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Fortune Financial Services

Investors who suffered losses after working with a Fortune Financial Services broker should know that they may be able to financially recover. Investors should also know about the firm’s alleged conflicts of interest, fees, and history of regulatory actions.

Fortune Financial Services (CRD #: 42150) is a brokerage firm headquartered in Monaca, Pennsylvania. It was founded in 1996. In addition to securities, the brokerage firm also sells life insurance, health insurance, and fixed annuities. Fortune Financial also offers tax preparation services.

Regulatory Actions

Fortune Financial Services has four regulatory actions on its record, handed down by the Financial Industry Regulatory Authority and the Pennsylvania Securities Corporation. The following are the two most recent – for a complete list, investors can review the firm’s detailed BrokerCheck record.

Alleged Failure to Supervise Variable Annuity Recommendations

On February 10, 2023, Fortune Financial Services entered into an Acceptance, Waiver, and Consent agreement (AWC) with FINRA in which the firm consented to the findings that they failed to reasonably supervise variable annuity recommendations. (AWCs are settlements with FINRA that allow firms to consent to the entry of findings on their record without admitting or denying the allegations.)

Firms should have systems in place that flag potentially unsuitable recommendations of variable annuities, which are complex investments with terms that are often difficult for even financial professionals to understand.

FINRA Rule 2330 prohibits brokers from recommending variable annuities that do not suit their customers’ financial goals, risk tolerance, liquidity needs, tax status, and age. The rule also requires brokers to inform customers regarding the variable annuities’ features, such as potential surrender charges, tax liability, and mortality and expense fees.
FINRA Rule 3110 requires firms to supervise their brokers and have written supervisory procedures in place.

According to the AWC, Fortune Financial Services’ failure to supervise allowed a broker to recommend variable annuities that were unsuitable because of their substantial surrender charges. As a result, FINRA alleges that 48 customers incurred $612,172.66 in surrender charges. The firm allegedly failed to catch red flags, such as when a variable annuity issuer terminated its relationship with the representative because of the high number of early variable annuity liquidations.

FINRA ordered the firm to repay $612,172.66 plus interest to customers.

FINRA did not fine the firm after taking into consideration the firm’s financial condition and commitment to retain an independent consultant to review and revise its supervisory system and procedures.

$45,000 Fine Following Municipal Securities Allegations

There is an earlier FINRA allegation that the firm failed to supervise. In August 2012, Fortune Financial Services consented to the findings that it had failed to properly supervise its representatives’ recommendations of Municipal securities. The firm also allegedly failed to preserve all correspondence relating to business and failed to conduct inspections of branch offices.

Products Offered by Fortune Financial Services

Fortune Financial Services offers the following products:

Mutual Funds: Mutual funds pool investor funds to invest in a basket of securities.

Variable Annuities: Variable annuities are insurance contracts with investment subaccounts. Investors may want these because of their death benefits and tax features, but these investments are often featured in investor disputes due to their overly complex contracts and tendency to lapse.

Indexed Annuities: These insurance products offer returns based on the performance of an underlying portfolio.

Fees and Conflicts of Interest

Fortune Financial discloses in their Customer Relationship Summary (Form CRS) that any product you purchase through the firm will have fees, charges, costs, and/or expenses that are set by the issuing company. Fortune Financial Services receives commissions from the insurance and investment companies, which creates a conflict of interest.

The firm recommends that investors ask, “Help me understand how these fees and costs might affect my investments. If I give you $10,000 to invest, how much will go to fees and costs, and how much will be invested for me?”

Variable products come with a base annual expense as well as additional charges for enhancements, such as death benefit riders.
Indexed annuities do not charge fees but come with the possibility that you could lose your principal investment.