As Baby Boomer Business Owners Head for the Exits, Insurance Agents Are Benefiting from the Great Boomer Sell-Off
The great wealth transfer is underway as baby boomer business owners hang up their hats and head for the exits.
More than $53 trillion in baby boomer-owned assets will change hands over the next 15-20 years as those born between the years 1946-1964 transfer their personal wealth or sell-off their business assets.
With more than $10 trillion of the boomers’ wealth held by four million small businesses, the surge in business-ownership sell-offs, in turn, will fuel demand for a wide range of professional services. From tax professionals and business brokers, to asset valuation specialists, wealth managers, attorneys, and insurance professionals, the demand for exit strategy expertise is expected to benefit those advisors who have positioned themselves to seize this unique business niche.
Insurance advisors, especially those with life settlement expertise, stand to benefit as their retiring business clients seek options to maximize the value of obsolete key person insurance policies.
Actual Case: Agent Helps Business Owner Sell Policy | Receives $60K Commission Check
This case involved a 74-year old business owner who was in the process of selling off portions of her business assets in order to retire. Finding herself over-insured, she sought the guidance of her insurance advisor regarding a $10 million key person policy that was no longer needed for business protection purposes. Her goal was to sell the policy, eliminate the premium burden of $127,000, and receive a cash payout far greater than the $70,548 cash surrender value offered by the carrier.
Given her standard health rating and a life expectancy of 15 years, the agent (who had experience with life settlement transactions) informed her that finding a willing buyer in the secondary market could be challenging. He informed his client that partnering with an experienced life settlement broker was the first step toward finding a buyer and achieving her goals to maximize the policy’s value. He recommended they partner with Asset Life Settlements and we were pleased to assist with the transaction.
After submitting the case to several buyers whose policy purchasing guidelines included healthy policy owners with longer life expectancies, we were successful in negotiating a high offer of $550,000 for the client. The client was thrilled with the cash windfall and the agent was surprised to earn a commission for $60,000.
- Insured: Female (age 74); Life Expectancy of 15 years; standard health
- $10 Million Universal Life Policy (Business Protection / Key Person Policy)
- Cash Surrender Value: $70,548
- Annual Premium: $127,000
- Highest Offer from Buyer: $550,000 (Net amount accepted by client)
- Commission paid to agent: $60,000
By the Numbers: The Market Potential as Boomers Hang Up Their Hats
So what’s the potential market size as older business clients hang up their hats and head for the exits?
- Baby boomers own an estimated 4 million U.S. companies. (U. S. Census Bureau)
- Retiring Boomer business owners will sell or bequeath $10 trillion worth of assets over the next two decades. (CABB.org)
- More than half of America’s small business owners are age 50 or older. (SCORE.org)
- A survey by the Exit Planning Institute revealed that over 70% of business owners aged 50 or older planned to exit their businesses within the next ten years.
- The most popular states for business owners age 50-plus are California, Florida, Texas, New York, and North Carolina (SCORE.org)
There’s little doubt that insurance advisors have a unique opportunity to benefit from the silver tsunami of retiring baby boomers seeking to sell their unwanted or obsolete life insurance policies.
Next Steps
Positioning your practice to handle life settlement transactions is the first step. Take time to refresh your knowledge of the secondary market for life insurance and review case examples and success stories — especially life settlement transactions involving key man policies. These can be found on the Asset Life Settlement website under Success Stories.
Partner with Asset Life Settlements
Choosing an experienced life settlement broker as your partner is essential to obtaining the highest possible offer for your client’s policy. In addition to negotiating the highest possible cash settlement for your client’s policy, partnering with Asset Life Settlements means advisors also benefit in the following ways:
Turn-Key Service: Our turn-key services approach means advisors can hand off their client’s life settlement case to us and we’ll do all the work.
Compensation for Advisors: We believe in rewarding advisors who entrust us with their clients’ life settlement cases. That’s why our compensation/commission structure is one of the most favorable packages available to advisors. Call us to discuss the details.
Medical Records: We absorb all costs for purchasing your client’s medical records. Some brokers and providers charge back to the advisor the cost for obtaining medical records and life expectancy reports, but Asset Life Settlements does not.
Life Expectancy Reports: We shoulder all costs for obtaining life expectancy certificates. Again, other brokers and providers may charge back this cost to the advisor, but we do not.
E&O Coverage: If you have regular E&O coverage, generally it will not cover life settlement transactions. We provide life settlement E&O coverage to our advisors/agents without any cost to them.
No Binding Language in Our Contracts: Some life settlement brokers require a 6-month exclusive right to sell in their agreements. We do not.
Leverage: Partnering with us means advisors are aligned with one of the most experienced life settlement teams in the country. Our 50+ years combined experience in the market dates back to the origins of the industry. We leverage our experience to benefit you and your client.
Fiduciary Duty: As a licensed life settlement broker in the State of Florida, we are required by law to represent the best interests of the policy seller. Partnering with an experienced life settlement broker means that the advisor can feel confident he/she has fulfilled their fiduciary duty to represent their client’s best interests. We recognize that financial advisors today are held to a stronger set of compliance obligations, and Asset Life Settlements has you covered as it relates to fiduciary duty, suitability, and best interest standards.
The current economic landscape and demographic trends involving boomer business owners creates an unprecedented opportunity for insurance professionals to generate additional revenue for their practices.
If you would like to learn more, call us at 855-768-9085 to discuss your questions. We’ll be happy to consult with you regarding your client's eligibility for a life settlement, as well as provide an immediate estimate of its value in the secondary market