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Feature: Agents becoming more assertive about settlement market

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Agents are starting to become more assertive in their efforts to learn about life settlements and to enter the market, according to industry professionals.

Rather than waiting for settlement brokers to come around, some agents are actively seeking out information and connections in the settlement market, says Roy Shellhammer, managing partner with RTG Consultants, a Longwood, Fla. firm that owns Life Settlement Pro.

They are also finding plenty of resources to help them, adds Bill Boersma, owner and president of Opportunity Concepts LLC, a Grand Rapids, Mich., consulting company serving advisors.

For many years, the main business model for the settlement business was for settlement brokers to call on established agents, advisors, planners, attorneys and certified public accountants, recalls Shellhammer. The brokers did this to find prospects for settlement sales, he says.

Many agents knew little or nothing about settlements at the time, so that’s how they learned–from the broker visits and the seminars some brokers put on.

But since then, settlement volume has increased, there has been more press about settlements, more states have adopted settlement regulations, and professionalism has grown in the industry, Shellhammer says. All those changes have contributed to greater advisor awareness–and consumer awareness too, he adds.

As a result, in the past year or so, Shellhammer says he has noticed increased appetite for settlement information among both advisors and consumers.

Now, agents “are starting to contact the brokers, instead of the other way around,” Shellhammer says.

In addition, more agents–and consumers–are visiting his website, and more are responding to his firm’s e-mail blasts about settlements, even as his firm steps up its internet profile and marketing campaign.

The agents are asking questions and learning what they need to know so they can turn around and do their own e-mail blasts to clients about settlements, put on settlement seminars and do mailings, he continues.

“We are helping them with that as much as we can, because the broker benefits from building strong relationships with agents,” he says. “We want the relationships, the prospects and the follow-up.”

The year 2009 was a challenging year for the settlement business, due to capital crunch and also the expanded life expectancies (LEs) that have come out, Shellhammer allows. But “the market is more neutral now, and agents are starting to show more interest.”

Jonathan Reilly has also seen more people checking his settlement firm’s website. He is president and chief operating officer of Life Distributors of America, LLC, Westlake Village, Calif.

“We’re getting more inbound phone calls too, especially from agents west of the Mississippi. They are seeking information on where the settlement market is going and they are looking for materials.”

Whether they need webinars, conference calls or general overviews, “we help them,” he says.

The uptick in calls was particularly noticeable in the first quarter of 2010, Reilly says. “The advisors have noticed the reports that the settlement market has been improving in recent months (after the difficult market of 2009), so they are asking how to get started, what to do about licensing, and whether more buyers are really coming into the market.”

Boersma points out that this learning is important, even for agents who think settlements are not beneficial for consumers.

The agent has a “duty to learn” enough about industry developments and trends in order to advise clients, he explains, noting that he himself worked many years as a life insurance agent before going into consulting.

If the agent does not want to recommend settlements, the agent should still be able to discuss them and explain the recommendation, he indicates.

“Agents always need to look for what solution is best for the client,” Boersma points out. “They also have to follow the rules of their own insurance company,” many of which still strongly oppose life settlements. So agents need to learn as much as they can about settlements in order to be able to approach their clients fully informed, he says.

Generally speaking, he notes, “the agent has more at risk by not offering a life settlement than by offering one–if, say, the client could get $70,000 for selling the policy versus only $13,000 from surrendering the same policy.”

If an agent does decide that a settlement is best, and if the agent’s own company is opposed to settlements, what many agents do is “turn that case to a settlement expert–without accepting any compensation for the actual settlement that results,” he says.

How can agents learn about settlements? Boersma recommends the following:

- Start out by talking to brokers and national insurance marketing organizations. “Look for firms with a reputation of being good at settlements,” Boersma advises, adding that “the biggest players are a good option, but so are major regional experts.”

- Read articles in trade magazines and business publications and websites.

- Listen to presentations on settlements at meetings of advisor associations and other industry groups.

- Go to conferences on life settlements.

- Ask for case histories, and learn about the trial and errors they represent.

Some agents may not be sure which broker or settlement expert to consult, Boersma says. In that case, he suggests using some of the standard measures that people use when checking out an expert–the number of years in business, the volume of business (though not always easily available), and testimonials and referrals.

Also, he says, ask about the kinds of policies and death benefits the firm deals with, the transparency of their settlement process, the compensation structure, the number of funders they use, and the record of the offers they have attracted.

There is no industry resource an agent can use to check the validity of such information, Boersma allows. But agents can use their personal networks as a cross check. Also, he says, the agent should ask: “Are they believable and trustworthy? Do they answer my questions? Do they seem to understand the market? Do I feel comfortable about working with them?”

The settlement business can be complicated, Boersma concludes. For instance, if a policyholder lives in one state but the policy is owned by a trust domiciled in another state, the agent in the policyholder’s current state might have difficulty finding bids for the policy, if the state where the trust is domiciled has more restrictive standards.

If the agent does not know the ins and outs of such arrangements, the agent would be smart to consult an expert, he says.

Shellhammer agrees, and adds: “Find someone who answers your questions and treats you and your client in a professional manner.”

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