Throughout the years, life settlement providers have been trying to tempt brokers to directly come to them instead of going through a settlement brokerage.
Not only that, but providers are also trying to cut out the producer too.
With that said, we will examine how policy owners and producers are affected by this business model.
The Mission Of Life Settlement Providers
Providers of life settlements represent buyers of policies or they can also be buyers themselves. Their mission is to purchase policies at the least amount. One of the ways to do this is to acquire policies, which can eliminate the competition. Doing this involves going directly to policy owners and producers.
This does mean that consumers might not always get the best price on their policies. In fact, companies that choose to go direct rarely win bids. At least that is the conclusion we’ve research based on personal experience.
This does make sense because why should people spend top dollar on the open market when they can just go direct and spend less. When policy owners go direct, then they are taking quite a bit risky. They will likely find the entire transaction to be difficult and they will probably not receive the most with their policy.
According to one California Life Settlement Provider, we asked, Producers, can be subjected to a lot of risks when the decision to go direct is made. Many states require the producer to be a fiduciary to policies owners if the transaction involves life settlement. This means it is the producer who is left with the baggage if things end up going wrong.
Producers should have plenty of experience and knowledge about life settlement transactions and they should be in compliance with a fiduciary. Not only that but in order to maximize the sales price, producers will need to shop around for policies on behalf of the sellers. Some providers probably don’t or can’t meet the requirements.
Many producers only handle a few life settlements throughout their entire career. It’s hard for them to gain knowledge in this area. Not only that but learning everything can take a lot of time that they may not want to spend.
Producers can offload their fiduciary responsibilities by using a life settlement broker, and with the amount of work involved in such transactions, it’s no secret why producers hand over their fiduciary responsibilities to brokers.
A brokerage firm that deals with life settlements offer a wider market to those who are potentially interested in buying. In fact, some of these potential buyers might only want to do business through a life settlement brokerage firm and if they are not able to do so, then there’s a chance they will just take their business elsewhere.
Life settlement brokers have bargaining clout because of volume. They also have the experience and knowledge to protect sellers in transactions that involve life settlements. Many settlement brokers have omissions and errors insurance, which covers producers too.
Should You Go Direct
Going directly does make sense in some ways, but it is usually the opposite in regards to a life settlement. It’s important to tell policy owners about life settlement because then you can offer to help them with it. By doing this, you won’t have to worry about whether or not they’ve missed an opportunity.
Producers want to do the best they can for both themselves and their clients. This is why they should do business with a life settlement broker instead of going directly to providers.This way they are protecting their own interests and the interests of their clients.