New York, NY securities attorney Jenice L. Malecki talks about annuities, private placements, and illiquid securities. Annuities, private placements, and liquid securities share a common characteristic: once an investor is committed, exiting these investments can be extremely difficult. She groups them together because they are not publicly traded in the conventional sense, so an investor cannot simply sell them at will. While it is possible to liquidate an annuity, doing so often incurs steep penalties and forfeiture of many of the benefits that initially made the investment attractive. Some private placements are structured to be effectively perpetual, potentially lasting for the investor’s lifetime, their family’s lifetime, or even beyond. Although secondary markets exist for certain products, selling through these channels typically results in significant discounts—often 30% to 50% of the investment’s current value, which may not even reflect full value.

Because of these factors, she emphasizes that suitability and best interest considerations are critical from the outset. Investors must assess not only their own financial position but also the impact on their estate and the ability of heirs to understand and manage the investment. Questions such as the proportion of the investment relative to the overall portfolio, the associated risks, and the long-term implications for beneficiaries must be carefully addressed before committing to these types of complex investments.