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The secondary market expands the range of financial planning solutions an
advisor can offer. For this reason, the advisor’s first responsibility is to
have a client’s life insurance holdings appraised on a regular basis. With an
accurate valuation, advisors can determine if a secondary market transaction
could be advantageous.
If a secondary market transaction is in order, advisors must next see that
certain due diligence requirements are met. They should ensure that the
purchasing firm has policies and procedures in place to protect client
confidentiality, including provisions that no identifying information
about the insured will ever be provided to an individual investor. They should
verify that the valuation process is rooted in a deep understanding of life
insurance to ensure an accurate and equitable valuation. Most important, they
should make sure that institutional capital is used to fund the transaction.
Only through such due diligence can the opportunities of the market truly be
realized.
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