Have you ever wondered what happens to the policies that clients sell to life settlement brokers? Now they can be part of your client’s overall retirement plan.

Life settlements, Wall Street’s newest asset class, are quickly becoming the darling of independent financial and retirement planners, and for great reasons. Until recently, life settlements were strictly an institutional investment. Now, they can be offered to individuals as well as institutional investors, either as a whole policy or on a “fractionalized” basis. This simply means that an investor can own small pieces of many policies and be a beneficiary of each.

Life settlements are directly correlated to life expectancy. As it is inevitable that eventually everyone has to die, the payout of a life settlement is assured by nature and not by some random CEO. Life insurers have a 100 percent track record on the payout of death claims, and life insurance, one of the longest standing asset classes, will be the last asset standing in a financial doomsday scenario.

Indispensible tools
So what does this mean to your client? Along with unmatched safety, life settlements possess two investment attributes that all financial gurus are touting as indispensible in today’s financial environment–non-correlation and absolute returns. Furthermore, clients are seeking these very attributes in the midst of our current financial meltdown. First, returns from life settlements are not related to the stock market, bond market, interest rates, monetary issues, terrorism or global political events. Second, life settlements offer absolute returns. There is security in knowing, at the time of purchase, the exact dollar amount that your investment is going to return when it matures.

However, even with all of these advantages, and a nearly 20-year track record of double-digit returns, don’t expect prospects and clients to immediately beat a path to your door. It just sounds too good to be true.

People believe what they can see, and if they don’t see “credibility” in life settlements or understand their value, they won’t know that they want them. How do you get around this and make people see and believe in the value of life settlements? A few effective marketing strategies include:

  1. Talk to a client’s accountant or lawyer and explain to them the value of this asset class. Getting third-party support for a new asset class can help expedite acceptance from the shared clientele.
  2. Use third-party support materials from credible, well-known publications and professionals who have talked positively about the asset class. Reinforcing its viability in your mail pieces and workshops helps with creating a “willingness” to learn more.
  3. Educate yourself. Always be ready to answer, both verbally and visually, all of a prospect’s questions. Use examples of applications, such as how life settlements have been a tool to hedge against risky investments, most notably, with Warren Buffett and his investment strategy.
  4. Explain the asset class in a problem-solution format. Again, third- party endorsements, print articles and positioning life settlements as a solution to a problem can mean huge sales increases for you and value to your client.

Once you have their attention, don’t sell the features, sell the benefits. Life settlements are a safe money alternative with a high return. Don’t just tell them, but show them the positive impacts of a safe, 10 percent return. Illustrate how many years it will take for them to recoup what they have lost up to now with life settlements, and without the risk of losing more. Show them a stretch IRA using life settlements and what that can mean to them, their spouse, child or grandchild. Life settlements are a great way to leverage RMDs and 10-percent-free withdrawals for clients with underperforming annuities, as well as IRA rollovers.

Agents selling life settlements are reporting increases in their annuity sales because they position them not as a replacement, but as a compliment to annuities and life insurance.

Life settlements are only available to individual accredited investors, and have only been so since 2007. However, their relative newness is not the only reason people are unfamiliar with the asset class. Given the fact that most broker-dealers and insurance companies do not have the ability to represent life settlements, the distribution network is very limited. But here comes the silver lining–that’s what makes the opportunity so much greater for you!

Don’t miss Garry’s session, “Take the Complication Out of IRA Strategies,” 2:45 p.m. — 3:45 p.m. at the 2009 Senior Market Advisor Expo. Click here to register today!