In addition, placing “future” premium payments into assets under management has other benefits for the client and the advisor.
In this scenario, the agent is making a sound recommendation that will increase their total assets under management, harden the overall financial plan, and earn a nice referral fee from the life settlement transaction.
2. Purchase an annuity or other product.
While it may not make sense for a client to acquire replacement coverage after a life settlement, an annuity might be a great fit.
A single-premium variable annuity could help them diversify and offer some guaranteed income down the road.
Yes, the interest rates are low for these products now, but the flexibility offered by eliminating the life insurance policy premium payment might be just what a client needs — in both the short and the long term.
In this scenario, not only does the agent offer a solid solution for their clients, but they also earn a “double-dip” referral fee for the life settlement transaction and a commission for the annuity product.
3. Free up cash for the family or themselves.
While our instinct as advisors is to put the payout from a life settlement to work, sometimes it might make sense for clients to gift it, place it in a trust, or spend just it.
For senior clients who are worried about their children and grandchildren, a settlement payout may be used to fund a trust or simply as a gift to relatives who are struggling.
Also, many seniors stopped traveling and seeing family during the pandemic, so they may want to make up for the lost time by traveling and enjoying their golden years a bit more than they have in the recent past.
Again, while we always want to recommend sound financial moves, we also don’t want to forget why our clients have been following our advice and saving money with us for years — so they can enjoy the fruits of their labor.
A little bit more on what we call the “double-dip.” Agents and advisors can put money in motion with a life settlement and then earn commissions on both the settlement and the sale of another insurance product.
After securing a policy appraisal by providing an in-force illustration and basic info, a life settlement payout can help clients cut costs while the advisor earns a commission: dip one.
Next, by adding the settlement to AUM or offering a new insurance product, the agent or advisor earns an increased commission or a substantial referral fee: dip two.
Inflation and rising costs are going to be major influencers for the remainder of the year and maybe longer.
Clients need to understand that a policy appraisal can help them understand how they can leverage their current life insurance to handle short and long-term concerns — and everyone loves a double-dip.
Wm. Scott Page is the founder of PolicyAppraisal.com.
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