According to the SEC’s announcement, the Equitable Financial Life Insurance Company will pay $50 million to settle fraud charges related to its alleged misrepresentation of investor fees for 1.4 million variable annuity holders.
Although the agency made Equitable’s failure to disclose this information to a school district in 2017, the company continued to do so, the SEC found.
Last night, the SEC announced that The Equitable had agreed to pay a punishment to compensate affected investors, the vast majority of whom are educators and support personnel from public institutions.
According to the SEC’s ruling, “Equitable gave investors the misleading impression that their quarterly account statements reflected all fees paid during the period” beginning in at least 2016.
The regulator discovered that the statements “more often than not” displayed zero fees, failing to disclose the vast majority of charges and expenditures incurred by investors in favor of a small selection of infrequently incurred ones.
“It is vital that investors not be deceived about the fees they are paying when deciding how to invest their hard-earned money and save for retirement,” said Gurbir S. Grewal, director of the SEC’s Division of Enforcement. Investment firms should take note: “This case should serve as an important reminder to check their statements to ensure accurate disclosure of fee information.”
According to the SEC’s ruling, Equitable broke the law by not adhering to the anti-fraud requirements of the Securities Act of 1933.
As the SEC put it, “while affirmatively offering an apparently all-inclusive picture of fees and expenses to investors,” Equitable’s quarterly account statements disclosed less than three percent of the revenue that Equitable got from its EQUI-VEST variable annuities.
The agency said that investors weren’t given notice that they were paying thousands of dollars a year in fees associated with separate accounts and portfolio operations simply because the account statements lacked any explanatory language or a reference to the prospectus.
The SEC claimed that in May of 2017 Equitable and other vendors met with the advisory committee to the school district with which Equitable did the most business in terms of both assets invested and a number of investors and that it was at this meeting that the insurance company learned that its annuity account statements may have confused investors on fees paid.
Make Sure Your Financial Advisor Discloses Their Fee Structure
It’s a good business practice for a financial advisor to disclose the fees he or she charges for advisory services on his or her website. Not only does it build a reputation of transparency, it also helps screen out non-qualified prospects. This is especially important for new advisors who are just starting out and do not have a lot of experience.
Commission-based advisors
Unlike fee-only advisors, commission-based advisors don’t charge a fee directly to you. They typically charge a flat annual fee or a monthly retainer, with commissions based on the value of accounts or financial products sold. However, this fee structure may not be transparent. To avoid paying unnecessary fees, make sure your advisor discloses their fee structure.
The fees that commission-based advisors charge clients are usually not transparent. This can lead to an unclear understanding of the total cost of the services and investments that they provide. In addition, commission-based compensation is not legal in most countries. Make sure your advisor discloses his or her fees so you can make an informed decision about whether to use a certain financial advisor.
Commission-based advisors typically make their money by receiving money from insurance companies or mutual fund companies for the sale of their products. These financial companies also pay commission-based advisors a portion of their ongoing management costs. Brokerage firms often employ a commission-based advisors model. They sell financial products like mutual funds, insurance packages, and insurance policies.
If you don’t buy financial products frequently, commission-based advisors may be a good option. They can help you grow your assets and provide guidance on insurance and investment products. Commission-based advisors will also provide you with advice on how to protect yourself and your assets.
Cost of working with a financial advisor
There are several factors that affect the cost of working with a financial advisor. One of these is the fee structure. Some advisors charge a flat rate, while others bill by the hour. The fee structure of a financial advisor can vary widely, so it’s best to ask about it before making a decision.
One factor to consider when evaluating the cost of working with a financial advisor is whether you can afford the fee. Many fee-only financial advisors have minimum asset levels and annual income requirements, so it’s important to understand if their services are right for you before hiring them. Some advisers are better suited for clients with a specific amount of investable assets, while others may not be as qualified.
Another important factor in determining the cost of working with a financial advisor is whether or not they provide value. Ensure that they can clearly articulate what they do for you and what they charge. If the fee seems high, negotiate with them and explain your needs. You may be able to get a lower rate if you hire fewer services and have more assets.
The cost of working with a financial advisor varies from advisor to advisor and is typically between $700 and $3,500. Most fees are fixed and are not tied to specific investment purchases or the value of your portfolio. Make sure you ask for a fee upfront and make sure to clarify whether follow-up meetings are included.
Comparing financial advisors
When it comes to choosing a financial advisor, many people are worried about the cost of his or her services. While cost is an important consideration, it is also necessary to evaluate the services the advisor will provide and how they fit into your overall financial plan. One of the best ways to do this is to examine your goals and what you hope to accomplish from a relationship with an advisor. This is known as the “begin with the end in mind” philosophy, which was popularized by Steven Covey in the book “The 7 Habits of Highly Effective People.” By choosing a relationship that supports your overall financial goals, you will make it easier to navigate the cost issues.
To find out what you should expect to pay for financial advice, look at the fee disclosures for multiple advisors. Fees for financial advice will differ based on the size of your account and the nature of the services the advisor will provide. This makes it essential to break down the fees into their component parts – investment management fees, financial planning fees, and product and platform fees.
Another key factor to consider is the total all-in cost of managing your assets. The total cost of managing your portfolio is generally higher than the fee charged by the financial advisor. This is because the underlying products cost more than the advisory fees. In fact, many advisors charge more than 1% of the total dollar amount, largely because of the transaction costs and various platform fees.
