Subaccounts – Variable Annuities

South Florida Variable Annuity Subaccount Mismanagement FINRA Arbitration and Litigation Attorney, Russell L. Forkey, Esq.

One of today’s popular investment vehicles is a variable annuity, which has been discussed in other sections of this site. The purpose of this post is to provide general information on certain types of subaccounts associated with variable annuities. Please keep in mind that this information is for educational purposes only and is not designed to be complete in all material respects. Thus, it should not be relied upon as providing legal or investment advice. If you have any questions, you should contact a qualified professional.

When looking to purchase a variable annuity, it is important for you to review the types of subaccounts offered by the company. This information should be provided in the sales material that you are presented with. Some contracts offer numerous mutual fund options; others just a few. Consequently, you must initially determine whether or not you will have enough investment choices to adequately diversify your holdings. This is because, as a general concept, diversification lowers the overall risk of your investments, and it can be accomplished through an almost unlimited number of subaccount combinations.

There are three general types of subaccount categories that you can choose from. They are equity, fixed income or balanced.

Each of these categories can be further subdivided to include:

Equity (Stocks)

• Growth or value
• Domestic or international
• Small-cap, mid-cap or large-cap
• Leveraged

Fixed Income (Bonds)

• Government
• Corporate
• Mortgage-backed
• High-yield (junk)

Balanced (Mixture of Stocks and Bonds)

• Balanced
• Asset Allocation
• Life-stage subaccounts

Once the initial subaccount allocation is made, your responsibility or that of your subaccount manager does not end. Consequently, it is necessary for you or your manager to track the performance of your annuity assets, periodically exchange money from one subaccount to another or to set up an automatic rebalancing program. Monitoring this type of investment should be done in the same way that you monitor any of your investments.

If you have turned the management of your subaccounts over to a professional money manager and you have any questions as to whether or not your subaccounts were mismanaged, please contact us for your initial free consultation.