secondary market watch

Life Settlement Industry Continues to See Growth


August 11,17 | 9:29 am

concept graph showing growth in life settlement industry with white arrows and one blue arrow pointing upSince many in the financial services industry are still unfamiliar with the life settlement market, it may come as a surprise that the industry itself is continuing to see strong growth.

As our EVP, Jamie Mendelsohn, wrote this past year on our blog and on LinkedIn, long-term growth for our industry has been projected for some time.

Now, that growth is playing out. Here are some of the factors that we think are the most important to understanding why the life settlement industry is showing no signs of slowing down – and why it’s likely to continue to grow for some time.

The demographics are favorable

Right now, Baby Boomers are retiring at a rate of about 10,000 per day, which is nearly 4 million per year.

Many of these seniors hold life insurance policies that they took out to support their families in the event that something happened. Now, many of those policies are unnecessary – and what’s more, the premiums are going up as they get older.

In addition, this huge wave of seniors is beginning to struggle with age-associated illnesses, mental decline, and the need for help with tasks of daily living. Many of these people – and their families – are finding that the costs of long-term care and medical care are outpacing their savings.

Life settlements are a way to monetize an asset – a life insurance policy – that is often overlooked. That’s no small thing to a family that’s struggling with the financial burden of long-term care payments.

More financial advisors are becoming aware of the life settlement option

Although the life settlement industry is certainly not well-known, more financial professionals – especially advisors who work with older clients – are becoming familiar with secondary market options.

This is because of a couple of things: one is that more direct-to-consumer life settlement companies are advertising directly to seniors about life settlements.

It’s important to note here that at Ashar, we always advise going through a life settlement broker – even if it’s not us. Brokers have a fiduciary responsibility to the policy owner, so it’s our job to get that senior the best possible price for their policy.

As those direct-to-consumer companies have spread their message to seniors, many of those seniors are bringing questions about life settlements to their financial advisors.

Direct-to-consumer life settlement providers, on the other hand, have a fiduciary duty to the investors they represent – the ones who are purchasing the life insurance policy. Therefore, they are working to get the lowest possible price on the senior’s policy.

The other reason has to do, in a sense, with timing. The huge number of Baby Boomers approaching or in retirement, combined with the disastrous effects that the Great Recession had on so many seniors’ retirement funds, has meant that advisors are seeing more clients with dangerously depleted savings.

Finding alternative sources of income, or liquidity, has become a necessity for many of these retirees. For those who no longer need the life insurance policies they bought decades earlier, life settlements make a lot of sense.

Life expectancies are growing

The life expectancy for Americans has been increasing fairly steadily for the past 100 years, and today it’s at an all-time high: 84.3 for men turning 65 today, and 86.6 for women turning 65 today.

While that’s an overall positive, it also means that retirees’ dollars are having to last them longer than ever before. It also means that it’s more likely that seniors will need long-term care or home-based nursing.

When you combine this with the fact that 88% of universal life insurance policies never result in a claim or payment, it’s easy to see why financial advisors are recommending life settlements as a viable option to their older clients.

The life settlement industry appears to be on a real upward trend, and we at Ashar, at least, don’t see that changing for some time. For more on industry topics, read “Financial Advising Trends That You and Your Clients Need to Know About.”

Call Now