Did You Miss A Piece of the Planning Puzzle?

Financial Planning Puzzle and Life Setlements“Things change, but they never stay that way.” This sounds like something baseball king of misspeaking, Yogi Berra, might have said?

There’s a kind of ironic wisdom there that can be applied to almost any situation. Things do change – and then they change again. Financial advisors know this truth well. Stocks go up and down. Interest rate fluctuations make what was formerly a great investment into just a so-so one. Clients’ life circumstances change – children graduate college, retirement looms, and the need for long-term care arises.

These are the reasons routine portfolio reviews are absolutely essential. Whether we do them for our own finances or for clients, we all know how important it is to regularly review where our money is, how our money is performing, and what we can do to make it perform even better. When undertaking these portfolio reviews, many financial advisors – no matter how knowledgeable they might be – tend to overlook one important potential asset value: the fair market value of their client’s life insurance. As an advisor, this oversight can cause unintentional liability exposure.

Nothing has gone through more changes in the last 40 years than life insurance. Therefore, if you’re helping seniors with financial planning, the puzzle is not complete without an analysis of the fair market value (FMV) of all valuable assets, including their life insurance.   The present value of life insurance can exceed the value of any other property your client owns. Unfortunately, policy owners frequently forfeit polices back to the carrier for pennies on the dollar and leave six or seven figures on the table.  Ironically, these policy owners would never dream of selling any other property for less than fair market value.

Because of all the changes affecting seniors, we’ve seen an increase in senior clients age 80-98 that own underperforming life insurance polices. Many of those policies are low in cash value because of the prolonged period of low interest rates, which impacts life insurance performance, and inside build up. As a result, their premiums are escalating and the determination of FMV can create new planning options. A proper analysis of health conditions and policy metrics by a life settlement broker enables financial professionals to factor FMV into the planning puzzle.  Sometimes the decision is made to pay more premiums and keep the policy, and sometimes your senior client decides to sell the policy for fair market value.  Armed with the right information, you can provide counsel that adds significant value to their overall plan. 

If you find yourself in a situation where your client needs to restructure or exit a life insurance policy, be sure to contact an independent life settlement broker for an appraisal of fair market value. You can also refer to the life policy owners section of the LISA website for more information.

About the Author 

Jon B. Mendelsohn is CEO and Co-­‐founder of the Ashar Group a nationally licensed life settlement brokerage firm dedicated to representing the seller and their advisory team in appraising and securing fair market value for their life insurance. Jon is recognized in the industry as a thought leader and tireless champion for transparency and life settlement best practices. Jon is a sought after speaker on the national stage and a valued consultant to professionals working with sophisticated clients in the planning process. Jon graduated from the University of Florida with two bachelor degrees and a master’s degree. Jon is a proud supporter of the company cause, The Crohn’ and Colitis Foundation of America. He and his family reside in Orlando, Florida.