Advisors Need Support, Not Silence
by Daniel Harris, Esq.

Considering the historical context, the statement was stunning. Frank Keating, president, and CEO of the American Council of Life Insurers (ACLI), addressing the National Association of Insurance Commissioners in June 2007 said, “We have no quarrel with traditional, legitimate life settlements. ACLI supports the right of legitimate policy owners to sell their policies in the secondary market.” This acknowledgment by the long-time opponent of a free market for existing life insurance was a watershed moment for the industry.
      How is the industry “supporting” the rights of legitimate policyowners to sell their policies? It is hard to tell since, judging by the industry’s official lexicon, life settlements do not even exist. The term “life settlement” is conspicuously absent from the glossaries published by the ACLI and the Insurance Marketplace Standards Association (IMSA.) The ACLI’s online discussions of “surrenders and lapses” and “replacing a policy” fail to mention the option. An overview of the “living benefits” of life insurance on the ACLI website is silent about the fact that a policy may have a significant market value.

New Tools, New Relationships

Mr. Keating’s proclamations aside, the insurance industry has yet to step up and provide the information and tools advisors need to make sense of their rapidly changing world. The rise of the secondary market has fundamentally altered the life insurance landscape. For starters, it has transformed the relationship among clients, advisors, and insurers. Instead of the carriers dictating the terms of policy ownership, consumers (with the aid of skilled advisors) are now in the driver’s seat. Policyowners have choices provided by a competitive marketplace for policies. Their policies (and the dollars they invested in them) must now be evaluated in the broader context of an overall wealth management strategy. In this new universe, advisors are much more than conduits for issuing and maintaining life insurance products. They are true advisors helping clients determine how best to use their insurance assets to achieve larger planning goals.
      As with all emerging markets, innovation abounds in the secondary market. New tools and applications are constantly evolving, giving advisors an ever-growing menu of options to offer clients. Advisors at the top end of the market, who are comfortable working in new markets, are already applying these concepts in the marketplace. Like the financial planners of the early 1980s who first tapped into the appeal of mutual funds, these early adopters tend to be savvy at seeking out information and embracing new products. Everyone else faces a shortage of quality education about life settlements and the secondary market as whole. This information gap puts advisors at a competitive disadvantage, especially given skyrocketing consumer demand for better alternatives to traditional surrenders and lapses.
      The time has come to acknowledge the profound evolution in the insurance marketplace. The industry can no longer afford to keep advisors in the dark. Given the proper information and education about the secondary market, professional advisors become industry catalysts, stimulating new levels of consumer interest in life insurance as an asset. As the Wharton School of Business has noted, a healthy secondary market in life insurance drives significant growth in the primary market as consumers associate increased value to life insurance as a whole. Advisors are calling for this information, but the industry remains silent.

Growth through Education

Fortunately, the secondary market is providing the tools that the industry has not. High-quality educational programs are available from the leading secondary market firms and advisors are enrolling in record numbers. These courses come in a range of formats, which include on-site seminar-based training and online distance learning. The best are fully accredited by the states and apply toward continuing education requirements. Most importantly, they give advisors of all experience levels, the information they need to counsel clients responsibly.
      Introductory courses provide an overview of the most important concepts for advisors who are new to the market. Advisors learn the basics of policy valuation including why some policies have higher market values and others don’t. They learn about typical candidates and how to determine if a life settlement is appropriate for a client. Examples drawn from real cases are used to demonstrate how the process works and why it can be a win-win situation for all parties. Thorough discussions of licensing and due diligence are essential to helping advisors know how to ensure that their clients’ interests are protected.

Beyond the Basics

Like the market itself, this education is dynamic. As the secondary market evolves, it has taken on greater complexity and sophistication. No longer just an exit strategy for unwanted policies, life settlements are now being used by advisors as a springboard to help clients reach a wider range of planning goals.
The newest secondary market courses are aimed at experienced advisors who have a working knowledge of the market. These programs keep advisors up to date on new products and introduce advanced planning concepts. Subjects include using the secondary market in business and estate planning, as well how tools such as life settlements can help clients reach multiple planning objectives.
      Of course, every advisor is different as is every organization. That’s why leading education providers have developed customized courses for a wider range of clients. Experienced practioners are leading seminar geared to local markets. Advisors can ask questions, share experiences, and gain a deeper understanding of the material.
      A Webinar format allows a dispersed audience to follow a presentation online Advisors can take accredited secondary market courses online, which lets them fit the coursework into their own schedule.
As with any product or service, there are questions to ask to make sure you are working with the right partner. Do they have the experience and perspective to be considered an authority on the subject? Can they present a range of concepts from the simple to the sophisticated? Does the presenter have deep and direct experience working with current secondary market cases? Are they licensed in your state and do they offer a full range of credits including CE, CPE, CLE, and CFP? Do they have a proven track record of providing continuing education? Can the course or presentation be tailored to the needs and expertise of your audience?
      Education is the lifeblood of our industry. By sharing new ideas and better information, everyone benefits: advisors, consumers, and the industry. While the industry may not want to admit it, the secondary market is here to stay. It’s time for them to back up their words with actions that truly support the advisors and policyowners who have so much to gain.
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Daniel Harris, Esq. is General Counsel for the Life Insurance Settlement Association in Orlando, Florida, the nation’s oldest and largest association of participants in the Life Settlement Industry.