Advisors ask their compliance departments, “How can I tell my clients that I provide comprehensive and holistic financial planning yet not disclose the life settlement option when appropriate?” With an aging population, many clients prefer to receive a buyout of their existing life insurance for an amount that is higher than their cash surrender value, providing liquidity for investments and other retirement needs.
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Longevity Series - Blog #1 (4-minute read)
This is personal. If you’re not paying attention to clients like me, you’re missing out on a huge growing segment of the financial planning arena driven by baby boomers. At my age (74), I’m on the leading edge of the boomers.
In September of last year, I broke my back when took a Superman flight over the handlebars of my mountain bike. I knew immediately this was different than my previous accidents where I was sidelined for several weeks because of torn muscles and ligaments in my shoulders. This time, I couldn’t walk for a while and my thumb and two fingers on my right hand were numb. This one really scared me.
This kind of accident can easily take you out of the game if you’re over age 70. Over the next several weeks, I lost significant muscle mass in my legs. I started physical therapy and sold my mountain bike and bought a recumbent trike with a motor assist so that I could stay active and keep up with my wife on paved trails. Until recently, I found it impossible to get up off the floor without assistance. I’m fortunate to be married to a health nut that still rocks her mountain bike at age 65. I was healthy before the accident and determined to get even healthier now with her help and the example she sets. Peter Attia, author of the New York Times #1 Best Seller “Outlive” is now one of my health mentors. His video is a real eye opener. Be sure to click on the pdf link below the video. This morning, my Garmin watch told me that my fitness age is now down to 71.5 years and my VO-2 max is increasing. I’m shooting for a fitness age of 67 within the next year.
I work in the life settlement market where 87% of settled policies are on insureds age 70-100+ (Source: Ashar Group). Clearly, this is a market that gives the advantage to retirement age clients. Many of these insureds have shortened life expectancies due to health issues or increased longevity. Health arbitrage is a key factor influencing the value of a policy in the settlement market. I own a 20-year convertible term policy that is reaching the end of its term shortly. You can bet on the fact that I’m going to check to see if it has any value on the secondary market before my term period ends. Secretly, I hope that it doesn’t have any value because my life expectancy will be too long. God willing, I hope to be a centenarian in good health and enjoying life to its fullest.
The focus of my financial planning has now switched to maintaining a healthy and active lifestyle until the angels come calling. Joseph F. Coughlin, founder of the MIT AgeLab and author of the #1 New York Times bestseller The Longevity Economy, provides the insight business leaders and financial planners need to serve the growing older market: a vast, diverse group of consumers representing every possible level of health and wealth, worth about $8 trillion in the United States alone and climbing.
BTW, I recently purchased an all-road bike and got back on two wheels, but not on mountain bike trails. It works a whole new set of leg muscles, and nine months after my accident I was able to get off the floor this morning using only my legs. I thought I might never see that again. Pay heed to the financial needs of “boomers” who are bound and determined to live longer and stay healthy and active. Because of increasing longevity, they need to reset their financial planning horizon with your help. Gotta go now. Amazon just delivered a new piece of fitness equipment to my doorstep.
Bill joined Ashar Group in 2006. He has been instrumental in helping financial professionals understand longevity planning to better serve their clients.
Ashar Group is a nationally licensed life settlement firm representing the best interests of policy owners by creating a competitive policy auction to deliver the best value to the seller. Ashar Group does not sell life insurance, management assets, or purchase policies. We are an independent resource for fiduciary advisors and their clients specializing in life insurance valuation for planning purposes. Contact us today.
Broker-dealers, banks, ILIT trustees, insurance carriers, and planners with a fiduciary duty understand that part of protecting clients' best interests means offering all the available options and recommendations to help clients meet their planning goals. When it comes to life insurance, many factors affect whether a policy still meets the original purchase goal. As policy owners age, they outlive their original planning goals, interest rates affect policy performance, and life situations change. Therefore, the need for their life insurance coverage may change too. Sometimes that means exiting a life insurance policy that no longer serves a positive financial purpose.
There is a valuable alternative to lapse or surrender. A life settlement is a buyout of an existing life insurance policy for more than the cash surrender value and less than the death benefit.
Over time, compliance officers have come to recognize that if life settlements are pursued for the right reasons, after a thorough review of all non-forfeiture options and suitability, a life settlement could very well be in clients' best interests. It is a viable exit strategy that should be disclosed in a comprehensive policy review in partnership with a resource that offers a compliance-centric process. However, broker-dealers do not just allow life settlements carte blanche. They put strict procedural guardrails in place to protect the company and their representatives from liability risk.
When you or your client encounter marketing by a life settlement company, they may all sound the same. It is exceedingly difficult for even the most experienced advisors to differentiate between a company representing their client's best interests and one representing the buyers. There are multiple factors compliance officers consider when selecting a life settlement company. However, there are common mistakes to avoid that revolve around ensuring that your clients receive independent and knowledgeable representation that protects their best interests.
Ensuring the life settlement company has a fiduciary duty to your client, the policy owner, is the most critical factor in approving a compliance-centric resource.
There are key elements that compliance officers look for when completing their due diligence in the approval of a life settlement partner.
Although compliance officers are responsible for protecting the best interests of the company they represent, they have historically hesitated to approve life settlements for advisors to offer as an option to clients. Ninety percent of states regulate settlements, alleviating past concerns and helping to integrate this solution into mainstream planning. Broker-dealers do not advertise or promote life settlements, so we encourage advisors to check with their compliance department to ask if they have an approved life settlement resource.
Over the past 20 years, we have undergone numerous lengthy due-diligence processes and assisted in designing compliance-centric workflows for many of the largest nationally recognized broker-dealers. Discover how we're different by design.
Ashar Group is a nationally licensed life settlement firm that acts as a fiduciary to protect the best interests of policy owners by creating a competitive policy auction to deliver the best value to the seller. Ashar Group does not sell life insurance, management assets, or purchase policies. We are an independent resource for fiduciary advisors and their clients specializing in life insurance valuation for planning purposes. Contact us today.
Your client’s life insurance policy may be the most valuable asset they own.
Seniors in retirement often drop their life policies. The reasons are many; the original need may no longer exist, they may need to eliminate expensive premium payments, or they just need some additional liquidity to help with medical costs and retirement needs. There could be a better way...
A life settlement is the sale of an existing life insurance policy for more than the cash surrender value and less than the death benefit.
Five Common Life Settlement Scenarios:
Who has the best chance of qualifying for a life settlement?
Anyone age 65 or older who has developed health issues since their policy was issued and owns a universal life or convertible term insurance policy has a high probability of benefiting from selling their policy. Policies with a death benefit of $250K or more can qualify. Even policies used in estate planning and business protection with death benefits from $2M - $100M can qualify. Younger policy owners with serious chronic illnesses can also explore the life settlement option. There are many scenarios where a client could qualify for a life settlement.
PRACTICE TIP: Never surrender a life insurance policy without first checking for life settlement value!
Ashar Group is a nationally licensed life settlement firm that acts as a fiduciary to protect the best interests of policy owners by creating a competitive policy auction to deliver the best value to the seller. Ashar Group does not sell life insurance, management assets, or purchase policies. We are an independent resource for fiduciary advisors and their clients specializing in life insurance valuation for planning purposes. Contact us today.
Responding to online advertising and generic value calculators can mislead client expectations. Many things in life rarely come about; when this happens, the average person doesn’t have the knowledge to make a good decision. This can be true for financial professionals and consumers alike.
Understanding life settlements is one of those things. Where do advisors and consumers go to find the answers to questions about life settlements? If you Google life settlements, you will come up with 152,000,000 results. Even if you zoom past all the paid ads, you are still left with an abundance of contradictory opinions and information. Consumers are particularly vulnerable when they respond to direct-to-consumer TV commercials and social media ads about life settlements.
If you’re an advisor, who would you listen to, and how would you know if you can trust them to serve the best interests of your clients? Most of these ads come from life settlement lead generation companies and life settlement providers that represent the best interests of buyers wishing to purchase existing life insurance policies at a highly discounted price. It’s a good deal for the buyer but a bad deal for your clients. Furthermore, it’s almost impossible to use Google to determine whether you’re working with a licensed life settlement provider representing the buyer’s best interests or a licensed life settlement broker with a fiduciary duty to represent the best interests of the policy owner selling the policy.
This is precisely why attorneys, CPAs, CFPs, RIAs, and client-centric life insurance professionals do not rely on Google, social media, or television ads to determine who they should trust to help their clients. They use a more comprehensive due diligence process to protect themselves and their clients.
The strategy behind life settlement calculators
Most online life settlement platforms connect policyholders directly or indirectly with licensed providers that represent the best interests of buyers. They aim to lead your client to provide information by completing their life settlement calculator, then give them an arbitrary value and engage them in conversation. This is a problem for your client because the value indicated is, at its best, only a guess. The minimal output from a calculator is rarely accurate, and the potential offer is changed after additional medical, financial, and policy information is obtained. This misleads your client and forces them to lower their expectations. Often a highly discounted offer will be presented to your client based solely on the information provided on the calculator, and the deal can be closed quickly. Too quickly!
Moving too fast in life settlements can come with some inherent risk for you and your clients. If your client is involved in a life settlement process emphasizing speed, you might suggest they tap the brakes and determine if they are sitting on the wrong side of the negotiation table.
Bottom line: Complex transactions that require sophisticated underwriting and a negotiation process take time. There are only two licensed entities that sit at the negotiation table. Life Settlement Brokers represent your client’s best interests, and Life Settlement Providers represent the buyer’s best interests. Fast life settlements are risky. Slow down on the front end to verify that your client is represented by a nationally licensed life settlement brokerage firm experienced in case design and conducts a transparent policy auction between multiple providers to drive more value to your client. They will be glad you did!
Ashar Group is a nationally licensed life settlement firm that acts as a fiduciary to protect the best interests of policy owners by creating a competitive policy auction to deliver the best value to the seller. Ashar Group does not sell life insurance, management assets, or purchase policies. We are an independent resource for fiduciary advisors and their clients specializing in life insurance valuation for planning purposes. Contact us today.
Ashar Group has created a special checklist for tax season that helps you conduct a new and timely discussion that strengthens your current relationships and opens the door to new ones.
Most tax practitioners are unaware that existing life insurance policies can provide a value significantly higher than the cash surrender value offered by the issuing insurance carrier.
“Almost 85% of term policies fail to pay a death claim; nearly 88% of universal life policies ultimately do not terminate with a death benefit claim. In fact, 74% of term policies and 76% of universal life policies sold to seniors at age 65 never pay a claim.”
Wharton School Study by Daniel Gottlieb and Kent Smetters
What happens to all those policies that were put in place to protect families and businesses? They are lapsed or surrendered. Most of those policies are dropped by senior clients in financial transition. The reasons are many. Their policy may no longer be needed for estate tax planning, they are outliving their coverage, the policy is too expensive to maintain, a business owner is retiring, or they are going through bankruptcy proceedings or divorce proceedings. Often, they simply want to apply any cash they can obtain from the policy and use that cash - and the ongoing premiums they have been paying - to other aspects of their financial plan. They may need extra cash for medical or caregiving expenses, donate money to charity, or simply maintain their standard of living during retirement. Furthermore, many tax advisors and consumers are unaware of the additional value that can be obtained through a life settlement.
What can tax professionals and financial advisors do to help?
It’s simple, all you must do is be in the right place at the right time before your client decides to lapse or surrender an existing life insurance policy. That’s where our Tax Planning Checklist for Existing Life Insurance comes in. Tax season is the perfect time to reach out to your clients and tax professionals and ask them the questions on the tax planning checklist. This creates awareness about options that are available that could have a significant impact on decisions that they make when considering dropping their existing life insurance coverage.
We’ll be at Finseca in D.C.
Please stop by the Ashar Group booth #201 to get access to the Tax Season Checklist and options to co-brand this checklist.
Over time, the need for life insurance coverage naturally changes. While life insurance can sometimes be the largest asset a client owns, it’s rarely reviewed for fair market value like other assets, including real estate, art, and jewelry. This results in clients making uninformed decisions, missing lucrative planning opportunities, and paying unnecessary premiums.
We all know the advantages of early detection when it comes to identifying health risks. We never want to hear the doctors say, “If only we had caught this sooner…”.
Your automobile is equipped with all sorts of warning mechanisms to detect a problem before it turns into a costly repair.
Your children’s report cards provide early detection of a drop in grades before your child needs to repeat a grade.
Your annual dental visits for cleaning and x-rays help detect cavities before they turn into serious problems.
What about existing life insurance policies that your clients currently own? When was the last time you had your client’s existing life insurance appraised to detect all available planning options?
Right now, you have clients in financial transition. Whether it is retirement, selling a business, divorce, bankruptcy, or simply outliving their financial plan, your clients ask, “What are my options?” Is it best for me to keep paying premiums, change my coverage, surrender my policy, or sell my policy for its life settlement value? If you aren’t answering these questions, someone else will. This leaves your clients and the relationships/trust you’ve built with them vulnerable and in jeopardy.
There are many reasons to consider an Early Detection Valuation to explore the suitability of maintaining existing life insurance coverage. You don’t need to be a life insurance expert or hold a license to consider a valuation or a life settlement. We’re here to help. We’re a qualified appraiser of life insurance for estate and tax planning, charitable donations, and other aspects of financial and retirement planning. Contact us today.
Ashar Group is a nationally licensed life settlement firm that acts as a fiduciary to protect the best interests of policy owners by creating a competitive policy auction to deliver the best value to the seller. Ashar Group does not sell life insurance, management assets, or purchase policies. We are an independent resource for fiduciary advisors and their clients specializing in life insurance valuation for planning purposes.
Excerpt from an article in NAEPC Journal of Estate & Tax Planning by Jamie L. Mendelsohn, EVP
Life insurance can be the largest unmanaged asset a client owns, and it is rarely appraised or valued. Policy owners allocate significant liquidity on an ongoing basis, often long after transitioning out of the original need that the policy was put in place to protect. Even after a traditional policy review and exploring historical non-forfeiture options such as a surrender, reducing the death benefit, or 1035 exchange, the client is left feeling as if they are not in an optimal position. Creating awareness and educating policy owners that the life settlement market exists can result in many planning opportunities, as well as mitigating risk and liability for the advisory teams.
Many policy owners have paid into policies for decades and want more than the intrinsic value of ownership when considering exiting it. The opportunity to take advantage of a secondary market, to capitalize on the numerous institutional buyers competing in an auction to deliver more value than other exit strategies, is an important option to discuss with policy owners. Getting clients in the habit of valuing their life insurance, similar to how they appraise other assets, could create additional cash flow for other planning needs.
Halloween is behind us and many of you may have walked through a corn maze with your children or grandchildren at a local pumpkin patch. You may have found that maze easy to navigate, but how do you navigate through the confusing maze of life settlement information to help your client monetize their policy for fair market value (FMV) rather than settling for a discounted value?
The path you choose will determine how much value created ends up on the policy owner/sell-side of the negotiation table versus the buy-side. One wrong turn in the maze can take you and your client down a path that enhances investor returns at the expense of providing more value to your client. We will show you how you can help your clients make an informed decision about choosing the right life settlement company at a time when they are being bombarded with life settlement marketing that can often blur the lines between truth and fiction.
Securing independent representation for your client is the cornerstone of a successful life settlement.
An existing life insurance policy, including convertible term insurance, may contain significant value, beyond the cash surrender value (CSV), that can be accessed and monetized through a life settlement. A life settlement is the sale of an existing life insurance policy for an amount greater than the CSV, but less than the death benefit. How much added value your client receives is totally dependent on which life settlement company they choose to represent them. The good news is that there has been life settlement regulation in place for several years that requires licensing that distinguishes between a seller’s representative and a buyer’s representative. Securing independent representation for your client is the cornerstone of a successful life settlement.
Brokers vs. Providers
There are only two licensed entities that are licensed to handle life settlement negotiations. One represents the seller, the other represents the buyers. Licensed life settlement brokers are fiduciaries to the policy owner. Their sole responsibility is to represent the policy owner in the life settlement transaction and obtain the best offer based on your client’s situation and needs.
One wrong turn in the maze can take you and your client down a path that enhances investor returns at the expense of providing more value to your client.
On the buy-side, life settlement providers are licensed to represent the best interests of the buyers. Most advisors are unfamiliar with the term provider, which is often conflated with the term buyer. As a result, advisors often unknowingly end up on the wrong side of the negotiation table working with a provider. Consumers are even more vulnerable because of constant consumer direct ads from providers on television and social media. If your client responds to an advertisement and gets involved with a “Direct Buyer”, then they are in fact dealing with a provider. Buyers are behind the scenes and prohibited from getting directly involved with the seller. Buyers must be represented by a provider. The only way your client’s best interests are protected is through a broker-managed life insurance policy auction forcing providers to compete.
Your client should only use one broker that forces provider competition because all brokers access the same providers. If providers receive information from two or more brokers, control of the case is lost resulting in a more discounted offer to the seller. Providers can’t trust information that comes from more than one source. Also, sensitive client information is more secure if properly handled by only one broker. When providers are forced to compete that means your client’s case can be looked at by all available institutional buyers.
Two due diligence questions to determine if a life settlement company is on the buy-side or sell-side
Ask your potential life settlement resource these two questions:
Bottom line: There are only two licensed entities that sit at the negotiation table. Life Settlement Brokers represent your client’s best interests, Life Settlement Providers represent the buyer’s best interests. The first step is to verify right up front that the life settlement company you choose to help your client is a seller’s representative. Starting out on the right foot will help you have a big impact on the amount of additional value your client receives.
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Ashar Group is a nationally licensed life settlement brokerage firm and a qualified appraiser of life insurance for estate and tax planning, charitable donations of life insurance, and other aspects of financial and retirement planning. It’s what we do. By remaining deliberately independent and conflict-free, advisors trust Ashar to protect the best interests of the policy owner during a life settlement, thereby mitigating reputational or liability risk for the advisor.
Use our life settlement probability calculator to determine potential opportunities, or contact us today to learn more about the life settlement solution.
