This month, our CEO, Jay Judas, talks to Jamie L. Mendelsohn, EVP, Ashar Group. The pair discuss the ins and outs of the life settlement market, Jamie clears up a common misconception we had about life settlements and HNW clients and we get restaurant recommendations for not one, but two states! Read on to learn more!
JAY: We are overdue to chat with someone from the top tier of the life insurance industry who is an expert in the life settlement market. We are remedying this oversight today by sitting down with you, Jamie. You have nearly two decades of experience in the life settlement space and all that time has been spent with Ashar Group. Tell me about your company and your role in the organization.
JAMIE: Jay it is always great to connect with you. Ashar Group is a business my family started in 2003 focused on valuing existing life insurance policies for advisory teams and their policy owners. For over two decades we have also helped policy owners monetize their policies in the regulated life settlement market, helping them capture the highest value by negotiating aggressively using our policy auction platform. As executive vice president, I am focused on working with advisors and their clients to understand the value of their life insurance assets and then negotiate on their behalf, representing sellers in the transaction.
JAY: I have enjoyed hearing about your parents and your siblings - you always seem to have new stories to share about them. I would love our readers to hear about your family and your upbringing and your path that led you to the life insurance world and, specifically, the life settlement segment.
JAMIE: We are blessed to have amazing parents who have instilled the importance of family – trust, honesty, compassion, love and strength. Our parents are our foundation. They love without judgement and support us like they can bear all burdens yet still rise up to make us stronger. We chose the name Ashar because we also want those attributes to shine in our professional lives. Ashar comes from the Old Testament, and it has many definitions. We chose “do what is right, you will be blessed” to represent our approach to our clients, the families and businesses we serve, as well as our team members.
JAY: Hopefully, over the years, it has become evident that some research, thought and deliberation goes into the subject matter questions posed in the Tier One Interview. A few weeks ago, you and I tossed around a lot of topics that could potentially be covered and, at the top of the list was how policyholders should think of their policies when it comes to their financial picture. Let’s start with that. I imagine most policyholders view their policies as a necessary evil to mitigate some sort of risk. But that is not the full picture, is it?
JAMIE: You hit the nail on the head. Many clients think of life insurance as a liability, the premium costs are a drag or a burden; however, it does serve as an important planning tool in various estate, tax, business, and charitable planning situations. If those needs change, if your clients wouldn’t buy that policy today, exploring a life settlement solution might be appropriate. The power of a life insurance policy is not just the death benefit, it’s also its assignability. The opportunity to sell a policy in a regulated institutional market to create potentially six to seven figures of immediate capital for other planning needs is available to many policyholders.
It’s important for your readers to recognize that life insurance is property, it’s an asset they own that could be the vehicle to create significant value. If the need for which the policy was put in place no longer exists, it’s important to value it before they discard or materially change it. Identifying if the unwanted or unneeded life insurance could fund the growth of the business, fund new insurance on the healthy G2 or G3, or just create additional value above what the carrier would give the policy owner at surrender.
JAY: When it comes to determining the value of a life insurance policy, I would guess many are unfamiliar with the auction process. There are a lot of television commercials where a policy buyer is advertising directly to potential sellers of policies. Is that going to typically result in the best outcome for the policyholder?
JAMIE: Those commercials on TV and online have been good for the industry in creating more awareness of the life settlement option; however, many times those advertisements are direct buyers that are misaligned with policy owners. They do not provide an auction; they are a single buyer trying to purchase the policy without having to compete against other purchasers. In my experience, competition drives value. To ensure the transaction is in the policyholder’s best interest and in accordance with the industry’s best practices, a seller representative is very important. A knowledgeable party that can access multiple buyers on behalf of the policy owner.
Ashar Group serves as a broker, a seller representative that is licensed to have a fiduciary duty to the policy owner. Our role is to build the strongest file possible and then to go to market and force the buyers to compete to purchase the policy, driving as much value into the pocket of the policy owner, versus leaving it in the pocket of the buyer. My work every day is focused on delivering the best results to the advisory team and policyholder by negotiating on their behalf with institutional buyers to secure the highest fair market value for the policy.
JAY: You are an excellent public speaker, Jamie, and I have seen you on stage dozens of times over the past decade or more. I am always impressed by how you categorize prospective life settlement prospects into one of two categories – those who are “at-risk” or “needs-based” and those who are engaged in pragmatic planning. It seems to me that most of the direct advertising is aimed at the first group but the opportunities for life settlements in the planning space are largely untapped. If you would, differentiate these categories and describe some of the different applications.
JAMIE: You are sweet - I appreciate your kind words. I enjoy educating fiduciaries around the country about this transaction. This is a market that can serve all socioeconomic levels, since it can purchase one hundred-thousand-dollar policies or policies with face amounts of fifty million or more. There are certain policyholders that can’t afford the ongoing premium or are concerned with the maturity date in the future or the expiration of a conversion date that they “need” to exit the policy. The goal is that they exit the policy for the most value that can be secured to help with other planning.
There are other clients that can afford the insurance; however, their protection need has changed, or they want to simplify their planning. Their decisions are more about their “desire” for certainty - access to immediate capital for other types of investments - more than viewing their insurance as part of their investment portfolio, or “for a financial profit” sale. There are many clients evaluating life insurance structures that are incorporating a fair market value analysis to determine if the life settlement option could be a solution to create more capital for other planning needs that are of greater importance or focus based on the evolution of their estate, business and charitable planning.
JAY: Let me dig into this a little bit further. Given our firm’s life insurance consultancy business where most of our clients have nine-figure net worths, I have shied away from life settlements after one family office told me, “Our client would never want a stranger owning a policy on one of the family members.” Now, thanks to you, I understand that is not necessarily logical thinking. What life settlement trends do you see with ultra-high-net-worth clients?
JAMIE: We have seen a significant uptick in the policies being valued for sale in the high-net-worth and affluent markets. Most people don’t want to walk away from an asset for well below the asset’s fair market value. Additionally, many of the policies written prior to 2005 have a maturity age of 95 or 100, meaning the full face amount will terminate if the insured lives past those ages. With longevity increasing, especially when you study the wealth factor and life expectancy, many policyholders want to mitigate that exposure by monetizing the asset now, freeing up future premium dollars that don’t have the extension risk that some life insurance contracts have from years ago. The idea of wealth transfer earlier in life and “giving while living” have also been factors influencing affluent clients to take advantage of the regulated institutional life settlement market.
JAY: Speaking of charitable planning, I know you do a lot of philanthropic work. What are you involved in and how else do you spend your time away from Ashar Group?
JAMIE: Ashar Group supports two main charities – the Crohn’s & Colitis Foundation as well as the Head & Neck Cancer Alliance since both diseases have greatly impacted our families. My twin sister and I have lived with Crohn’s disease since our early 20s and, for the last two decades, we have dedicated time and resources to create more awareness of these diseases, as well as help to fund research. Hopefully, there will be a time in the near future that families and patients won’t need to suffer and fight like we have to overcome some of the challenges of these diseases – hospitalizations, surgeries, drug therapies, etc. We fight for those who can’t, we support and work to lift up all those impacted by these diseases to be a good example of what one can accomplish, even with a chronic illness.
JAY: Thank you for being so generous with your time, Jamie. You know that Pete and I really enjoy hanging out with you and your siblings and I’m certain we would attend any life insurance conference simply to visit with any or, as is often the case, all of you. We have reached the restaurant question, and I know you have been doing your homework. Without naming a steakhouse or a steak dish, tell me about some restaurants I need to visit and what I should order.
JAMIE: We have discussed that I split my time between Orlando and Bozeman, so I have favorites in both cities. In Bozeman, a great Asian restaurant is Shan. It’s in the Cannery district and offers amazing panang curry dishes, duck wontons, and Dan Dan noodles.
In Orlando, my niece, Kori, usually makes the most delicious food for me. I love a good Smash Burger from Cow & Cheese, as well as the meatballs and Bolognese from Prato on Park Avenue in Winter Park.
Since its inception, Life Insurance Strategies Group has solely focused on the individual high net worth life insurance market. We do not sell products. This allows us to offer unbiased, pragmatic advice. Visit us at www.lifeinsurancestrategiesgroup.com.