By: Bill Clark

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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 that emphasizes speed, then you might suggest that they tap the brakes and determine if they are sitting on the wrong side of the negotiation table. No one likes to be hard closed.

I’m a big fan of the Fast and Furious movies and was saddened by the unexpected passing of Paul Walker in a fatal car accident in Los Angeles. On the home front, we all hold our breath as our teenagers start driving and hope and pray they never become the victim of a car crash. There’s a reason why car insurance companies charge more for inexperienced teenage drivers. Thankfully most of them reach adulthood unscathed.

Emphasizing Speed Over Outcome in Life Settlements is Risky Behavior

Most of our children do not end up flying fighter jets and exhibiting high-risk behavior like Tom Cruise in the Top Gun movies that had the famous line, “I feel the need for speed”. (By the way, Top Gun – Maverick which came out in June of 2022, is a must-see.) When a client is selling their life insurance policy, speed could mean there aren't competing buyers bidding on the policy. If your client fills out a life settlement questionnaire online and receives a quick offer, there could be cause for concern.

A direct buyer/provider offer may be fast, but it can leave some of your client’s money on the table, opening the door to liability for the advisor.

Successful life settlements that protect your client’s best interests require a degree of sophistication and information gathering that does not happen overnight. A fast offer is made with minimal underwriting information and is intended to quickly entice your client into settling for an amount that is less than what would be created by forcing competition among buyers. While the offer will be higher than the cash surrender value (CSV), it will be a far lower offer when compared to a fair market value (FMV) offer that is achieved through a life insurance policy auction between buyers. Those fast offers aren’t formal offers and can decrease once all the medical and policy information is reviewed. This could leave your client frustrated and confused. Some financial advisors even get caught up in these fast offers and unknowingly advise their clients to accept the offer without understanding how life settlements really work.

When Providers (Buyers) Compete, You and Your Client Win

There are two sides to any financial negotiation table: the buy-side and the sell-side. In the life settlement market, there are buy-side representatives (licensed providers) who may have one or more buyers they represent. Their goal is to get the best rate of return (lowest offer to your client) for the buyers they represent. They may tell you that they submit to multiple buyers, but they only use the buyers that they represent as a provider. This eliminates higher offers that could have been derived from forcing competition between multiple licensed providers.

A direct buyer/provider offer may be fast, but it is absent of competition and can leave some of your client’s money on the table. It also opens the door to liability for the advisor if stakeholders, such as beneficiaries, ask later if you shared the policy with multiple buyers/providers to create competition or if only one provider/buyer made the offer.  A provider will gladly help your client sell their policy directly to the buyer, but they can’t serve two masters. They have a fiduciary duty to the buyer they represent, not your client.

The only way to receive an offer that provides fair market value to your client is through a competitive policy auction process that forces providers to compete.

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, 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 that is 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 licensed life settlement broker that acts as a fiduciary to protect the best interests of policy owners in the life settlement process by creating a competitive auction to deliver the best value to the seller. Ashar Group is an independent seller’s representative and does not sell life insurance, manage assets, or purchase policies. 

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Tax practitioners who are wary about discussing life settlements are not alone. Learn more about getting the best value in a life settlement transaction.



get a secondary opinion®

For a high number of seniors, the sad truth is that most will let their policies lapse instead of exploring a life settlement: which means no death benefit will ever be paid out. And according to the Insurance Studies Institute, 90% of these seniors would have considered a life settlement had they been aware of this option in the first place.

Yet many insurance agents are experience difficulty keeping up-to-date about the opportunities a life settlement may present. Some are even prohibited by their carrier or broker dealer to even have to discuss the subject of a life settlement with their clients in the first place. In situations where advisors have a fiduciary responsibility to their clients, this prohibition puts these planners in a position where they are literally handcuffed when it comes to meeting their fiduciary responsibility to their clients.

According to a life settlement study by the U.S. Government Accountability Office going back to 2010 and based on over 1,000 life settlement transactions, it found that seniors selling their policies in a life settlement transaction received almost 8 times as much money as the would have if they had surrendered their policy to the insurance company.

As a planner or fiduciary who has a client anticipating lapsing or surrendering a life insurance policy, it is to your advantage to get a secondary opinion® with The Ashar Group to see if you can do better with a life settlement. We are a team of highly skilled experts who work on behalf of financial advisors, trustees and other financial practitioners to find, negotiate and secure the true market valuation for life insurance policies in the secondary market.

Take a quick value policy quiz: https://ashargroup.com/quiz. It can help you determine if your policy can make more in the secondary market.

get a secondary opinion®

In a client-advisor relationship, the advisor is at an advantage, which is why it’s an advisor’s fiduciary responsibility to act in good faith for the client’s benefit. And this is more than the right thing to do; in many situations it’s the law. For example, according to The Employee Retirement Income Security Act of 1974 (ERISA): “A fiduciary shall discharge his duties with respect to a plan solely in the interest of the participants and beneficiaries “ (section 404 of ERISA)

With the advent of Life Settlements and the noticeably high hidden value they may contain, Consulting with a Secondary Market Specialist like The Ashar Group can provide a much needed source of revenue for a client, which is why no stone should be unturned to find the fair market price of a policy. If an executor fails to protect the estate’s assets the beneficiaries may have legal recourse to sue the advisor. And even if it even if legal action isn’t taken, the damage to a reputation could have serious consequences.

Life Settlements offer many options, and they are why advisors recommend to their senior clients who are looking for a way to enhance their retirement income to consider looking into the secondary market for a life settlement payout. For more information, talk to a Secondary Market Specialist at 800-384-8080 or visit ashargroup.com for more information.

get a secondary opinion®

Many changes can happen to seniors as they get older, which is why the ability to provide them with the services and support for those you love. Here are some links that you may find helpful as you deal with senior care and all the financial and emotional complexities that come with it. For a full list of recommended sites, please visit ashargrop.com.

AARP - American Association of Retired People:
The AARP website contains unlimited resources to help with retirement needs and healthcare planning. Research all the options available and hear from others on how today’s economy and events are impacting them. The AARP's retirement planning page: click here.

Society of Financial Services Professionals:
Society members can offer seniors and those who are providing their care expert assistance with: estate, retirement and financial planning; business and compensation planning as well as insurance for life, health, disability, and long-term care.

The Assisted Living Federation of America (ALFA)
The Assisted Living Federation of America (ALFA) is the largest national association exclusively dedicated to professionally-managed, resident-centered senior living communities and the seniors and families they serve. Their mission is to be a voice for choice, accessibility, independence, dignity, and quality of life for all seniors. For additional information, visit alfa.org.

The Alzheimer's Association
The Alzheimer's Association advances research to end Alzheimer's and dementia while enhancing care for those living with the disease. Learn more at allz.org.

The National Parkinson Foundation (NPF)
For over half a century, the National Parkinson Foundation (NPF) has focused on meeting the needs in the care and treatment of people with Parkinson’s disease (PD). NPF has funded more than $182 million in care, research and support services. Learn more about Parkinson's disease.www.parkinson.org.

If you are in a position where you think it would be prudent to consider additional alternatives like a Life Settlement, talk to a secondary advisor. You can also go to https://ashargroup.com/policy-value-questionnaire/ to take the first steps in determining if a policy may qualify.

get a secondary opinion®
A or B as concept of choice

The possibilities of utilizing a SMV®, or Secondary Market Valuation, are many. If you are considering a Life Settlement, here are some important considerations:

• Make sure to work with a reputable Life Settlement Broker that will always have best interests of your client in mind. They will be will put your policy through a competitive bid process to ensure your client get the most for the policy.

• Consider the life settlement options. For example, Ashar offers a variety of alternatives when deciding on a life settlement: With the Lump Sum Settlement, the policy owner would sell the insurance policy that is no longer needed or affordable on the Secondary Market for more than cash value. With Term Transformer, a client can turn a term policy that is no longer effective for the policyholder or is about to expire into a cash settlement. And with Ashar's Split Death Benefit Option, the policyholder truly does have the best of both worlds. The policy owner retains a percentage of the death benefit while the buyer takes over the premium payments enabling the original policy owner to retain some coverage with no future premium payments on their part.

• Do it for the right reasons. Some reasons are better than others for choosing a life settlement. One easy way to determine if a life settlement is your best option is by going to www.ashargroup.com/quiz/start to see if you qualify. Besides reasons like funding long term care or reducing or elimination premiums, other compelling reasons include:

* Determining the value of a policy for a recent merger or acquisition
* A change or transfer in business when a policy can be valued as a significant asset
* Funding a project by generating liquidity

get a secondary opinion®

Policy owners now have more options and control than ever before thanks to the secondary market for life settlements, which has allowed policy holders to put a value on what may be their largest asset. In fact, it’s no different than putting a value on a house on the open market.

And just like the transaction process with a house, the process for determining Fair Market Value (FMV) is very similar. Legislation has changed to protect the rights of the policy holders so they can sell their policies for the most competitive bid. This legislation also includes the right to be informed about the opportunities presented by the market and the right to privacy throughout the transaction. These factors in in turn have helped open up the market, while piquing the interest of the policy holder’s advisor to determine a FMV in the secondary market.

A SMV®, or Secondary Market Valuation is determined by numerous factors. Of all the factors that are taken into consideration, the one that trumps all others is the life expectancy of the insured, which is what the actuary will use when estimating the valuation of the policy. Typically life settlements are offered to seniors’ age 65 and older with a life expectancy of 15 years or less in most cases. When the cost of premiums is very low, then there are some offers being made for life expectancies greater than 15 years.

The results of the Secondary Market Valuation is also determined by the type of policy owned, whether that’s universal life, whole life and even a convertible term policy all can benefit. Investors choose universal life policies for example, largely due to the flexibility in premium payments.

The bottom line is that a life settlement broker is needed to secure fair market value by creating an environment that encourages a competitive bidding process. An SMV®, or Secondary Market Valuation, incorporates the impact of obtaining a variety of competitive bids from a multitude of prospective institutional buyers to ensure that the highest value possible is obtained. An experienced life settlement broker has the knowledge and experience to help make this happen.
If you are in a position where you think it would be prudent to consider alternatives, talk to a secondary advisor. 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.

get a secondary opinion®
Secure Online Cloud Computing Concept with business man

Before the Secondary Market emerged, advisors and policy owners had few options when surrendering or lapsing a policy, which is why we came up with the idea of 5 best practices to protect your client and yourself. With more options and advantages available in the Secondary Market, advisors can offer their clients the potential for larger settlements and the possibilities to offset tax obligations. With these opportunities also comes the responsibility of advisors to know when the secondary market can be advantageous for a client, and this is where a Secondary Market Specialist comes in. These specialists are able to identify the potential for a policy to be sold on the secondary market, generating a settlement which can enrich the life of the policyholder and ensure the advisor did their due diligence for their client. Here are a few examples of how a Secondary Market Specialist can help traditional advisors and their clients:

- Offset estate tax obligations with life insurance – With the passing of the American Taxpayer Relief Act of 2012 (ATRA) estate tax exclusions were raised. This can cause a reduction in a client’s estate tax liability, which in turn can reduce the amount of policy coverage needed and frees up liquidity for other uses

- Convert a term policy into a cash settlement – The Term Transformer offers an alternative to liquidate a policy. It’s designed for a convertible Term Life Policy that is about to be surrendered or about to lapse

- Limiting liability for exit planning – Determining fair market value of a life insurance policy may be worth more than the business, generating significant value for a client for exit-planning or transferring business

- Eliminate premiums without surrendering policy – A Split Death Benefit Option from Ashar gives policyholders the opportunity to eliminate premium while maintaining some coverage with no future premium payments (a percentage of death benefit goes to policy owner while a buyer takes over premium payments.)

- Analyze likelihood of a policy flush in hidden value in the Secondary Market – Determining Fair Market Value (FMV) can significantly enhance the lifestyle of a client and minimize the risk of a lawsuit against advisor for negligence

If you are in a position where you think it would be prudent to consider alternatives, talk to a secondary advisor. 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. It only takes a minute, and it could help save your clients thousands.

get a secondary opinion®

Let’s talk a minute about the benefits of fair market value. Let’s say you owned a nice wooded lot that was considered a valuable piece of real estate. Would you simply forget about it and go about your business as if it never existed? Or give it away for a mere fraction of what you knew it was worth? Of course not. Yet, when it comes to life insurance policies, most people let their policies lapse or surrender without checking to see what they might worth on the secondary market. In fact, more than $90 billion of term policies available on people 65 and older today are being significantly undervalued.

So what determines fair market value of a policy? First, consulting with a Secondary Market Broker can offer the support advisors and their client’s need who are not familiar with the Life Settlement Process. For example, the Ashar Group has something called a SMV®, Secondary Market Valuation. The SMV® generates a variety of competitive bids from many different institutional buyers who are showing interest in the policy. If it is a favorable option for the client, a Secondary Market Broker can help negotiate with providers to determine the fair market value of the policy through this efficient and exhaustive process that takes all factors into consideration. Because of this competitive bidding process, The fair market value can be worth up to 7 times the value of the policy at face value, offering the policy holder a compelling reason to proceed with the Life Settlement process.

If you think it would be prudent for your client to pursue a life settlement, then talk to a secondary market specialist. You can also go to https://ashargroup.com/quiz/ to take the first steps in determining if a policy may qualify for a life settlement. It only takes a minute, and it could help generate the short-term liquidity today that some many people are looking for to help alleviate financial stress in these economic times.

get a secondary opinion®

When a client decides to pursue a life settlement arrangement, more often than not it is because an influx of capital is needed to fund a long-term expense like health care. This is why it is very important for the client’s advisor get assistance from a life settlement broker to make sure that multiple bids from different providers are acquired to ensure the most competitive offers. This is key, because multiple bids from the same provider is not achieving fair market value, that’s simply achieving what the provider wants to pay.

A life settlement can provide many times the surrender value to the client when competitively bid right. That’s why it is also important for an advisor to do their research and retain the services of a respected and nationally licensed brokerage firm that has experience and a good industry reputation as a life settlement broker. These secondary market brokers are familiar with the key players and can help get the the best market value for the client.

If you are in a position where you think it would be prudent to consider alternatives, talk to a secondary advisor. 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. It only takes a minute, and it could help save your clients thousands.

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