For 16 years, we have written about life settlements and what a great alternative this transaction could be for seniors about to lapse or surrender a policy.
And, as you can't help but notice, in the last few years, ads for life settlements are all over the television, the radio and social media as more firms want "in on the action."
Despite this increased visibility, there are relatively few transactions done each year.
Why are so many policies still being lapsed or surrendered before anyone determines if the policies could have yielded additional value on the secondary market?
Clients' Best Interests
Perhaps it's because advisors aren't focused on in-force policies, especially when the policies cover older people.
This lack of attention could become an issue as, according to the SEC's Fiduciary Interpretation, "An investment adviser must, at all times, serve the best interest of its client and not subordinate its client's interest to its own."
What happens when policyholders or their families realize, too late, that they weren't made aware that they might have received much more than the policy's cash value and are upset because their advisor did not suggest trying to sell their policy?
Sooner or later, it seems likely there will be litigation.
Think of all the baby boomers who have policies that haven't been reviewed since they were purchased, and how many of these policies will "blow up" due to changing interest rates and mortality charges.
Additionally, how many policyholders' needs or financial circumstances have changed since they first bought the policy?
Reaching Out
Sending a letter or email is a relatively painless way to follow up with your senior clients whose objectives and resources might have changed, and it helps you to satisfy your ethical and fiduciary responsibilities.
Finally, after all the years of asking people for money to pay premiums on their insurance, a life settlement could be a great way to get them money.
And, from lots of experience, getting people money is a big win-win: Not only do you make them happy when selling their policy, but you earn money too.
As we always say, "it can't hurt to try — it can only hurt not to." This time, we add, it can't hurt to contact your senior clients — it can only hurt not to!
Robin S. Weinberger, CLU, ChFC, CLTC, is the director of national accounts for Life Insurance Settlements Inc. She has been a general agent and director of national accounts for Connecticut Mutual and vice president of marketing for Sun Life of Canada.
Peter N. Katz, JD, CLU, ChFC, RICP, is a life settlement broker and co-director of national accounts with Life Insurance Settlements. He is also a consultant specializing in life insurance advanced sales illustrations, and he has served as an advanced markets attorney and in product development.
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