Corporate & Securities Law

Equity-indexed annuities (?EIAs?), also known as ?fixed-indexed insurance products? or ?indexed annuities? are a class of complex insurance products that have gained popularity in recent years. 

EIAs are in essence a combination of investment and insurance products that typically fluctuate more than  a fixed annuity with less risk (and less potential return) than a variable annuity.  In other words, EIAs help give investors some upside in rising markets while limiting the downside in falling markets. At the end of the investment period, the EIAs owner can typically take a lump sum distribution to receive regular payments based on the ending balance.

In theory the products seem attractive, but investors should be cautious.  

One of the dangers of investing in an EIA is that they are a complex financial product that the average investor may not fully understand.  For example, EIAs use derivatives to put collars around the annuities in order to limit their upside and downside.  EIAs also use a complicated gain calculation formula. In many cases, multiple indexing methods are used to correctly calculate the gain.  This makes it difficult to compare one EIA to another, which hinders the evaluation of its true performance.

The fees for EIAs are often high, and the early surrender penalties can be very costly for those investors who need to exit early.  Moreover, investors with a longer term investment horizon with capital appreciation in mind may not want to consider an EIA as an investment option, as there are other products available to them that offer enhanced returns while limiting downside losses.

If you have suffered significant losses investing in an equity-indexed annuity, you may be able to recover their losses through arbitration.  Contact Jim Eccleston at the Eccleston Law Offices at 312-332-0000 to discuss your case.