In the investment industry, everything pales when compared to a liquidity event for a client that triggers a world of new investment possibilities. But the harsh reality is that too many advisors and financial planners are overlooking the easiest and most accessible path to a liquidity event: life insurance settlements.
Financial planners, estate planners and wealth advisors are all guilty of missing out on the enormous, multi-faceted benefits of life insurance settlement transactions for their clients. The reason for this is their failure to understand what it can mean in both the short and long-term. More than missed opportunities, failure to review life insurance risks falling short of our fiduciary obligations as it defaults a built-in mechanism for relationship building.
On the surface, life settlement transactions can be easily dismissed because they don’t earn commissions, but doing so is a major mistake. Short-sighted thinking like this sacrifices not just the opportunity to put money in motion, but also our ability to get in front of clients for the right reasons; strengthening our relationships with them, and then guiding – and benefiting dramatically – as the proceeds of putting money into motion are reinvested.
The benefits of a life settlement are many and warrant a closer look.
Life Settlement Companies Aren’t Competitors
They aren’t seeking investment funds from your clients. Today these companies are typically institutionally-funded, from sources such as pension funds, endowments, large financial institutions, insurance companies, family offices, hedge funds and other investors that are savvy and accredited. They aren’t looking at our clients as investment opportunities and pose no risk to our relationships with them. What they are seeking is an honest evaluation of life insurance policies that in many cases, no longer make sense.
Think Strategically Beyond a Single Commission
It’s not simply about a life settlement without a commission, it’s about the possibilities ignited by a life settlement. Too many of us are overlooking the obvious. We think putting money in motion results from reducing real estate holdings, selling a business, or taking money out of the stock market, but a life settlement can generate hundreds of thousands – even millions of dollars – of funds that need to be reinvested for a client’s retirement. More than a fair trade for a simple, fast and easy transaction that significantly increases assets under management.
Build Relationships and Money Under-Management
By doing the right thing everyone wins. A policy evaluation for a possible life settlement is a simple, accelerated process, and puts us in front of clients for the right reasons – looking out for their best interests. In a few days life settlement companies can provide a summary and non-binding options. In our hands, this is a tremendously valuable and powerful tool. Discouraging the process ignores what’s in the best interests of a client, and eliminates the opportunity to put more assets under management by putting money in motion.
Protect Yourself and Meet Client Obligations
An annual evaluation is much more than a way of providing superior service to our clients, it’s also the first line of defense in strategic self-protection. The media is paying close attention to recent lawsuits seeking stiff penalties for failing to educate clients about life settlement options and liability for financial losses. You may have read about a California case involving Lincoln National Life Insurance Company, alleging their failure to make policyholders aware of their options. The lesson for us is clear; doing the right thing is not only sound business strategy but also protects us from exposure that can easily be prevented.
With the down economy in the rear-view mirror for many, opportunities are all around us. The stock market is climbing to new highs, housing is recovering, consumer is confidence rising, and it may be a great time for a client to sell a business.
Yet, for all of that, an objective review of life insurance policies is a great way to serve our clients, meet our fiduciary obligations, and quickly put money in motion, and lots of it.
Stephen E. Terrell is Senior Vice President of Market Development and Branding of The Lifeline Program, a life settlement provider based in Atlanta, Ga. You can also follow him on Twitter @LifelineProgram