A client of LPL Financial has filed a lawsuit against the broker/dealer, claiming his advisor sold him a variable annuity from The Phoenix Companies, despite knowing that the insurance company was in financial trouble.
The PHL Variable Insurance Co. was pushed into liquidation in 2024, leaving 100,000 policyholders facing a $2.2 billion shortfall, according to published reports.
Kerry Nietz filed the class-action suit this week in the Southern District of California, where LPL is based, claiming that for more than a decade, his advisor concealed the threats facing Phoenix while keeping millions of dollars in fees. The advisor is not named in the suit.
“At all times after 2009, Defendant knew the financial risk facing Phoenix and chose to keep silent so it could hide its breaches of trust and failure to disclose while quietly pocketing and improperly retaining millions of dollars in upfront and trailer commissions, to the detriment of Plaintiff and Class Members,” the complaint read. “By the time Plaintiff and Class Members became aware of their financial injury, it was too late.”
The lawsuit claims that after events in 2009, including ratings downgrades of Phoenix, LPL removed the company from its recommended products platform and stopped selling its annuities.
Nietz’s annuity contract was worth more than $1 million by 2023, but he’s been unable to receive the full benefits due to PHL Variable being in rehabilitation, according to the complaint. He claims he could have withdrawn the cash value in full or performed a 1035 exchange if he had known about the insurer’s risks.
The lawsuit is alleging professional negligence, breach of fiduciary duty, fraudulent concealment, unjust enrichment and violation of Washington’s Consumer Protection Act.
“LPL stuck its head in the sand as to the material risk facing Phoenix/PHL Variable, and actively concealed the material risk facing Plaintiff and Class Members who purchased the Phoenix Products,” the complaint said.
LPL Financial did not immediately return a request for comment prior to publication.
