A variable annuity is a hybrid investment product, which combines some of the features of a life insurance contact with some of the benefits of a mutual fund. Variable annuities are big business, and growing by leaps and bounds. In 1999, sales of variable annuities totaled $121 billion dollars, up 21 percent from the previous year.[1]� This represents an increase of over $100 billion dollars in sales over the last decade, a nearly tenfold increase.[2]�
As detailed below, variable annuities are complex instruments that are often not fully understood by the investing public or even by the financial advisors that recommend them. As a result, the financial industry has been beset by lawsuits and arbitration claims brought by disgruntled investors who claim that they were not fully apprised of the risks, restrictions, or expenses involved in these instruments. In addition, securities regulators, including the Securities and Exchange Commission and the National Association of Securities Dealers, (NASD) have recently issued investment advisories warning investors of the risks and costs attendant in variable annuities.
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