Avoid Unlicensed Operators in the Life Settlement Industry — Part 3

A woman anxiously looking at paperwork

We’ve touched on unlicensed activities generally and encroachment as one form of unlicensed activity to be concerned about. Another form of unlicensed behavior that has a significant impact on consumers, investors, and the industry at large involves the proliferation of investment programs promoted by inexperienced, unlicensed, and in some cases, unscrupulous parties. The risks to which these businesses expose individual investors, policy owners, and the legitimate industry are significant.

Unethical Life Settlement Operators

A casual browsing of the internet reveals that there are dozens of companies offering life settlements to investors. There are also quite a few individuals and businesses holding themselves out as buyers of policies that are unlicensed. Sometimes these two activities are combined into a single company (or two affiliated companies), and still, others are associated with other companies that play one or more roles in the legitimate marketplace but are collaborating with unlicensed actors as well.

As a general matter, conflicts of interest abound in this dark corner of the investment world. In addition, and ironically, consumers who sell their policy to unlicensed or unscrupulous parties may never know if they’ve been misled or harmed. After all, how often does someone who has sold an asset check to see if they were treated fairly after the transaction has closed?  Homework, if not done beforehand, is rarely done after the fact, and even if it is, there’s little or no recourse to be had by then.

A Market Full of Illegitimate Investors

On the investment side of the marketplace, unlicensed promoters offer individual investors policies or interests therein based on a sales pitch that is very attractive – at first glance. Sadly, many of these promoters are doing things behind the scenes that expose investors to all sorts of undisclosed and difficult-to-uncover risks. By the time the company is in trouble with regulators or the law, it’s too late, and the more time that passes, the more money that can be lost.

Take, for example, the companies that offer individual investors the opportunity to buy individual life settlements. Many of these companies are neither licensed nor regulated by choice. They argue that they “don’t need to be” or something to that effect. However, when something goes wrong, where does the investor turn for help? The answer is that even if there is a place to go, their money’s gone, the promoter is gone, and the loss – in real dollars – is significant. The irony is there are plenty of investment companies that are licensed, regulated, and reputable, and if you qualify, you can participate in the marketplace. There are risks associated with all asset classes, of course, but at least you can deal with licensed professionals if you do a little homework.

So why do these back alley businesses thrive? It’s because the pitch is usually fashioned around the idea that you can gain access to something that only institutions know and use, but only by going through the promoter’s “back door.” Not only is this untrue, but it is also unnecessary. There are plenty of front doors through which you can explore the life settlement marketplace, gain information and education, and thereby make an informed decision.

To learn more information about life expectancy underwriting and how assessments can be used for legitimate life settlement transactions, contact ISC Services.