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Life Health > Life Insurance > Life Settlements

Understanding life settlements can increase AUM

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There are good reasons for the more than 20 percent –year-over-year growth of life settlements. Start with great client benefits from transactions that are safe, monitored, and often can be nothing less than financial masterstrokes. Life settlements can trigger liquidity events, put money into motion and increase assets under management.

Ironically, there are also good reasons why this reborn investment tool isn’t growing even faster.  Despite such dramatic growth, life settlement remains commonly misunderstood.  Your clients and your practice deserve the facts.

A recent survey of financial advisors was recently conducted by The Lifeline Program and Penton Research. You can download this compelling, comprehensive, easy to read white paper here. Learn about the common misperceptions and separate fact from fiction.

The conclusions say it all.  Despite the growth, the clear majority of financial advisors still don’t understand today’s Life settlement options.  When the facts are understood, advisors and their clients really benefit.

Basic life settlement facts

Life settlements are purchased life insurance policies that no longer make sense as part of a client’s investment strategy.  This is often a hidden asset, as many policies can yield more than the face value of the contract.

That’s not only good client news that’s a pleasure to deliver. A life settlement also showcases broader advisor investment acumen, cements client relationships and builds the advisor’s personal brand.

What’s new and improved

Much has changed since life settlements were introduced over twenty years ago. Today’s transactions are safe, secure, and flexible, with diverse client benefits and advantages.  Today’s settlement companies are licensed, regulated, monitored, and subject to state statutes and insurance commissions.  Trustworthy buyers that make confidentiality and privacy priorities, and no special knowledge or skill set is required for advisors.

Fiduciary best practices

Life settlements can be a dynamic event and a tempting option, but as with any investment, they should only be used when the advisor has determined they make sense for the client. If the policy aligns with the investment strategy, the client is pleased with the policy and can afford it, it may make sense to leave it in place. Estate tax considerations should also be factored in.

When life settlement are right

Here are a few examples when life settlements should be considered.

If the policy is clearly underperforming, it should be reviewed like any other investment.

If the client is financially stressed and can no longer afford the premiums, settlements can be a solution.  Lapsed policies yield nothing, but selling may yield more that the policy’s value.

If the policy no longer makes sense or has been outgrown, such as one purchased for a young, growing family, it’s an asset that can be more productive when used differently.

And if a client has pressing financial challenges, or faces daunting long-term care expense, life settlements can be a swift and life-changing solution and redefine retirement.

Settlement puts money in motion

Life settlements are a demonstration of the depth of an advisor’s investing and wealth management skill. You simply transform a passive, unused, forgotten or outdated investment — the life insurance policy — into a dramatic new beginning, or a timely solution to a client’s problem.

The Best first step for advisors

A great way to start is to look at the report detailing the survey conducted by The Lifeline Program.  There are compelling reasons to review every client’s portfolio with a new understanding of the safety and benefits of life settlements. If it make sense for them, you’ll create new opportunities to serve them and grow your business.

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Stephen Terrell (Photo: LifeGuide)

Stephen E. Terrell is president of LifeGuide Partners, LLC, a company that generates current market values for life insurance policies for agents and their senior life insurance clientele. He can be reached at (888) 484-3350 and on Twitter at @Tweet_Stephen.


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