The Financial Industry Regulatory Authority (FINRA) published an Investor Alert on the rewards and risks of equity-indexed annuities. An annuity makes periodic payments to the holder of the annuity. There are fixed annuities that make fixed payments and variable annuities that make variable payments. Equity-indexed annuities (EIA) are similar to both fixed and variable annuities. They pay an interest rate linked to an equity index and guarantee a minimum interest rate.
Investors will benefit from this investor alert: EIAs are complex contracts whose true risks and costs are often obscured and how the lack of SEC oversight and regulation have resulted in 'unscrupulous' sales practices of equity-indexed annuities issuers.
SLCG has written a paper on equity-indexed annuities explaining more of this. Investors can visit our dedicated website for more related papers and notes.
