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:  

  1. “Are you a licensed life settlement broker or a life settlement provider”? Have them produce their license for your state if you’re not sure. You can also visit their website to find the answer. Sometimes you must read the fine print. If you discover that they are a licensed life settlement provider, then they are a buyer’s representative. Providers 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 buyers, not your client. Many life settlement resources are just lead generation companies and are not licensed to represent either side of the table. Do you really want a lead generation company to have access to your client’s sensitive health information?  
  1. “Do you conduct a life insurance policy auction forcing providers to compete?” Only a nationally licensed life settlement broker has the licensing and the expertise to conduct a successful life insurance policy auction forcing providers to compete. However, any insurance agent that wants to receive a commission from a life settlement, must first be appointed as a life settlement broker. They may complete one or two life settlement cases per year. They do not have the staff, national licensing, or expertise to run the policy auction. Make sure your resource is a nationally licensed life settlement broker. Fiduciaries do not take commissions but can charge fees for life insurance valuation and other services provided by a life settlement broker. 

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.

Frequently Asked Questions
Still have questions?

Why is Fiduciary Representation Important?

The only way an advisor can ensure their clients get an accurate valuation of their existing life insurance policy (and the best value if a life settlement option is chosen), is by partnering with a life settlement resource that has a fiduciary duty to protect the best interests of the policy owner/seller.

For even the most knowledgeable fiduciaries and financial professionals, it can be difficult to determine who is representing your client. Here’s some information to help complete your due diligence when selecting a life settlement partner.

Brokers vs. Providers

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 possible offers based on the client’s situation and needs.

Providers are licensed to represent the investors. The secondary market for life insurance would not exist without providers who are licensed to purchase policies on behalf of institutional investors around the world. Institutional investors come and go as funds become available, and the licensed provider’s responsibility is to get these investors the best deal.

Direct-to-consumer buyers have an obligation to the institutional investors who purchase the existing life insurance policies, and their primary goal is to obtain the highest rate of return for the purchase.

Not All Brokers are Created Equal

Only a broker who does not have an interest in companies purchasing policies can be considered an independent resource acting solely in the best interest of the policy owner.  

Any individual who holds a life insurance license in their state can pay a fee and apply to be a life settlement broker in that state. An overwhelming majority of life settlement resources acting as brokers are only licensed in one state. Because national licensing is expensive and time-consuming, these entities sometimes “borrow” licenses from other sources to complete transactions in other states. Some life settlement resources are only lead generation companies – meaning they aren’t licensed to facilitate the transaction at all. They simply gather your clients’ information and sell it to licensed sources.

A nationally licensed life settlement fiduciary plays a vital role in protecting your client’s data, ensuring the best offers from reputable institutional buyers, and keeping track of all compliance and regulatory requirements.

Due Diligence: Selecting the Right Life Settlement Resource

  1. Do they purchase policies for their own funds or for any other life settlement resource?
  2. Do they have an ownership interest in any entity that purchases policies for the secondary or tertiary market?
  3. Do they sell products or provide financial advice that puts them in direct competition with you?
  4. Are they a licensed fiduciary to the policy owner or the buyer?
  5. Do they hold a transparent competitive auction that guarantees the best offers?
  6. Have they ever sold policies to individual investors?

Ashar Group is a nationally 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, management assets, or purchase policies. Find out how we’re different or contact us today.

Frequently Asked Questions
Still have questions?

Request a Webinar

Ashar Group has created a virtual knowledge base to provide fiduciaries, financial professionals, and strategic partners the ability to stay current on the life settlement market and educate them on the importance of treating life insurance as an asset.
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get a secondary opinion®

piggy bank photo: Piggy bank piggy-bank.jpg

It’s not unusual to hear about a policyholder who abandons or cashes in their life insurance policy without first checking for its fair market value.. If they had appraised their policy, many would have found out that it could have been worth far more in the Secondary Market than what they received by simply letting the policy lapse or cashing it in with the insurance carrier that issued the policy.

Those familiar with the Secondary Market know that obtaining the best value for a life insurance policy doesn’t always come from the issuing company, and having a Secondary Market Valuation, SMV®, not only provides up to date information about what the policy is worth, it also can mitigate liability for trustees and fiduciaries that might have unknowingly surrendered or lapsed policies for minimal value.

The results can be life-changing and provide liquidity for retirement, caregiving, and lifestyle needs.

So what must an advisor and client do to ensure the best possible outcome? First, evaluate all options available to the client, including a life settlement. Next, work with a firm such as Ashar that is licensed to advocate on your client’s behalf. Their responsibility is to analyze the client’s probability of receiving an offer for their policy in the Life Settlement Secondary Market and guide the client and advisory team efficiently through the process, while minimizing potential pitfalls. A licensed broker, such as Ashar, is aligned with the client’s interests and will negotiate with their established institutional funding relationships to secure the best offer possible for your client’s policy. The goal is to facilitate a formal negotiation between institutional buyers and obtain multiple offers through this competitive bidding process.

By following these steps, you’re helping to ensure that your client is being dutifully represented, while you protect your reputation and limit liability. If you have any questions about the Secondary Market, please call us at 800-384-8080.

get a secondary opinion®

The Secondary Market for Life Insurance is a global market with a variety of institutional investors. It is comprised of private equity, pension funds, reinsurers and global banks. In a life-settlement transaction, a policyholder sells an existing policy for an amount higher than the cash surrender value, but less than the death benefit. The new owner pays the premiums and collects the death benefit when the insured passes. This is a win-win for both parties. Similar to a structured settlement or lottery buyout, the consumer receives a lump sum today and the institutional investor, such as the pension plan, can meet their future obligations.

Due to the complexities of the transaction, it is imperative to secure the services of an experienced and knowledgeable licensed broker to facilitate the case design, negotiation and closing process.

If you are considering valuing your policy, talk to a secondary market advisor such as Ashar Group who can guide you through the process. You can also go to https://ashargroup.com/policy-value-questionnaire/ to help you determine if your policy may qualify for a life settlement.

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