Life Settlements

Looking for Recurring Commissions?
by Curtis M. Cole

Have you been wondering if there are any viable new products that offer recurring commissions? We may have found what you’re looking for. Thousands of seniors each year are taking advantage of the opportunity to sell their unwanted or unneeded life insurance policies. Insurance agents and brokers have embraced this new industry to help their clients recoup some, if not all, of the policy premiums they have paid in the past, while creating a new income stream.

So who’s buying all of these life insurance policies? Large financial institutions are purchasing the vast majority. They recognize the potential for a superior return on investment. They also recognize the safety of a large insurance company backing the investment and committing to pay the death benefit at maturity. Institutional investors are coming forth in record numbers to participate in this phenomenal new asset class called “life settlements.”

But the best-kept secret is that your clients can invest in the same policies and achieve the same potential returns as the large financial institutions. This is what first attracted us to life settlement investments. Having individual ownership of a life settlement policy is a very secure way to invest. The client actually obtains ownership and beneficiary rights to part of the policy. By owning a portion of the policy, the client maintains control over their asset. Think of owning a condominium, but not the entire building. Our clients can enter this market at a fraction of the cost that large institutions are required to commit. This is discrete asset ownership with all of its privileges.

All of these features make this a very attractive alternative investment, but agents will be most interested in the opportunity for long-term recurring commissions.
Let’s see how recurring commissions work for you. The following scenario depicts an average client’s portfolio. For simplicity sake, this example assumes that the client reinvests all of their portfolio maturities. The returns are superior to many other investment choices since many clients invest through an IRA or other qualified accounts. Agents have enjoyed a 98% average reinvestment rate for many years.

An Average Client’s Portfolio

• Investment Amount: $100,000
• Age of Investor: 45 years old
• Average holding period until policy maturity: Five years
• Average portfolio multiplier: 1.75 (for every $1.00 invested, the client receives $1.75 in return)
• Active writing agent commission: 6.16% (paid on the full dollar amount each time funds are invested, or reinvested.)

Age of Value Agent Client of Portfolio Commission
45 $100,000 $6,160
(initial investment)
50 $175,000 $10,780
55 $306,250 $18,865
60 $535,937 $33,014
65 $937,889 $57,774
Total commission to agent
in 20 years $126,593

With this example, your client’s initial investment of $100,000 could grow to $937,889 in a 20-year period and the total commission paid to you would be $126,593.
As you recommend investment products to your clients, you can see that including life settlement investments as part of a diversified portfolio offers predictable gains to the client and a long-term commission to the writing agent that is unmatched in the industry.

Benefits Of Life Settlement Investments For Individual Investors:

• Uncorrelated to stock, bond, commodities, and real estate markets.
• Not directly affected by interest rates, global economy, or political climate.
• Investment assets issued by some of America’s largest and most financially stable life insurance companies.
• Underwritten by a wholly owned subsidiary of a NASDAQ traded company.
• A transferable asset for estate planning.
• Offers true portfolio diversification.

Some annuity products offer a higher initial commission. Since most have very long holding periods and severe surrender charges for early withdrawal, they don’t give you the chance for additional commissions for many years. (10+ years in many cases) A 9% commission on an annuity product will earn you $9,000 on an original investment of $100,000. But, as you can see from the example above, having a happy life settlement client who receives predictable returns could earn you more than $125,000 in commissions as the client continues to reinvest their maturity dollars.

Think twice before you automatically recommend the product with the highest initial commission. It may not be the best deal for your client and you will most certainly be leaving big dollars on the table in recurring commissions.

Life settlement investments continue to make sense for clients and agents alike. The above example is for illustration purposes only and is not intended for client use. Reinvestment percentages vary between clients, but even if your client only reinvests their initial investment at each maturity, the commissions to you are significantly higher than most other products.
––––––––––
Curtis Cole is president of New Asset Advisors, LLC in Dallas. He is an expert in life settlement investments. For more information about offering life settlement investments to your clients, call 877-319-3999, e-mail curtis@new-asset.com, or visit www.newassetsales.com.