Even though life settlements have been available for over two decades, fiduciaries may not be clear on measures that need to be taken to protect the best interests of their clients. There are a few simple guidelines that you can follow to help mitigate risk.
The first and most important is to know whom you are dealing with when you choose a life settlement resource to assist you in the process.
Who do they represent? Do they have a duty to you and your client or do they have a fiduciary duty to get the best internal rate of return for the fund they represent? Your best bet is to use a life settlement broker that represents you and your client and shops the entire market, gets multiple bids from multiple parties, and secures an offer that represents fair market value. Providers and funds do not represent you and your client and can only offer something called “fair value”.
Is your broker of choice licensed nationally? Do they have a full service operation that includes extensive case design, internal medical underwriting, and pricing?
Your reputation as a fiduciary is at stake every time you choose a specialist to help you with a transaction that is beyond your area of expertise. That’s why it pays to complete your due diligence before you make a selection. Be sure to get recommendations from firms and fiduciaries that have worked with them before. This transaction is no different than others you've participated in throughout your career. Look for integrity.
Avoid common misconceptions about over shopping your policy. Too many companies communicating confusing messages to the market could negatively impact the client. Select one broker so that your case doesn’t get marginalized or commoditized. This is a regulated market and all brokers go to the same licensed providers/funds; however their credibility and capability to represent can be harmed if the approach isn't deliberate.
All brokers are not the same. Some of them are boiler room operations, some are one and two man shops, some are operating with borrowed licenses, some of them do life settlements as a sideline business, and most of them don’t fully shop the market and drive competitive bidding. Be sure to complete your due diligence and find a broker with an impeccable reputation and a full service operation dedicated solely to life settlements, secondary market solutions, and life policy valuations.
With more on the line as Life Settlement options become more popular, it is important as an advisor to evaluate a client’s financial situation then talk to a Secondary Market Specialist to determine if a Life Settlement or a Secondary Market Valuation can be a logical option. If so, a Secondary Market Specialist can analyze your client’s policy and determine the likelihood of receiving a desirable offer for their policy in the Life Settlement Secondary Market.
If you think your client is in a position where a SMV could provide a better outcome, talk to a secondary advisor at 800-384-8080. You can also go to https://ashargroup.com/policy-value-questionnaire/ to take the first steps in determining if a policy may qualify for a life settlement.