Clients, and their advisors, have a choice when they wish to sell an unwanted or unneeded life insurance policy. They can go direct to buyers or through a broker. But, which way is better?
In a recent article for Think Advisor, I explain who does what. The reason? With different entities advertising on TV, radio and the internet, it can be confusing as to where these parties' loyalties lie. Below is a synopsis or read the full article here:
There are two main parties:
1) Providers - these are buyers. They do not have a fiduciary duty to clients to offer the highest amount for the policy. Not unlike you or I when we are trying to buy an asset (a car, for example), they are trying to obtain the asset (the policy) for the lowest amount of money. In reality, this means that a client is most likely going to under-sell their policy. Providers say, correctly, that going through them means that you keep 100% of the commission. Sounds good, right? But....at what cost to you and your client?
2) Life Settlements Brokers - brokers have a fiduciary duty to advisors and their clients, to market the policy to obtain the highest offer possible. This is done through access to many different providers, and leveraging them against each other to maximize value for clients.
Yes, there are commissions when working with a life settlements broker, and they are shared with insurance and financial advisors. However, offers with brokers are typically higher, and advisors often receive more commission, even with the commission share.
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