Keeping Assets Safe in the Life Settlements Market
Despite the life settlements industry's best efforts, news reports of executive malfeasance still hit the news with an upsetting frequency. The latest case involves a group of investors in Texas who lost $30 million they'd invested in life settlements with National Life Settlements LLC, a company now facing fraud charges. To date, the Texas Supreme Court was able to recover 69 percent of those investments. The charges - the life settlements were fraudulent and unregistered brokers and agents were doing the selling.
This case is unfortunate as it stains an industry that has made great inroads into the investment world. Life settlements are now regulated with the same stringent measures as used for insurance policies. There is a larger measure of accountability on the life settlements market now more than ever. And the majority of life settlements brokers are welcoming the added consumer protection as it serves to legitimize further the industry.
But that begs the question: How do investors identify reputable life settlements firms? As the case in Texas proves, it's not enough to assume your state authorities have a handle on all life settlement business. By following the checklist below, investors can perform a little due diligence themselves, which could save millions in potential losses down the line.
- Is your life settlement broker registered? Check with the state insurance department to determine if your broker and firm have the required licensure to practice in your state. If yours is a state that doesn't have such requirements in place, check with the Attorney General's office and the Better Business Bureau to determine if the company and broker are in good standing. When in doubt, don't.
- What are the state's licensing policies? Hard to imagine, but some states require only payment of the fee and an application for life settlement brokers to get up and running. Look for companies that have obtained licensure in states with strict laws on the books - Ohio, Pennsylvania, Texas, and Florida are some of the toughest laws in the country. It's a fairly safe bet that a company operating in Oklahoma and has licensure in Ohio is a reputable firm.
- How transparent is your deal? Is your broker answering your questions? Brokers are able to tell you who the buyers are, what the offers consist of, and how the process works from end to end.
- Is your broker also a buyer? If so, don't deal with that broker. Such conflicts of interest, not allowed in any other industry, can greatly impact your investment. Instead, look for a broker who works for you, not himself as well.
- Does your broker seek institutional investors? Fraud can be thwarted if you do business with a broker whose main client base are those large companies used to assessing risks and funding larger investments.
- Is your broker insured? Good brokers qualify for errors & omissions insurance. If your broker isn't insured, that's a red flag. It's also a sign that your broker doesn't have the means to pay back any bad investment claims.
- Does your broker comply with NAIC standards? Compliance with National Association of Insurance Commissioners standards is not mandatory, but it's a great measurement of your broker's commitment to conducting business fairly.
For more information on choosing the right life settlements company, call Opulen Capital at 877-678-5361.
