Do life settlements serve clients' best interests?
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.
Does your compliance department allow for life settlements?
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.
Are all life settlement companies created equal?
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.
Choosing the right partner. Does your life settlement resource pass the compliance test?
There are key elements that compliance officers look for when completing their due diligence in the approval of a life settlement partner.
Verify the following when selecting a life settlement resource:
- Are they a licensed life settlement broker or a licensed life settlement provider? A broker serves as a fiduciary to the client and advisor, not the buyer.
If they are a provider, your compliance officer may not allow you to do business with them because they represent the buyers only (not the client) and do not perform price discovery.
- Do they hold a life settlement broker's license in all states that require them?
- How well do they meet their fiduciary responsibility to protect the best interests of the policy owner/seller during the life settlement process?
- Are they independent with life settlements as their core business, or are they only an accommodation broker with minimal transactional experience, doing it as a supplementary part of their overall business offerings?
- Do they have a proven track record and expertise to conduct a transparent policy auction between all legitimate providers to obtain the best value for your client?
National broker-dealers include life settlements on their platform.
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.
Policy was eating cash flow needed for caregiving costs
Funded long-term care needs and relieved financial stress from her family.
Business was sold, and the policy was no longer needed
Business owner was able to receive additional value above and beyond the sale of the company.
Donated policy to a charity ran out of cash value to pay premiums
Donor was able to create a living legacy and enjoy seeing the gift used while living.