As Stocks Take a Dive, Some Retirees Take a Look at Life Settlements

Since its inception, the market's growth and staying power can be attributed to a number of factors, including a more robust regulatory environment that protects the best interests of policy sellers (consumers), and the infusion of investment capital from major financial institutions who are attracted to its non-correlated asset class. Institutional investors often allocate a certain percentage of their investment portfolio in non-correlated asset classes, such as life settlements, in order to insulate a portion of their investment funds from the extreme volatility of the financial stock market.

Although it's too early to tell, it's possible that the stock market's recent slide may actually drive more institutional funding into the life settlement (uncorrelated) asset class. If so, that would be good news for policy sellers (retirees/seniors) because when more institutional capital flows into the secondary market for life insurance, the acquisition price for policies (i.e. the cash settlement for the policy seller) moves up a notch.

Tool for Financial Advisors to Calm Clients' Fears

Financial advisors have an opportunity to calm their clients' fears ─ especially their senior clients who may be on the precipice of retirement and who have insufficient funds in their emergency cash account.

Now is the time for advisors to let their clients know about the life settlement option and assist them in obtaining a policy appraisal.

According to the Life Insurance Settlement Association, "When a life insurance policy is no longer needed, wanted or affordable the option of selling it can maximize the asset value and minimize losses for your clients. Advisors have a moral, if not a fiduciary responsibility, to understand and inform their clients about options available with unneeded or unaffordable life insurance policies, including a possible sale of the policy."

Serving Your Client's 'Best Interests'

As most advisors are aware, the financial services industry is undergoing dramatic change as it relates to fiduciary standards. The SEC Regulation Best Interest Rule (Reg BI) and similar regulations that take effect in 2020 mandate that certain financial advisors serve their clients' best interests when making an investment recommendation.

Although the new Reg BI compliance standards do not expressly apply to life settlements, the spirit and intent of the new regulations is clear: If selling an unwanted life insurance policy is clearly the best option for retired clients who need immediate cash to preserve their invested assets, financial advisors have an obligation to inform their client about it.

Financial services professionals have now entered a new "consumer-first era." That's why compliance-driven advisors who are helping their clients sell unwanted policies will want to partner with an experienced broker like Asset Life Settlements who are bound by a fiduciary duty to negotiate the highest possible offer for your client's policy in the secondary market.

— Read Life Settlements: What Producers Should Know About Fair Market Value, on ThinkAdvisor.

Jeff Hallman is a co-founder and managing partner at Asset Life Settlement LLC. He has been involved in case submission, underwriting, compliance, the institutional bidding process, life expectancy analyses and contract negotiation in the life settlement market. He can be reached at 888-335-4769 x1108.

Scott Thomas is a co-founder and managing partner at Asset Life Settlements LLC. He can be reached at 888-335-4769 x1115.