Variable Annuities: Payday or Peril?
On Wall Street, July 1st, 2006
The two workers were part of a larger group of 32 ExxonMobil chemical
plant and refinery employees. They were blue-collar and financially
unsophisticated, ranging in age from 55 to 67. Some were pipefitters
making maybe $45,000 per year, while others were machinist supervisors
earning as much as $80,000 with overtime. During three years of
meetings that began in 1997, their broker repeatedly told them: "Why
are you working? I can make you more money when you're retired than
when you're working."
The employees say they turned over their retirement savings to that
broker, who put their money in variable annuities and mutual fund B and
C shares. But after losing much of their retirement money, the
employees brought an arbitration action against the adviser, David
McFadden, and his firm, Securities America. In May, an NASD arbitration
panel awarded the workers $22 million--one of the largest such awards.
The amount included $3.5 million in punitive damages.
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