A Life Settlement Road Map for Trusted Advisors
I receive calls on a daily basis from Trusted Advisors around the country (i.e., CPAs, Lawyers, Trust Officers, Insurance Agents, Investment Advisors) asking the same questions. "I have a client that has a policy that they no longer want or need and want to sell into the secondary market. What are the next steps?" A Trusted Advisor's profession involves an inherent fiduciary obligation to safeguard the assets and to an extent, the overall well-being of their clients.
Ask anyone the hardest part of engaging in a life insurance settlement and he or she will tell you it is two-fold: knowing what to look for in terms of legitimate life insurance settlement indicators is first. The second part is surprising; even for someone with nuts-and-bolts sales experience: overcoming your own mental roadblocks because of inexperience or uncertainty.
Hence, the following road map will lend a hand to the astute professional who remains in a prime position for seeing what others fail to from identifying key indicators of a legitimate life insurance settlement case.
NUMBER ONE:
Train yourself to look beyond the mental roadblocks, namely, not having "any of those types of clients". How many affluent clients know what a life settlement is or the value it can bring? The number one concern of seniors today is that they do not outlive their financial resources. You may, with little effort, come to realize a number of settlement opportunities are right under your nose provided you know one when you see it.
NUMBER TWO:
Licensing requirements. State insurance and/or financial services departments issue such licenses according to their individual guidelines, respectively. Always confirm your settlement broker will provide compliance guidance and support.
NUMBER THREE:
Regulatory statutes / best practices. A number of registered investment advisors, CPAs, and insurance agents insist their life insurance departments prohibit life settlements. Much of the time, however, brokerage firm, bank, and trust company insurance departments approve of the practice so long as transactions exceed suitability guidelines. Maintaining your fiduciary obligation to act in a client's best interest must be taken into consideration.
NUMBER FOUR:
Who is buying the policies? Heavily regulated banks and mutual funds buy big portfolios of policies the way they buy other investments. Knowledge of individual policy owners is unknown and of no concern. The portfolio's rate of return is what's important; not any previous policy owner's personal information. Protection of such information is regulated by the Health Insurance Privacy and Accountability Act and additional overlapping regulations to protect consumers.
NUMBER FIVE:
Talking points. Let's say you discover what appears to be a no-brainer life settlement candidate. Time to address such matters with your client. What to say is key. A good settlement broker will make adjustments to meet your concerns or comfort levels and that of your client.
Cases usually fall into three categories:
- The policy is too healthy / too young for a legitimate settlement; case closed.
- The policy is cash-value rich with low premiums and is the ideal settlement; case very open.
- Somewhere in the middle. The broker will request additional information and appraise the insured person.
The ability to appraise a policy and present suitable options for your client within the shortest turnaround time available is a key consideration in working with a life settlement broker.
Numbers don't lie. A thorough settlement broker will, therefore, go through great lengths to assess a given policy's settlement suitability to avoid wasting your time and that of your client. The specifics in terms of what goes into a policy settlement's sales cycle require attention to detail, competent underwriting and valuation, and other integral components.
Your clients sell business assets, get divorced, and adapt to varying degrees of life circumstances. The life settlement, when used responsibly and with precision, usually makes money, saves money, or achieves a significant feat such as ridding unnecessary overhead or refunding paid premiums to someone living longer than anticipated. The biggest challenge is you devoting some time to better understand the opportunity behind life insurance settlements as the market for unneeded, unwanted, or unaffordable insurance policies continues to steadily grow.
I would be happy to answer any questions you may have about this or any other life settlement topic. I can be reached at 888-849-0887 or llagrotte@lsa-llc.com.
Leo LaGrotte
March 13, 2012
