Life Settlements and the misinformation game
At times, the life settlement industry, or a reverse life insurance process, appears to be the victim of the childhood game "Telephone." One person quickly whispers a message to another, and so on, until the meaning and nuance is completely garbled.
Despite major positive shifts in recent years, many agents remain misinformed about life settlements, and recent survey results prove it. Both secondary and primary research show that many still believe that life settlements are unregulated, only for the terminally ill and require specialized knowledge. Many also believe the transactions to be nefarious and creepy. An education gap exists which financial professionals should cross for the benefit of themselves and their clients.
Do they require specialized knowledge?
Research found that 61% of agents and financial advisors said “yes,” but the answer is “no.” While the industry wants anyone participating to be well informed, no specialized licenses or experience is required to assist a client with a life settlement.
Aren’t they only for the terminally ill?
Research results show that more than 30% of agents believe that life settlements are only for terminally ill clients, yet the industry has been purchasing policies from healthy seniors for more than a decade.
Don’t Life settlements violate insurable interest stranger-owned regulations?
Again, nearly 30% of advisors surveyed believe all life settlements are part of the stranger-originated life insurance activities that hampered the industry 10 years ago. Government crackdowns put STOLI schemes out of business, and some went to jail.
The reasons that clients might consider a life settlement have become more mainstream:
- Unneeded or unwanted insurance is in danger of lapsing, has always been the sweet spot for the industry.
- As more seniors reach retirement age with Universal Life and term policies and escalating premiums, the market potential improves.
- Longevity factors are playing into the planned retirement timelines.
- Life settlement companies have even figured out how to purchase expiring term policies.
Can you handle your client's settlement questions?
In a survey conducted in 2013, 15% of financial professionals had never heard of the option, while only 26% have heard of the option, but knew next to nothing. An additional 48% were familiar but feared to recommend them to clients from hearing propaganda, but nothing they could remember.
The Baby Boomer generation is just beginning to retire, and this “me” generation is known for breaking all of the rules and using all of their resources and options. They are the savviest group of retirees yet. The more information you can provide, the happier your clients will be.
Learn where to get unbiased opinions from people that have real experience in the settlement industry. Seven percent of agents have been part of a successful transaction, and that number will only grow as more boomers retire and become educated about the process.
Gone are the days that a financial professional can share overheard opinions based on the days of life settlement companies seeking individual investors for fractionalized and risky investments. Today, most life settlement funding companies use institutional capital to purchase life insurance policies. Unfortunately, speed to a transaction is one of the hurdles they still need to finesse. As for longevity tables and the health of seniors shifts to a healthier-than-ever group of people, knowing if your client will fit into the "buying-box" of these companies can still pose a "hurry up and wait" dilemma.
The newest wrinkle for 2017 is lead generation companies
They are not brokers and therefore they are unable to take a commission or negotiate offers between funding companies. Instead, they work with financial professionals and seniors to evaluate and prepare them for a settlement, or not. By running analytics and performing medical interviews, lead generation companies quickly give them an idea of what they can expect.
If a decision is made to go forward with a transaction, a lot of the cumbersome and time-consuming tasks are out of the way, and the file is put in front of a funding company with the correct buying parameters for the sellers.
So when it comes to life settlements, it’s time to put down those pesky soup cans that are connected with strings and start having some real two-way communications with people that have experience in this industry. Researching them now will help prepare you for the day a client calls and asks, “What can you tell me about doing a life settlement?”
Stephen E. Terrell is president of Golden Opportunity Network, a web-based company that enables financial professionals, seniors, and families to organize and prequalify individual life settlement cases, reverse mortgages and other alternative retirement funding options. During his more than 25 year career in the life settlement industry, Terrell pioneered consumer marketing through numerous award-winning advertising and publicity campaigns. For more information, call 888-944-5715, visit www.goldenopportunitynetwork.com or follow him on Twitter @Tweet_stephen.
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