Top Ten Myths? - #10 "The liability is too great"

If you are an advisor, you might believe that the liability is to great. However, it is impossible to reconcile any refusal to offer this service to your clients with your fiduciary duty to disclose material information to them.

All reputable Life Settlement providers offer E&O coverage for their advisors. Not to be aware of this liquidity option or to overlook disclosing to the client the existence of this tool can only be considered contrary to the client's best interests. Any liability lies with the broker/dealer or carrier who prohibits their advisors from participating in the industry.

In addition there are disclosure and rescission provisions built into these transactions to ensure the client's rights are protected.

Every financial professional should be mindful of the spirit of the NASD "suitability rule" (Conduct Rule 2310) in his or her approach to life settlement transactions, even though the sale of a life insurance policy is not a securities transaction.

The suitability rule provides that a member shall have reasonable grounds for believing that the recommended transaction is "suitable" for the customer based upon the client's entire financial and personal profile.

If you are an advisor, hopefully this article will prove helpful as you conduct your due diligence on the "Life Settlement" Industry. "Life Settlements" are a viable financial option for your senior clients. The market will continue to grow exponentially and as it becomes more mainstream, your clients will ultimately participate with or without you.