[quote=AllREIT] [quote=deekay]

AllReit,

You have not defined what life insurance is.  You have not answered my question about how your clients react when you tell them the truth about settlements.

[/quote]

Life insurance is contract between you and an insurance company for payment upon a specified event. It's basicly a fancy put option. And like any put option it has value.

Whats scary is that some of my clients want to invest in life settlements.


[/quote]

You forgot one key element in your definition.  It is guaranteed payment on death that will not result in a profit to the beneficiary.  In other words, life insurance settlements provide a profit to the third party that buys a CV policy.  A previous poster mentioned a case where his client sold a $3mm DB policy for $80k.  A profit of $2.4mm results for the new owner/benficiary.  By definition, this is not life insurance.

The fact your clients are asking about it and you are not warning them of the pitfalls is disturbing.  By selling a policy to a settlement broker, you and your client are putting a big fooking target on your backs.  I mean, an individual has a VESTED INTEREST in seeing your client die sooner!!!  Not to mention the ramifications these transactions can have on the insurance industry (higher premiums/tougher underwriting, etc).  They go against everything life insurance needs to do and should be made illegal for the good of insurance companies, clients, and financial advisors/agents.

Did I mention how sickening it is to hear your clients wanting to get involved in this?  I know we've had our differences, AllReit, but I sincerely hope you do not encourage this kind of stuff. 

[quote=theironhorse]where did the "underperformance" and "biased information" come from?  Allreit has his own funds? [/quote]

I can neither confirm nor deny this, but AllReit holds himself out as an RIA.  He invests his clients' money in Vanguard ETFs and charges a 1% wrap fee.

He is biased because any strategy that doesn't allow him to cram all investable assets into his wrap program is wrong in his opinion.  His bias is towards fee-based planning.  Thankfully, he only does investments and doesn't (hopefully) convey his utter lack of knowledge of financial planning concepts to his clients.

[quote=deekay][quote=AllREIT] [quote=deekay]

AllReit,

You have not defined what life insurance is.  You have not answered my question about how your clients react when you tell them the truth about settlements.

[/quote]

Life insurance is contract between you and an insurance company for payment upon a specified event. It's basicly a fancy put option. And like any put option it has value.

Whats scary is that some of my clients want to invest in life settlements.


[/quote]

You forgot one key element in your definition.  It is guaranteed payment on death that will not result in a profit to the beneficiary.  In other words, life insurance settlements provide a profit to the third party that buys a CV policy.  A previous poster mentioned a case where his client sold a $3mm DB policy for $80k.  A profit of $2.4mm results for the new owner/benficiary.  By definition, this is not life insurance.

The fact your clients are asking about it and you are not warning them of the pitfalls is disturbing.  By selling a policy to a settlement broker, you and your client are putting a big fooking target on your backs.  I mean, an individual has a VESTED INTEREST in seeing your client die sooner!!!  Not to mention the ramifications these transactions can have on the insurance industry (higher premiums/tougher underwriting, etc).  They go against everything life insurance needs to do and should be made illegal for the good of insurance companies, clients, and financial advisors/agents.

Did I mention how sickening it is to hear your clients wanting to get involved in this?  I know we've had our differences, AllReit, but I sincerely hope you do not encourage this kind of stuff. 

ok.  I just don’t see why anyone would farm this out to someone else.  ALLREIT-I may differ with you on a few things, but can understand differences  of opinion on the life insurance front.  Why do you let someone else handle such an important part of a clients financial picture?  Just curious.

I refuse to believe that Allreit is an actual advisor that deals with real live people with real life issues.   All theory with no practical applications.

[quote=theironhorse]ok.  I just don't see why anyone would farm this out to someone else.  ALLREIT-I may differ with you on a few things, but can understand differences  of opinion on the life insurance front.  Why do you let someone else handle such an important part of a clients financial picture?  Just curious. [/quote]

He farms the insurance work out.  Isn't it obvious by his utter lack of understanding of life insurance from a practical standpoint? 

[quote=AllREIT] [quote=deekay][quote=AllREIT] [quote=deekay]

AllReit,

You have not defined what life insurance is.  You have not answered my question about how your clients react when you tell them the truth about settlements.

[/quote]

Life insurance is contract between you and an insurance company for payment upon a specified event. It's basicly a fancy put option. And like any put option it has value.

Whats scary is that some of my clients want to invest in life settlements.


[/quote]

You forgot one key element in your definition.  It is guaranteed payment on death that will not result in a profit to the beneficiary.  In other words, life insurance settlements provide a profit to the third party that buys a CV policy.  A previous poster mentioned a case where his client sold a $3mm DB policy for $80k.  A profit of $2.4mm results for the new owner/benficiary.  By definition, this is not life insurance.

The fact your clients are asking about it and you are not warning them of the pitfalls is disturbing.  By selling a policy to a settlement broker, you and your client are putting a big fooking target on your backs.  I mean, an individual has a VESTED INTEREST in seeing your client die sooner!!!  Not to mention the ramifications these transactions can have on the insurance industry (higher premiums/tougher underwriting, etc).  They go against everything life insurance needs to do and should be made illegal for the good of insurance companies, clients, and financial advisors/agents.

Did I mention how sickening it is to hear your clients wanting to get involved in this?  I know we've had our differences, AllReit, but I sincerely hope you do not encourage this kind of stuff. 

[/quote]

Who says I've ever proposed a life settlement to anyone? I think these people are clever, and doing alot of good by giving liquidity to people who's main asset is useless to them while alive.

Why is the CV worthless when someone is alive?  You call them clever, I call them parasites. 

I believe in free markets, and a life policy is like any other asset. It's your life, and you should be able to profit from it.

I believe in free markets and free will as well.  Do what you want.  You however do not understand the ramifications if these settlements continue to exist.  It is no different than a mob hit for profit.  I couldn't sleep at night knowing someone has a contract on my life.

As for big target's, how many people are killed by relatives over life insurance vs killed by life settlement investors seeking a higher IRR. I think anyone with excess coverage (e.g your proposed $5million maximum coverage) is at risk.

You're sick.  The difference is one is illegal and the other should be illegal.  Either way, someone is PROFITING off someone's death.  That, by nature, goes against what life insurance is defined as.  Not to mention the moral and societal dilemas it causes. 

How do you know how much life insurance my clients need or want?  Have you ever told your clients they can purchase far more insurance than you think they 'need'?  Oh, you don't give a crap, you're only looking for their AUM.  And you hold no accountability as a result.  Yet you hold yourself out as an expert.   

Life insurance is just a parametric put option. Nothing less, and certainly not anything more.

No wonder you'd suck as an agent.  You treat people as numbers, an algorithim.  If insurance is only a series of financial transactions, why refer the business and create your own risk management system.  You'd make a killing

[/quote]

[quote=Dust Bunny]I refuse to believe that Allreit is an actual advisor that deals with real live people with real life issues.   All theory with no practical applications.[/quote]

Well said, babs.

[quote=deekay]

Who says I've ever proosed a life settlement to anyone? I think these people are clever, and doing alot of good by giving liquidity to people who's main asset is useless to them while alive.

Why is the CV worthless when someone is alive?  You call them clever, I call them parasites.

How much CV is in the policy vs how much can you get from the life settlement folks? No one would be doing life settlements if they didn't think it was a better deal than keeping the policy in force.

As Ronnie James Dio said: "Holy Father, Holy Ghost, who's the one that pays the most?"

I believe in free markets, and a life policy is like any other asset. It's your life, and you should be able to profit from it.

I believe in free markets and free will as well.  Do what you want.  You however do not understand the ramifications if these settlements continue to exist.  It is no different than a mob hit for profit.  I couldn't sleep at night knowing someone has a contract on my life.

Boo hoo for poor AIG as their whole life policy have suddenly become whole life policies. Bad underwriting on the part of insurco's is no-one elses fault and no ones elses problem except themselves.

Frankly if I had a $5m bounty on my head as you suggest, I wouldn't be sleeping at night. 

As for big target's, how many people are killed by relatives over life insurance vs killed by life settlement investors seeking a higher IRR. I think anyone with excess coverage (e.g your proposed $5million maximum coverage) is at risk.

You're sick.  The difference is one is illegal and the other should be illegal.  Either way, someone is PROFITING off someone's death.  That, by nature, goes against what life insurance is defined as.  Not to mention the moral and societal dilemas it causes.

Life insurance is profiting from the time, distance and fear of death. The lifeco hopes that premiums paid, (and investment returns on its reserves) will exceed the future value of the death benefit.

The life settlement folks hope that the future value of the death benefit will exceed the purchase cost and ongoing premiums for the policy. Two sides of the same coin (policy).

The excess cost of the premiums over the death benefit is economic profit, and part of a vast transfer of wealth from policyholders to lifeco's and their shareholders. It's your choice on how much empire tax you want to pay.

Deep down, life insurance is very simple parametric put option. And it is priced as a very simple peice of math, using mortality and ammortisation tables.

http://en.wikipedia.org/wiki/Actuarial_science
http://en.wikipedia.org/wiki/Survival_analysis

and my favorite

http://en.wikipedia.org/wiki/Gompertz-Makeham_law_of_mortali ty

Two numbers (background death rate and age) is all you need to predict lifespan. Insurance Rating classes correspond to different assumptions about the background death rate and age factor.

Now some people, (often sellers of life insurance) like to pretend that life insurance something more than a put option.

How do you know how much life insurance my clients need or want?  Have you ever told your clients they can purchase far more insurance than you think they 'need'?

Yes, I've told people that if they want to they can buy about $5m in life insurance before the lifeco's will start getting suspicious. Cases over $1m may take longer to close due to the involvement of reinsureres.

I tell clients that the insurance agent will sell them any amount of life insurance they could possibly need, and alot more if you let him.

Oh, you don't give a crap, you're only looking for their AUM.  And you hold no accountability as a result.  Yet you hold yourself out as an expert.  

No, the difference is that my compensation isn't linked to how much life insurance I sell. I have no incentive to recomend buying more life insurance than can be justified by a needs analysis.

Life insurance is just a parametric put option. Nothing less, and certainly not anything more.

No wonder you'd suck as an agent.  You treat people as numbers, an algorithim.  If insurance is only a series of financial transactions, why refer the business and create your own risk management system.  You'd make a killing

Because doing investment management is much less capital intensive than starting up a life insurance company.

 Anyways, I view my purpose in life as something other than selling lots of life insurance on behalf shareholders of MET etc.

[/quote]

[quote=theironhorse]ok.  I just don’t see why anyone would farm
this out to someone else.  ALLREIT-I may differ with you on a few
things, but can understand differences  of opinion on the life
insurance front.  Why do you let someone else handle such an
important part of a clients financial picture?  Just curious.
[/quote]



Two reasons.

[quote=AllREIT][quote=theironhorse]ok.  I just don't see why anyone would farm this out to someone else.  ALLREIT-I may differ with you on a few things, but can understand differences  of opinion on the life insurance front.  Why do you let someone else handle such an important part of a clients financial picture?  Just curious. [/quote]

Two reasons.

1) Not currently licensed for life insurance sales

1.5) The insurance agents I use for life insurance do a good job of it, including complex cases, and they take good care of the clients.

2) Part of the business model is explicitly doing investments/financial advice only without any external relationships clouding that.

I've thought about hiring someone who is licensed and setting up some kind of arrangement, but as is I like (and clients like) the 100% independant model.




[/quote]

Oh, my God! You're one of those Garrett Planning Network robots!!!! That explains everything. No wonder you're such an idiot.

[quote=deekay][quote=AllREIT] [quote=deekay]

AllReit,

You have not defined what life insurance is.  You have not answered my question about how your clients react when you tell them the truth about settlements.

[/quote]

Life insurance is contract between you and an insurance company for payment upon a specified event. It's basicly a fancy put option. And like any put option it has value.

Whats scary is that some of my clients want to invest in life settlements.


[/quote]

You forgot one key element in your definition.  It is guaranteed payment on death that will not result in a profit to the beneficiary.  In other words, life insurance settlements provide a profit to the third party that buys a CV policy.  A previous poster mentioned a case where his client sold a $3mm DB policy for $80k.  A profit of $2.4mm results for the new owner/benficiary.  By definition, this is not life insurance.

The fact your clients are asking about it and you are not warning them of the pitfalls is disturbing.  By selling a policy to a settlement broker, you and your client are putting a big fooking target on your backs.  I mean, an individual has a VESTED INTEREST in seeing your client die sooner!!!  Not to mention the ramifications these transactions can have on the insurance industry (higher premiums/tougher underwriting, etc).  They go against everything life insurance needs to do and should be made illegal for the good of insurance companies, clients, and financial advisors/agents.

Did I mention how sickening it is to hear your clients wanting to get involved in this?  I know we've had our differences, AllReit, but I sincerely hope you do not encourage this kind of stuff. 

[/quote]

Lets be clear on somethings again ..

LI settlements are viable if and only if you have idetified the needs of the client ..not because you re selling it to raise money ect.. so for example in the case I quoted .. The client made 80k which he used to buy himself other insurance so he would not have to pay out $32k a year for coverage on one policy ..

Seconly your conspiracy theory is faulted .. just because he sold his policy to another company  .. doesn't make him marked for death.. Please learn about insuarnce trauches ..thanks..

And lastly the insurance companies don't care who pays the premium and then who gets the benefit.. don't you understand that 7 out 10 times it is another insurance company doing the buying.  

How do your client's heirs feel about this?  I'm curious - they wouldn't be interested in getting a tax-free $3mm DB?  They'd rather get $160k or whatever the UL is going to pay out?

[quote=deekay]

How do your client's heirs feel about this?  I'm curious - they wouldn't be interested in getting a tax-free $3mm DB?  They'd rather get $160k or whatever the UL is going to pay out?

[/quote]

Ok ..did you not notice that I said they were in their 70's ...one and two .did also not notice that I said they were paying $32k per year..

Now would you like to repeat your question or make another ?

[quote=deekay]

How do your client’s heirs feel about this?  I’m
curious - they wouldn’t be interested in getting a tax-free $3mm
DB?  They’d rather get $160k or whatever the UL is going to pay
out?

[quote=AllREIT] [quote=deekay]

How do your client's heirs feel about this?  I'm curious - they wouldn't be interested in getting a tax-free $3mm DB?  They'd rather get $160k or whatever the UL is going to pay out?

[/quote]

Who cares about the heirs, let them solve their own problems.

The living, and soon to be dead, want to stop paying WL premiums and to get cash payments now while they are still useful.

WL premiums are a nusiance for people living on fixed income, who have other expenses to deal with. That's why so many policies lapse at the very moment of greatest value.
[/quote]

Allreit, it almost sounds like your clients are one step away from the poor house.  Every once in a while I'll come across a couple that I know probably won't make it through retirement, but if they NEED that WL premium currently, they must be in terrible financial positions.  I would rather work with, and yes, it is MY choice, with people who can afford life insurance because they HAVE money.

You can keep working with the broke or near-broke.  I want wealthier clients so I too can be wealthier.

[quote=snaggletooth][quote=AllREIT] [quote=deekay]

How do your client's heirs feel about this?  I'm curious - they wouldn't be interested in getting a tax-free $3mm DB?  They'd rather get $160k or whatever the UL is going to pay out?

[/quote]

Who cares about the heirs, let them solve their own problems.

The living, and soon to be dead, want to stop paying WL premiums and to get cash payments now while they are still useful.

WL premiums are a nusiance for people living on fixed income, who have other expenses to deal with. That's why so many policies lapse at the very moment of greatest value.
[/quote]

Allreit, it almost sounds like your clients are one step away from the poor house.  Every once in a while I'll come across a couple that I know probably won't make it through retirement, but if they NEED that WL premium currently, they must be in terrible financial positions.  I would rather work with, and yes, it is MY choice, with people who can afford life insurance because they HAVE money.

You can keep working with the broke or near-broke.  I want wealthier clients so I too can be wealthier.

[/quote]

Holy sh*t, I just figured it out...and sorry for replying to my own post but........

Allreit, It makes sense that your clients can't afford their WL premiums.  It's because they aren't making any money having a core position of TIPS.  Hell, they can barely afford to buy milk and eggs at the grocery store, so they stand no chance of keeping their WL policies.

And lastly the insurance companies don't care who pays the premium and then who gets the benefit.. don't you understand that 7 out 10 times it is another insurance company doing the buying.  

Care to back up that 7 out of 10 times statement.  It is complete BS that insurance companies don't care who pays and who gets the benefit.  They hate life settlements and this is why companies ban their agents from being involved with them.  Life settlements are terrible for the industry and for consumers.  They can help an individual consumer, but on the whole, they are a nightmare.

Life settlements cause insurance companies to have lower than expected lapse rates which can drastically increase expenses which raise the cost of insurance for everybody.  Additionally, life settlements destroy the concept of insurable interest which in turn changes life insurance to an investment and could encourage Congress to kill the favorable tax treatment.  The end result is consumers paying more to get less.

As for WL premiums not being affordable for old people, it sure appears as if Allreit doesn't understand the difference between WL and UL.  Participating WL policies are very easy to afford to keep in old age.   This is because the client is paying rates based upon the age of purchase and dividends can be used to pay the premiums.  I have never seen a client over the age of 70 who had a participating WL contract older than 20 years where the dividend was not higher than the premium.

[quote=whitewlfz][quote=deekay]

How do your client's heirs feel about this?  I'm curious - they wouldn't be interested in getting a tax-free $3mm DB?  They'd rather get $160k or whatever the UL is going to pay out?

[/quote]

Ok ..did you not notice that I said they were in their 70's ...one and two .did also not notice that I said they were paying $32k per year..

Now would you like to repeat your question or make another ?

[/quote]

Yep.  I understood both major points of your case.  I'll ask again - when you mentioned the concept of a life settlement to your client's heirs, how did they react?  Were they concerned they'd receive a much lower benefit?  How did they react when you informed them your client will have a target painted on his/her back? 

And don't give me the "oh, it was sold to an institution" line.  Corporations want to be compensated for their investment.  If you think corporations live in this idyllic world where they've got NO incentive to off your client early, you're more gullible than your posts let on.

[quote=AllREIT] [quote=deekay]

How do your client's heirs feel about this?  I'm curious - they wouldn't be interested in getting a tax-free $3mm DB?  They'd rather get $160k or whatever the UL is going to pay out?

[/quote]

Who cares about the heirs, let them solve their own problems.

The living, and soon to be dead, want to stop paying WL premiums and to get cash payments now while they are still useful.

WL premiums are a nusiance for people living on fixed income, who have other expenses to deal with. That's why so many policies lapse at the very moment of greatest value.
[/quote]

Who cares about their heirs?  Wow, you must work with a real humane bunch of hypothetical clients.

For someone who, up until recently, was paying $32k/year for life insurance, I hardly think this case is an instance of someone living on a fixed income.