Three Myths Direct Buyers Want you to Believe.
Life settlement brokers represent the policy owner in the transaction and have a duty to act in the best interest of a client. The broker’s and client’s goals are aligned, particularly the goal to sell the policy for the highest price possible.
A single life settlement provider-you know the big guys advertising on national T.V.- typically are the actual buyer of a client’s policy and so the direct buyers goal is to pay the lowest value possible for the policy. Life settlement direct buyers have no duty of advocacy, fiduciary or otherwise to the client like brokers do.
Obviously, either financial advisors or clients considering a life settlement would logically choose to be represented by someone on their side(a. broker) and that is interested in obtaining the highest possible price for the policy.
There are three myths perpetuated by life settlement direct buyers to confuse the market of clients and their advisors in considering who is best to represent the client in a life settlement. These myths are misleading and intended to be by life settlement direct buyers.
These three myths are as follows:
Myth #1: A broker’s commission will be higher than the increase in the sale price of the life policy. False. Providers and direct buyers of life policies often claim that the key advantage of working with them is to eliminate the intermediary fees (primarily the brokerage fee). An experience life settlement broker will create enough competition on a policy sale that the owner will realize more money in pocket, even after deducting the brokerage fee then would have been realized dealing with the direct buyer. Think about it, how is it even possible to know what a policy may be worth unless it is put out in the open market to get bids, especially when that process also introduces the concept of competition between buyers that drives a value up? It’s common sense, myth number 1 is easily disproved in light of the facts.
Myth #2: Direct buyers get you paid faster. False. Because the brokerage process of a life settlement involves the purchase of a policy by a third party, there may be a slight time differential. This differential is most often a week to 10 days.
So what is better, a check from a direct buyer a week sooner and perhaps 100,000.00 less or simply waiting an extra week for a six figure or higher increased payday? I think you know that answer.
Myth #3: A broker does not ad value to a life settlement transaction. False. As stated above, the fact that a broker offers a process of buyers bidding to purchase a policy inherently disproves this myth. Advice to “cut out the middleman” is simply tired and old school. In addition, a broker invest a substantial amount of resources, both time and money, to acquire and gather policy information, optimized demonstrations, medical records and life expectancy reports. All of that data is necessary to effectively market the policy to prospective buyers out in the market.
We can’t begin to attribute negative motives to all life settlement direct buyers. However, by accessing the broker system and process of marketing and selling a policy by a professional firm who fulfills a duty to act in the best interest of the seller/client.
Life settlement direct buyers asking you to “just trust us’ is not a risk worth taking. Talk to us today about your life settlement needs!
Dan A. Penning
Life Settlements Specialist
Professional Life Settlements Plus
