As in the primary life insurance market, an advisor can work with a broker to shop around a life policy for settlement in the secondary market. Or, an advisor can try working directly with a life settlement provider. Which is best?

Working with a broker on a life settlement transaction will provide a representative for the seller’s interest, says Patrick Duke, managing principal of Chesapeake Financial Settlements LLC in Rockville, Md.

“By using a broker instead of going directly to the funders, you’re engaging someone to act as a fiduciary on your behalf,” he says. By comparison, when an advisor works with funders or providers, they are working with entities that are seeking to meet the goals of their investors. “They’re in the business of buying it for as little as possible,” he said.

Then again, while brokers provide a “valuable service” to their clients, they also add another layer to the process, and another party that must be compensated, points out Alan Buerger, chief executive officer of Philadelphia-based Coventry.

“They are another intermediary in the chain,” he says, “and they’ve got to get paid.”

Buerger says he has received e-mails from agents asking about money going to a broker, money he notes that could either be used to increase the agent’s compensation or be passed along to the policyholder.

As an example, he points to a recent case in which an agent was asking about $25,000 being taken by a broker that would have made a $250,000 offer to the policyholder a $275,000 offer. “That is a material amount,” he says.

Of course, many professionals helping clients find an appropriate life settlement have experience with the insurance industry, and they may not want to share their commission with someone slse. However, Duke says that life settlements are a distinct type of transaction, and “that’s not the business they’re in.” Working with a life settlements broker, he says, is just the same as a producer going to a brokerage general agent.

Brokers, Duke notes, are also capable of meeting the needs of a client within the process itself. Going through a broker does not slow the transaction and in fact gives the client the opportunity to seek out the best possible deal, he adds. “It depends on the client,” he contineus. “We’ve had clients who say ‘I need this money now’ and we’ve had others who are more interested in getting top dollar.”

Additionally, he says a broker can help meet clients’ specific needs in terms of how, and with whom, they want to do business. “We have had clients who say ‘I don’t want these guys’,” in reference to certain providers that may “get into the limelight.” Their concern is they have heard or seen something negative about the company they want to avoid.

Bringing a life policy to a broker for sale on the secondary market will also ease the burden of overseeing the transaction, Duke says. It also relieves the advisor of having to learn the details involved, leaving the process for someone else to handle who has experience in life settlements.

“It’s better to have someone managing the process,” he contends.

In terms of the process, Buerger ays that it can be “a little faster” to work directly with an advisor or agent. Also, he notes, based on Coventry’s experience, “more deals, as a percentage of submitted deals, get done when we’re working with an agent.”

A direct transaction also allows better communication with the seller’s other advisors, such as the attorney, who could facilitate the transaction, Buerger observes. “We’ve got the ability to speak to a client’s counsel without the extra layer,” he says, nothing that could make it easier to change provisions or language in the contract.

A majority of Coventry’s business comes directly from insurance agents, financial advisors and the like, with 15% coming via life settlement brokers, Buerger notes. However, he reiterates that “brokers provide a valuable service.” The best solution for an advisor may be to offer a policy to the secondary market both directly and through a life settlements broker, he adds.

This “creates competition for the broker” and it could serve as an inducement for the broker to shop the policy to more funders and seek more offers. Although many funders will not increase or decrease their offers based on whether or not a broker is involved, Buerger notes that “there’s a lot of commission competition” that could increase the amount of money going to the advisor or the seller in the transaction.

If an agent or advisor “wants real competition, they should submit to a broker and at least one funder,” he concludes.

In fact, he notes, it is “very common” for Coventry to receive a submission from both an agent and a broker for the same policy. “That happens literally every day,” he says. In such cases, he says his firm works directly with the agent if that submission was received first. But, he adds, “we don’t cut the broker out,” and will work with the broker if their submission comes before the direct submission.