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Anil Vazirani featured in AZ Republic ‘Fixed-indexed annuities draw billions from retirees, criticism of returns’

https://www.retirementplanningscottsdale.com/2018/08/17/anil-vazirani-featured-in-az-republic-fixed-indexed-annuities-draw-billions-from-retirees-criticism-of-returns/ Anil Vazirani featured in AZ Republic ‘Fixed-indexed annuities draw billions from retirees, criticism of returns.’

In an article published in the Arizona Republic by Dennis Wagner on August 15, 2018, Peoria resident Rick Brady says his fixed-indexed annuity earned him 2 percent returns, less than advertised.

Each year, Americans pour billions of dollars into a curious financial product that, as it’s sometimes advertised, seems too good to be true. Some companies tout returns of up to 50 percent over five years, with the claim that consumers won’t lose their original investment even if the stock market crashes.

The products, known as “fixed-indexed annuities” or FIAs, function like life insurance in reverse: The purchaser sets aside a safe nest egg, accruing interest, and after a waiting period collects regular payments until death.

It’s a pitch that appeals to retirees.

Yet Anil Vazirani, a Scottsdale financial adviser who has taken an intense interest in FIAs, says the advertising often misleads consumers, and the contracts they sign are so full of jargon, caveats and options they are impossible to fathom without legal training or a finance degree.

Vazirani acknowledges some annuities offer stable, guaranteed income, and are sound investments. However, he contends, over the past two decades companies have been marketing exotic hybrids using deceptive sales tactics that prey on elderly consumers.

A few years ago, there were just six exotic FIAs on the market. Today, according to Wink Inc., a market research firm, there are more than 50. During 2016, Americans poured $58 billion into FIAs.

That’s why Vazirani has since 2008 waged war against a handful of FIA companies. He has condemned their sales practices on his radio show and websites. He has fought them in court. He has begged law enforcement and regulators to do something.

Because FIAs are tied to stocks, Vazirani insists, they should be treated as securities, which cannot be sold by insurance agents. Instead, they should be sold only by licensed professionals obliged to act in the best interest of their clients.

“We have all seen the movie, ‘Wolf of Wall Street,’” Vazirani warns, “and the sequel will be ‘Wolf of Annuity Industry … ’”

In correspondence with government regulators and law enforcement, Vazirani describes himself as among the top 1 percent of America’s financial advisers, a Hall of Fame inductee with the Society of Senior Market Professionals and “the ultimate industry insider.”

He also calls himself a whistleblower.

At his Scottsdale office, Vazirani pulls out sample ads for fixed-indexed annuities.

One features a chart showing how a $100,000 investment can grow to $400,000 in 20 years. It is listed as a “hypothetical illustration” and, upon closer inspection, contains this notice: “The values in this illustration are not guarantees or even estimates of the amounts you can expect from your annuity. … Not to be used for illustrations of in-force contracts.” 

Vazirani says he came to the United States at age 19 from Mumbai with $500 in his pocket. He understands financial anxiety, and believes seniors desperate for security are especially vulnerable. 

While FIA terms are spelled out in brochures or contracts, Vazirani contends key information often appears in footnotes, fine print or legal language that even experts would struggle to comprehend.

Meanwhile, he asserts, the consumer gets a spiel from an insurance agent who has no fiduciary duty, and is looking to score a commission.

The FIA brochures on Vazirani’s desk contain brain-numbing legal declarations such as this:

“For the S&P 500 Annual Point to Point Index Account, we compute and credit the Index Interest Rate at the end of each one-year Index Term based upon the difference in the starting and ending index values for the Index Term. If the difference is positive, we divide the difference by the Index Term’s starting index value to determine the percentage change in the index value for the Index Term. We then compare the percentage change to the Cap and use the lower of the percentage change or the Cap as the Index Interest Rate.”

Those sentences are part of a 17-page marketing document.

“All of it is there in fine print, but that doesn’t make it right,” Vazirani says. “Arizona consumers. … getting zero when they were promised 30 to 50 percent.”

While a customer’s principal is guaranteed, that does not mean it is entirely safe, he adds. Fees can eat into the total. And FIAs have no backing by the Federal Deposit Insurance Corporation. If the insurance company goes broke, clients lose.

Vazirani points out language in an ad for one of the products: “… we guarantee that you will never lose any of your initial investment or credited earnings due to performance of the underlying index.”

Beneath multiple footnotes, a small box contains this notice: “Not FDIC or NCUSIF insured • Not guaranteed by the institution • Not insured by any federal government agency • May lose value”.

In 2008, Vazirani’s Scottsdale company, Secured Financial Solutions LLC, was selling standard annuities that included products from Aviva USA Corp., one of the world’s largest insurance companies. Aviva, which has since been acquired by Athene Holding Ltd., controlled nearly one-third of the U.S. market in fixed annuities.

Vazirani had marketed more than $100 million in Aviva products over the prior four years, making him a top seller, according to court records. 

According to Vazirani, his contract with Aviva was terminated in retaliation for lodging a complaint about sales agents who were improperly advertising annuities. The move wiped out 40 percent of his company’s commission income.

Aviva denied retaliating, claiming in court submissions that Vazirani was expelled as part of a new distribution plan, and because he violated contract provisions.

As the dispute escalated, Vazirani’s attorneys warned they would “publicize the injustices.” When no settlement ensued, Vazirani emailed his lawyer: “Let the war begin.”

In court papers, Vazirani claimed Aviva breached his contract, defamed him and colluded with other companies to blackball him.

About the same time, more than a dozen internet sites suddenly popped up with names like “avivasucksusa.com” and “aviva-exposed.com,” mocking and condemning Aviva’s FIA business.

Vazirani sent out email blasts to people in the annuity business, and used his weekly radio show to assail Aviva and its marketing practices.

Aviva countersued, claiming Vazirani’s attacks amounted to a criminal racketeering operation that involved extortion, wire fraud, cyberterrorism and trademark infringement.

Litigation dragged on for eight years, in state and federal courts, with puzzling and contradictory judgments.

Ultimately, all Vazirani’s claims were denied, as were Aviva’s accusations against him.

While Aviva was subsumed and the hostile Internet sites have vanished, Vazirani’s campaign continues. The goal, he says, is to warn the public and stop unethical marketing practices.

Over the past two years, he’s bombarded members of Congress, the Department of Labor, the Securities and Exchange Commission, the Arizona Department of Insurance, the Attorney General’s Office and others with letters.

Vazirani wants investigations. He wants new regulations. He wants laws and rules changed.

“Maybe I lost the battle legally,” Vazirani says, “but I can win the war by exposing what I know to the regulators.”

Vazirani’s integrity quest is complicated by complaints filed with the Arizona Department of Insurance accusing him of the very conduct he criticizes.

Honecker, on behalf of Vazirani, urged federal investigators to determine whether specific FIA promotional campaigns constitute fraud or misrepresentation.

Sheryl Moore, president and CEO of Wink, which analyzes the annuities market, says FIAs are generally sound investments with annual returns of about 2.32 percent, slightly better than certificates of deposit.

Asked about companies projecting annual returns up to 9 percent, Moore says, “Nobody should be advertising anything like that at all.”

She concedes some companies use deceptive sales tactics — “the naughty stepchildren of the life insurance industry” — but says FIAs generally are “a fantastic product that not a lot of people know about. It’s just that the marketing-conduct issues kind of give it a black eye.”

Read the full story here: https://www.azcentral.com/story/money/business/consumers/2018/08/15/fixed-indexed-annuities-draw-billions-retirees-criticism-return/654236002/

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