Is 1908 a life settlement broker?

No. Because if we chose to be a broker, we would, by definition and regulation, have to engage your clients instead of you, their trusted advisor. We strongly believe that the industry has been badly broken for a long time as much because of the absence of the wealth advisor, fiduciary, or insurance professional in the process, advocating for their clients, as anything else. This absence has resulted in policy sellers being badly taken advantage of by egregiously expensive life settlement brokers and individual policy buyers, like those that advertise on TV or use search engine optimization strategies to market to individual policy sellers, keeping you out of the process.

What does 1908 do?

We enable fiduciary and fiduciary-minded wealth advisors of all stripes to deliver a credible price discovery process for their clients with unwanted and surplus life insurance that they might wish to sell. We provide efficient, effective price discovery on a secure auction platform, engaging a universe of credible institutional buyers of in-force life insurance, through their licensed Providers. Our model leverages a unique, fully-transparent underwriting and auction process that generates meaningful psychic and intrinsic outcomes that are far superior to those of egregiously expensive and opaque brokers. 

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We do not "negotiate" on a policy seller's behalf or claim to "create demand" by creating a narrative for your client's policy. They are financial assets with a market of very sophisticated buyers - they are not swayed by anything a market intermediary does with regard to valuing a policy.

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As the founder of one of our largest RIA enterprise clients cited, "brokers sure tell a good story." Indeed, they do. We just tell an honest one, conduct a transparent process, and charge a fair fee for it. 

What kinds of advisors does 1908 work with?

Fiduciary wealth advisors, fiduciary-minded life insurance producers, and other fiduciaries of all types.

Who can sell a policy?

Any policy owner - person, trust, or business -  of a policy that has been in force for at least two years.

What policies are likely to sell?

Term, Universal Life, and Variable Universal Life policies all may have value, depending on the age and health of the insured(s). Single life and joint life policies are in demand, although joint policies tend to sell at a discount to single life policies.

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Policies greater than $500,000 will typically generate multiple bidders. There really is no maximum size policy, although very large policies, typically greater than $20,000,000, will appeal to a smaller universe of only the largest buyers, but still competitive.

Do insureds need to be a certain age?

If the insured(s) is healthy, with the current market discount rates and duration appetite, policies start to have value, all other things equal, in the early 70's. If there are minor health impairments, into the late 60's, moderate impairments, into the mid 60's. If there are significant health impairments, virtually any age will work.

Is there a medical exam?

No. Existing medical records will suffice, typically two years from the insured's primary physician. If there is a complex medical diagnosis, buyers will also likely require records from any relevant specialists who are treating the insured.

How often am I likely to actually see opportunities across my client base?

Although certainly episodic, it is far more frequent than most are aware, with an even remotely proactive approach; our analysis of life insurance industry and wealth management industry data concludes that fewer than 10% of policies that could be sold are ever presented to the market.

Life insurance industry analyses suggest ownership rates among the HNW over 65 years old of more than 60%. It also suggests aggregate lapse rates of 90% in subsequent years.

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So, more than 50% of HNW clients >65 will eventually lapse a policy that they no longer want or need. Ideally, they can make that assessment with you and, if the determination is that the policy no longer serves the needs of the owner that the utility of a settlement can be assessed. 80% of those policies will, indeed, have a settlement value that is greater than cash surrender value.

What determines the value of a policy?

There are a number of criteria that buyers assess and incorporate in their valuation, the most basic of which are the age and health of the insured and the projected premium load of the policy over the projected life of the insured. Having said that, individual buyers have unique criteria and weighting of those criteria that may impact the bid of an individual policy, such as view of insured health (and the implications of impairments on that particular insured's longevity), extension risk, carrier, policy type, discount rate, etc. 

Is there a competitive market?

Yes, while there is not an organized market per se, there is a universe of high-quality institutional buyers, including several household names in private equity, public and private pension funds, endowments, and family offices.

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Our auction, to which you are invited and that you monitor, is the closest proxy to an organized market of institutional buyers of in-force life insurance.

Is it a regulated transaction?

Yes, in 45 states.

What buyers does 1908 engage?

We engage a broad universe of experienced, established life settlement "providers", the statutory/licensed entities that act as buyer agents for institutional buyers. We only engage the most reputable capital in the market and do not engage fringe buyers or "hot money" buyers with whom we do not have direct experience and cannot vouch for their business practices.

How long does it typically take to complete a sale?

From start to finish, typically about 60 days, although with greater medical history or ownership structure, the process can take a bit longer.

We are typically able to deliver final, actionable bids to you and your client in 5 - 10 days. Depending on how complex an ownership structure the policy has, the contract to effect the transfer of ownership is completed within a few weeks, at which point the buyer funds escrow and requests the carrier to transfer ownership. That final step can take as long as 30 days (by statute), but is typically completed in 10 - 15 days.

What fee is paid to 1908?

5% - 7.5% of the difference between the gross winning bid and the cash value of the policy. Be aware that brokers cite a figure that looks suspiciously like this amount; they are citing the % of the policy's face value. Broker fees are almost universally 20% - 33%.

How is 1908's process so much faster?

Generally, by not having to perpetuate the theater that we are doing things that we are not. Specifically, though, in four primary ways;

1. We do not waste time on the front end with executing various agreements (e.g., exclusivity periods, negotiating fees, etc.) with your client that are all, ultimately, about limiting your client's options and maximizing the perception of complexity and value for the broker,

2. We do not request life expectancy reports, which often takes weeks and even months to procure (which buyers do not need and actually tend to suppress value),

3. Our best-and-final bid process is completed in 5 days (or 10, if a medically complex case) rather than the >45 days required by the incumbent channel. And we'll keep it simple by saying that there is a reason that their auction process is so opaque. They are shameless in the efforts to create other, undisclosed fees that they receive. NOTE: Single buyers can match our process speed, but the bids are by definition and invariably not competitive,

4. While we remain as actively engaged as you need of us, we do not get in the way during the contracting and closing processes - that is between you, your client, and the buyer and we add no value other than guidance and process insight. Brokers remain inserted in the process, insisting that all interactions go through them, in an effort, again, to perpetuate the perception of value created and to prevent the revelation of elements of the transaction that they'd prefer the seller not know.

How does 1908 actually generate higher winning bids?

Whereas the incumbent channel uses an iterative, open-bid, "common value" auction process, we use a blind, best-and-final, "private value" auction process, which ensures that bidders actually bid to their true maximum value ascribed to that policy rather than just to beat the next highest bid (up to their max value).

To see how our process yields higher max bids faster in practice, review these auction examples.

What are the tax consequences?

Every case is unique, so, we cannot cite the implications for your client or situation, but, the most basic answer is  (a) ordinary income tax on the policy’s cash surrender value minus the basis, and then (b) long-term capital gains on the net proceeds of the transaction to the seller minus the cash surrender value. 1908 Advisors does not provide tax guidance or advice – a policy seller should consult a CPA or other tax professional about the specifics of a client's transaction.