, fees and charges, investment options, and death benefits. In addition, investors should compare the benefit and costs of the annuity to other variable annuities as well as other types of investments such as mutual funds. EIAs are far more complex financial instruments than variable annuities. They have characteristics of both fixed and variable annuities. Their return varies more than a fixed annuity, but not as much as a variable annuity. So EIAs give you more risk (but more potential return) than a fixed annuity but less risk (and less potential return) than a variable annuity. EIAs offer a minimum guaranteed interest rate combined with an interest rate linked to a market index. One of the most confusing features of an EIA is the method used to calculate the gain in the index to which the annuity is linked. To make matters worse, there is not one, but several different indexing methods. FREE INITIAL CONSULTATION WITH VARIABLE ANNUITY & EQUITY INDEXED ANNUITY INVESTMENT DISPUTE ATTORNEYS The Law Offices of Robert Wayne Pearce, P.A. understands what is at stake in securities, commodities and investment law matters and constantly strives to secure the most favorable possible result. Attorney Pearce provides a complete review of your case and fully explains your legal options. The firm works to ensure that you have all of the information necessary to make a sound decision before any action is taken in your case. For dedicated representation by a law firm with substantial experience in all kinds of Variable Annuity and Equity Indexed Annuity investment law disputes, contact the firm by telephone at 561-338-0037 or toll free at 800-732-2889 or via e-mail.

Apr 1, 2019

Watch Out for Early Retirement Scams

In the last 5 years early retirement scams have become widespread as a result of the financial crisis. Many major corporations decided to downsize and offer early retirement with benefits (pension plan or lump sum payments) to their older and highly compensated employees in their 50s or near retirement. Many holders of 401(k)s became unemployed and instead of seeking new employment they were persuaded by financial advisors to cash out their 401(k)s and enjoy their early retirement with promises that could never possibly be kept by financial advisors. The common thread in all of these early retirement scams is the false promise of investment returns at a rate greater than the rate one would need to withdraw funds from their retirement savings annually to support themselves. Unfortunately for many employees who accepted the offers of early retirement and/or those who were persuaded to cash out their pension plans or 401(k)s and reinvest with unscrupulous financial advisors and stockbrokers, the results have been horrible in terms of tax consequences, investment returns, and the total loss of years of retirement savings. It is important to be on high alert for retiree predators because those who promote early retirement schemes can be highly persuasive. Run when you hear pitches from financial advisors like the following: Everyone can retire early! You can make as much in retirement as you can by continuing to work! You can expect returns of 10% or more annually! You can withdraw 8% or more of your savings and never run out of money! We know a secret tax loophole (IRS section 72 (t)) that allows you to retire early! These financial advisors will prepare beautiful charts, graphs and glossy brochures that will absolutely demonstrate their promises can be kept if only you invest through them. However, the stockbrokers will not tell you about the effect of ordinary income tax on your withdrawals; the large upfront sales charges and management fees on the mutual funds or variable annuities they use in their projections; the effect of stock market volatility on projected returns; or the assumed rate of returns in their hypothetical retirement proposal. The reality is, you are always going to pay income tax on the amount you withdraw from your retirement account, even if you avoid IRS penalties; you are always going to pay for new investments, and that expense is going to affect your rate or return; all of the advisors projections assume a steady rate of return, and that periods of lower than average investment returns or negative returns will severely deplete your savings and render it impossible to live out your retirement with the same projected income; and the assumed rate of returns used in their projections were historically and/or statistically unachievable throughout your life time. It is critical that you think carefully before you decide to voluntarily take an early retirement and/or cash out your 401(k) or other retirement account for management by some financial advisor or stockbroker promoting an early retirement scheme. Taking early retirement can only make sense if you have enough saved to begin with based on your lifestyle and monthly expenses. Further, only withdraw funds at a rate that would not deplete your savings too early and certainly no greater than 3 to 5% per year with less being withdrawn in the early years. You need to make smart investment decisions and not base your retirement upon lofty growth expectations in your investment portfolio. Remember, medical science and health care has improved all of our life expectancies. And so, it is as important not to underestimate your future expenses as it is to not overestimate your future retirement income in making your decision about retirement at any age. The most important of investors’ rights is the right to be informed! This article on Early Retirement Scams is by the Law Offices of Robert Wayne Pearce, P.A. , located in Boca Raton, Florida. For over 40 years, Attorney Pearce has tried, arbitrated, and mediated hundreds of disputes involving complex securities, commodities and investment law issues. The lawyers at our law firm are devoted to protecting investors’ rights throughout the United States and internationally! Please visit our blog, post a comment, call 800-732-2889, or email Mr. Pearce at pearce@rwpearce.com for answers to any of your questions about losses you may have suffered in connection with any early retirement recommendation and/or any related investment matter.

Mar 2, 2019

A Stockbroker’s Introduction to FINRA Examinations and Investigations

Brokers and financial advisors oftentimes do not understand what their responsibilities and obligations are and what may result from a Financial Industry Regulatory Authority (FINRA) examination or investigation. Many brokers do not even know the role that FINRA plays within the industry. This may be due to the fact that FINRA, a self-regulatory organization, is not a government entity and cannot sentence financial professionals to jail time for violation of industry rules and regulations. Nevertheless, all broker-dealers doing business with members of the public must register with FINRA. As registered members, broker-dealers, and the brokers working for them, have agreed to abide by industry rules and regulations, which include FINRA rules.

Feb 1, 2019

Investing in Note-Linked Structured Products

In general, structured products are notes linked to a single security, a basket of securities, an index, a commodity, a debt obligation, and/or a foreign currency. There is a large variety of structured products, some of which offer full principal protection, while others offer limited or no protection of principal. The majority of structured products have a fixed maturity date and pay an interest rate substantially above the prevalent market rate, but they also frequently limit the upside participation in the reference asset if principal protection is offered. Investment banks or their affiliates are the primary issuers of structured products, but the products are not all listed on a national securities exchange.