Exploring Fiduciary Duty in Life Settlements
Understand the role of fiduciary duty in life settlement decisions with Rob Haynie, Managing Director of Life Insurance Settlements, Inc., in this insightful episode of our Life Settlement Expert Series.
Haynie elaborates on the significance of putting clients' interests first, exploring how fiduciary duty shapes the life settlement decision-making process and the complexities advisors face. Furthermore, he underscores that a life settlement can serve as a strategic means to fulfill this duty by uncovering assets clients may not have known they owned.
TRANSCRIPT
Rob Haynie, Owner and Managing Director, Life Insurance Settlements, Inc.
My name is Rob Haynie. I'm the Managing Director and one of the three Partners of Life Insurance Settlements, Inc. We're located in South Florida, Pompano Beach to be specific, and we're a licensed life settlement broker who represents the seller or owner of the life insurance policy in the life settlement process.
How Does Fiduciary Duty Come Into Play for Financial Advisors When They Are Advising Their Clients on Life Settlements?
Fiduciary duty is an important concept in the fact that they have to act in the best interest of their clients. So, if you look at television today, you'll see different financial services firms talk about “fiduciary duty”. They do it, someone else doesn't, etcetera. But you're kind of in a position where you need to do it on behalf of your client. We think it's intelligent for someone to do it for a couple of reasons. One, it certainly helps their client, which is the ultimate goal. Secondly, it gives you an opportunity to potentially repurpose those additional funds that are coming out of a life insurance policy or an asset that they didn't even know they owned.
How Do You Assist Financial Advisors in Fulfilling Their Fiduciary Duty to Their Clients During the Life Settlement Process?
So, the best example I can give you is: A policy owner sells a policy he or she doesn't want, takes the proceeds, in many cases, up to eight times more than they would have gotten through cash surrender value, and then buy another product to better suit their current needs, an annuity comes to mind. There's a commission that's earned in between that transaction that the financial planner, whoever it is, would receive for just doing his fiduciary duty.
What Are Some Common Challenges or Considerations That Financial Advisors Face When Engaging in Life Settlements?
The main problem many face from the life insurance industry is if you're a captive agent, many carriers prohibit you from even discussing it. They'll send memorandums out, alerts, etcetera, that say if you even mentioned the word, you're fired. So, your livelihood is at stake. So, again, you have to make a decision. I could put food on the plate for my family or talk about life settlements. But, that's changing, and the reason it's changing is certain individuals, without naming too many names, have been taken to court and they don't necessarily sue the advisor, they sue the entity above them, and that's of grave concern to a lot of broker-dealers. So, we're seeing a lot more broker dealers and registered investment advisors realize this is an asset that they need to explore when it warrants it. I'm not saying you should stop everything and look for settlements all day, every day, but you should know what to look for when it pops on your desk.