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Advisor Today, “Selling Life Settlements Today”

Life Settlements

Selling Life Settlements Today
Find out what you need to know before exploring life settlements.

By Tina Orem

Nick Mallis, COO of the life-settlement division of Advanced Planning Services, Inc., was at a conference when an advisor asked about life settlements.

The advisor was working with a couple in their late 80s who had an unneeded life insurance policy with a $100,000 surrender value. Mallis told the advisor he would shop the policy around to see if he could get a life settlement for the couple.

Then the advisor dropped the bomb. “He said to me, ‘Oh, it’s too late,’” Mallis recalls. The advisor had already instructed the couple to surrender the policy. “I said, ‘For the hundred grand?!’ He said “yes.” When Mallis told the advisor he might have gotten the couple $2.1 million in a life settlement, he was shocked.

Mallis’ experience is a good example of how little many agents know about life settlements. So for those thinking of exploring life settlements, here are three things to consider.

Points to ponder

1. You might need a license. In the last few years, many states have implemented various licensing requirements for advisors, agents, brokers and providers who work with life settlements, while others have little or no licensing regulation. Know what you need, especially when transactions cross state lines.

“If you have a case that’s a New York resident who has a home in Florida [and] who has a policy owned by a trust in Delaware,” Mallis illustrates, “you’ve got to adhere to, if not all the states, the most stringent. It depends again on which states are involved. Some states take precedence.” Federal registration requirements may soon come into play, too. In April, SEC head Mary Schapiro suggested in a letter to Congress’ Special Committee on Aging that life-settlement transactions may soon require SEC registration.

2. The policy your client sells will still count toward his insurance-buying capacity. The maximum amount of life insurance people can own is typically equal to their net worth. Policies sold in life settlements still count toward that limit. “If somebody’s income and net worth say they can buy $10 million of insurance and they have a $9 million policy that they sell and want to buy another $9 million policy, they probably can’t do it,” explains Mallis. “They can probably only buy $1 million because that policy is still in force on their life.”

3. Buyers are picky. It’s a buyer’s market these days, says Michael Gray, president and CEO of MEG Financial, Inc. “We used to have several cases pending at all times. Now, we occasionally submit a case when we uncover an opportunity,” he notes.

The slowing economy has made many investors desperate for cash, which has increased the supply of policies for sale. But shrinking credit markets, increasing life expectancies and controversy over stranger-originated life insurance have made buyers extra choosy. Gray says now only a handful of his 2,000 clients fit today’s criteria.

“Life settlements are a small part of what I do,” he notes. “We’re scrutinizing our prospects significantly more now in terms of sizing up their life expectancies before we actually go into the submission process,” he explains, adding that certain policies get more attention. “The older the better. If it’s a term policy, it has to be convertible and it has to be convertible to something that’s relatively competitive.” Policyholders offering earlier payouts also get more attention. “Whereas before they had to have two health issues,” Gray notes, “now they have to have a much shorter life expectancy.”

Even if life settlements are strange to some advisors, Gray and Mallis say fiduciary duty is a compelling reason to learn about them. “The biggest mistake is to not put an option on the table to the client if it is available,” Gray says.

Mallis agrees. He still thinks of that advisor’s $2 million gaffe. “When I was traveling in Florida,” Mallis says, “I saw a TV commercial that asked: ‘Are you over 70 years of age? Have you cashed in a life insurance policy in the last two years? Did your insurance agent tell you about the life-settlement market? If not, call the law offices of so-and-so.’ ”

LIFE SETTLEMENTS
Selling Life Settlements Today
Find out what you need to know before exploring life settlements.

  View PDF

AMA Insurance Agent, Michael Gray

July 10, 2009

Mr. Michael Gray
196 Easy Nine Mile Road, Suite D
Pensacola, FL 32534

Dear Mr. Gray:

This letter confirms that you have successfully completed all of the necessary requirements to become a member of the AMA Insurance Agency, Inc.’s Trusted Source Network. Through your affiliation with our strategic partner, M.D. Financial Services, Inc. (MDFS), you are now authorized to use the exclusive Network Seal to identify and market yourself as an approved member of our Network.

As a reminder, the Trusted Source Network was developed to provide physicians with well vetted, deeply experienced and highly respected sources of financial advice. This is, and will remain, a very exclusive array of professionals. I want to thank you for enduring the extensive screening and certification processes necessary to become a member; as you can imagine we’ve set the bar very high.

We’re very pleased, and excited, to be working with you!

Sincerely,

J. Michael Hegwood
Assistant Vice PresidentAMA Insurance Agency, Inc.

View original letter

MEG Financial Statement on Berkshire Hathaway Downgrade by Fitch for “Key Man Risk”

Warning! MEG Financial Emphasizes the Importance of Key Man Insurance in View of Recent Financial Ratings Cut of Warren Buffett’s Berkshire Hathaway.

Pensacola, Florida April 3, 2009- MEG Financial, founder of www.keypersoninsurance.com a specialized national provider of key man insurance, is warning businesses of all sizes to hedge against “key man risk”. Successful companies that are dependent upon one or more key people need to seriously consider key man insurance to protect against the potential loss of an indispensable executive. The recent Fitch Ratings downgrade of Berkshire Hathaway (NYSE: BRK-A)(NYSE:BRK-B), one of the nation’s best run and most respected investment holding companies, emphasizes how important one individual can be to the success or perceived success of an organization. In fact, one of the main reasons Fitch provided for cutting the financial ratings of Berkshire Hathaway was the “key man risk” linked to Warren Buffett’s ability to continue to negotiate deals and make investments on behalf of the company.

The Ultimate “Key Man”

Warren Buffett, the 78 year old “Oracle of Omaha”, is the Chairman and CEO of Berkshire Hathaway and its largest shareholder. He is known the world over for his ultimately successful value investing strategies and as of 2009 ranks second on the Forbes list for richest people in the world. His significance to Berkshire cannot be overstated which is why Fitch emphasized “key man risk” as a reason for the downgrade.

Losing a Key Executive Would Seriously Impact Most Companies!

Key employee exposure is not exclusive to large publicly traded organizations like Berkshire Hathaway. In fact, small and medium sized businesses are even more reliant on the talents and experience of a select few. In these cases, it is even more crucial to protect the company from the untimely death or disability of a significant bottom line contributor. In fact, in smaller organizations, one individual can be so vital to the overall success of a business that if they leave the company, become disabled or die, the company dies as well. However, the good news is that there is an easy and inexpensive way to protect against the risk of the loss of a key employee or executive.

Key Person Insurance is the Best Solution to “Key Man Risk”

Key man insurance, commonly referred to as key person insurance, is the most effective and efficient tool a business can use to guard against the death or disability of a highly valued employee or business owner. For years, companies both large and small have purchased and owned both key man life and key man disability insurance policies on the lives of their strategic people so that business continuity can be maintained in the unforeseen circumstances of a death or disability.

Don’t Be Shortsighted When It Comes to Buying Key Person Insurance!

The recent downgrade by Fitch of Berkshire Hathaway, one of the largest and most highly respected companies in the world clearly emphasizes the need for businesses of all sizes to consider key man insurance. If Berkshire Hathaway can be downgraded for its exposure what company is immune to the “key man risk” of losing a master technician, top salesperson or CEO?

For additional information on key man insurance, contact Michael E. Gray, Jr., Independent Insurance Agent and President of MEG Financial or visit our website: keypersoninsurance.com (http://keypersoninsurance.com/keyman_insurance_quote.php.)

MEG Financial:

For the past 15 years, MEG Financial of Pensacola, Florida, a nationally known key man insurance specialized brokerage firm, has worked with businesses to secure key man insurance and to promote it as an intelligent and inexpensive way to protect against “key man risk”. MEG Financial’s key man website, www.keypersoninsurance.com offers instant key man insurance quotes for companies of all sizes across the country.

Contact:
Michael E. Gray, Jr., Independent Insurance Agent and President
MEG Financial
(877) 583-3955
www.keypersoninsurance.com
CA 0C39049

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Key man insurance