Dictionary.com defines a fiduciary as “a person to whom property or power is entrusted for the benefit of another” and the thesaurus uses words such as guardian, trustee, aboveboard, trustworthy and straight as interchangeable words for fiduciary.
Insurance agents may not be fiduciaries yet, but aren’t their companies positioning them as trusted advisors who are supposed to be doing the right thing for their clients? However, many insurance companies and broker-dealers still object to their producers helping clients to explore a life settlement before a policy gets lapsed or surrendered.
Hard as it is to believe, each year $57 billion of face amount of life insurance lapses on insureds over age 65 (this number excludes smaller face amount whole life policies). This massive amount of death benefit represents about 250,000 policies with an average face amount of $225,000.
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Realistically, only a very small percentage of these policies would likely qualify for a life settlement. But if you were a client with a policy that could be settled, and your agent did not advise you of that option, wouldn’t you feel that the agent — someone you count on to give you the best possible advice —has violated your trust and has committed an act of malpractice?
As the new DOL fiduciary rule is phased-in next year, it seems more than likely that the best interest principle will carry over into all aspects of a producer’s business, including life insurance and, consequently, life settlements. If your company prohibits you from facilitating a life settlement, you are being prevented from acting in your client’s best interest. Aren’t you setting yourself up for a lawsuit by clients who were damaged financially by missing out on a life settlement and receiving only the surrender value for a policy which they terminated?
For those of you who took the CLU Pledge and are not making life settlements a part of your practice, aren’t you in violation of your own ethical standard?
“In all my professional relationships, I pledge myself to the following rule of ethical conduct: I shall, in light of all conditions surrounding those I serve, which I shall make every conscientious effort to ascertain and understand, render that service which in the same circumstances, I would apply to myself.”