Valic Financial Advisors Fined $1.75M

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Valic Financial Advisors Fined $1.75M

Referring to several conflicts of interest regarding how the firm paid brokers selling annuities, FINRA announced that it fined Valic Financial Advisors Inc. $1.75 million. FINRA found that VFA “failed to have a reasonable system to address and review the conflict of interest created by its compensation policy,” the regulator stated. It specifically pointed to occasions when VFA’s customers decided to move assets out of variable annuities to other in-house products, including VFA indexed annuities, as causing the fine.

“From October 2011 through October 2014, VFA created a conflict of interest by providing registered representatives a financial incentive to recommend that customers move their funds from Valic variable annuities to the firm’s fee-based platform or into a Valic fixed index annuity,” FINRA said. “VFA further incentivized the conflict by prohibiting its registered representatives from receiving compensation when moving customer funds from a Valic VA to non-Valic VAs, mutual funds or other non-Valic products.”

“During 2012 and 2013, FINRA found there was significant volume of assets moving from Valic VAs to the advisory platform,” the release said. “Also, in a seven-month period after the compensation policy was amended to include the proprietary fixed index annuity, sales of that product grew more than 610%.”

Valic Financial Advisors, which has about 1,350 advisors, is owned through subsidiaries of American International Group Inc.

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