MATERIALLY BETTER OUTCOMES
FINANCIAL AND PSYCHIC BENEFITS
UNIQUE EXPERIENCE, UNIQUE VALUES, DIFFERENTIATED RESULTS
In a rapidly evolving, increasingly competitive wealth management landscape in which clients are placing a higher premium on financial planning expertise and execution, assuming that you can partner with a firm that shares your values and professionalism, is there any circumstance in which you would not want to enable a client to extract maximum value from a life insurance policy that is no longer of sufficient utility for them to maintain?
If your answer is "no," and you'd like to generate results like those below, we're here to help.
1.3x
average multiple of broker winning bid
1.8x
average multiple of broker net proceeds
~20
buyers reached
15/60
days to actionable bids/funding
Smarter Planner Podcast
Hear in this episode of the "Smarter Planner Podcast" Belle Osvath, CFP, interview 1908's founder, Scott Sanders, about his company's innovative approach to helping financial planners work with their clients to sell life insurance policies that they and their advisors determine they no longer want or need.
We have seen time and time again direct evidence of the benefits of both higher bids and materially lower fees that accrue to our clients who want to do a life settlement as a result of using 1908’s service.
Senior Insurance Advisor
$10 billion RIA
Real Families, Real Results
Case Studies
Rebalancing charitable trust
$12,000,000 GUL | Winning Bid: $5,300,000
Net: $4,700,000 | Greater than broker: $930,000
UHNW insurance advisory firm (part of $340B RIA)
The UHNW couple maintained a charitable Trust with significant assets, including several life insurance policies. The life insurance was becoming increasingly expensive and the family, their advisors, and the Trustee assessed, given the exhausted cash value of each policy, that the best interest of the Trust would be to exit two of the policies on the husband, avoiding future years of premiums and deploying the proceeds to a return-generating strategy.
We received eight bids, including a winning bid of $5,300,000 and net proceeds of $4,770,000 (with this client firm and advisor, we each receive a fee for service of 5%).
A broker would likely have gotten marginally more than the second highest bid of $4,800,000 and would have been paid a fee of $960,000 (their "lesser of 8% of face value and 33% of the transaction value"), resulting in $930,000 less in net proceeds to the seller (in this case, we split a 10% fee with our insurance agent partner).
Rebalancing insurance portfolio
$9,800,000 GUL | Winning Bid: $4,300,000
Net: $3,970,500 | Greater than broker: $511,000
UHNW insurance advisory firm (part of $340B RIA)
The 91 year-old UHNW couple with a large life insurance portfolio wanted to explore the sale of two second-to-die GUL policies as part of a broader estate planning exercise.
At the end of the one-week auction, two bids were within 5% of each other, so, we conducted a one-day run-off, if either wished to refine their bid with the knowledge that there was at least one other bidder within 5% of their bid, without telling either whether their bid was the higher. Each modestly increased their bid, resulting in a winner pf $4,300,000 (second high bid of $4,250,000).
Given the narrow difference in the top two bids, we would expect that a broker would have gotten about the same winning bid, but would have taken several weeks, given their multi-round bidding process. Using the calculation that brokers use (the less of 8% of face and 33% of the gross winning bid less the surrender value), the compensation, assuming they generated the same winning bid that we did, would have been $784,000, netting to the seller $3,466,000. The total fee to the client was $322,500, of which we received 2/3rd and our insurance advisor 1/3rd.
Opportunistic - asset allocation
$5,200,000 UL | Winning Bid: $802,500
Net: $742,000 | Greater than broker: $205,000
$10 billion RIA
The original owners and insureds of the policy, a healthy couple in their late 70’s, had a few years earlier sold the policy to a third-party LLC in which their beneficiaries retained an interest.
Despite the insureds’ good health and relative youth, the policy's no lapse guarantee made it very attractive to a universe of investors, as the only risk to an owner was duration and greater expense, not return. While the policy would become increasingly expensive as the insureds aged, the death benefit grew correspondingly, to a maximum of more than $8,000,000.
While we quickly received a number of bids, ranging from $650,000 to the winning bid of $802,500, it was a complex case that took longer to close than our typical transaction because the policy was held in a trust owned by an LLC, controlled by a 3rd party investor, in which the original beneficiaries still retained a minority interest and right to reject a sale to protect their ultimate projected payout.
Desire for liquidity
$2,000,000 UL | Winning Bid: $200,000
Net: $185,000 | Greater than broker: >$50,000
$10 billion RIA
The trustee of a Trust that held a term policy on the moderately impaired 67 year-old insured engaged us regarding the potential for a settlement of the term policy that was two months from expiring. She had intended to let the policy expire, but realized that it would make sense to explore whether a converted policy might yield something in a sale.
The insured, who also funded the Trust, had a complex medical history that resulted in variable views of his life expectancy. Given his age, buyers' actuaries would need to forecast a life expectancy of <20 years for the policy to have any value at auction.
Our blind, best and final auction process, however, ensured that those bidders using a shorter life expectancy would not be able to curate their bids to be only sufficiently higher to win the auction, but rather to the actual value they ascribed to the policy. The policy received a handful of bids, with a max bid of $200,000 - yielding a much better outcome for the Trust than lapsing it would have.
Opportunistic - no longer needed
$1,000,000 UL | Winning Bid: $100,000
Net: $92,500 | Greater than broker: >$50,000
Large national wirehouse (advisor now with $190 billion AUM RIA)
The advisor reached out to us after a previous policy review, in which we'd recommended his client instead fund the premiums on a $2,000,000 policy on her very impaired husband. Although we could likely sell the policy for $1,000,000 and collected a significant fee, we could not in good conscience recommend that she not maintain it.
In this case, a retired 72 year-old radiologist had initially taken out a $1,000,000 term policy as collateral for an MRI that he had purchased for his practice years earlier. He had converted it into a UL for one of his children as he finished college. As that son had advanced in his career, he no longer wished to maintain the policy and the advisor suggested that he explore a settlement.
The insured was very healthy and active and, although the policy was reasonably priced, it was not what is otherwise a very attractive policy to investors, so, we received only two bids, $50,000 and $90,000. But the seller was so happy with the outcome that he and his wife insisted on paying for a celebratory dinner at the best steakhouse in Chicago.
Illiquid Trust
$3,000,000 UL | Winning Bid: $165,000
Net: $153,000 | Greater than broker: >$50,000
$70 billion RIA
We were engaged by the advisor, who had recently joined a $3 billion AUM RIA in San Francisco that had just become part of a large PE-backed aggregation of individual RIAs, on behalf of the trustee of a Trust (ILIT) of which his client was the insured, owner, and donor. The still-practicing 73 yeard-old orthopedic surgeon no longer wished to fund the trust, so the trustee, the insured/donor’s brother, wanted to explore options to maximize the value of the Trust’s only, including a settlement.
The policy’s cash value had dwindled to less than $15,000, leaving less than six months before the policy would be lapsed without additional premiums being paid. The trustee was exceedingly organized and timely in his responses to our information requests, enabling us to quickly present the case to market, opening the auction less than two weeks after we first spoke with the advisor.
We received five bids for the policy, including a $165,000 high bid, with the second highest bid at $140,000, which, given the broker commission of >30%, would have resulted in a net to the policy owner of less than $100,000, at least $50,000 less than what we delivered.
