Published on 13 Jan 2011
Survey reveals need for guidance on life settlements
Story by: Julia Bradshaw
Advisers in the UK are calling for more guidance and education from the FSA on the life settlements asset class, according to research from PDL International.
The independent survey, carried out on PDL’s behalf by NMG Consulting with 353 investment IFAs, revealed that more than one-third of financial advisers wanted clearer guidance from the City watchdog.
The survey also revealed that 30 per cent would like increased transparency on how life settlements work and how risks can be mitigated. A further 27 per cent of those surveyed said they wanted more education and support from providers and industry trade bodies in dealing with life settlements.
Sven Kuhlbrodt, managing director of PDL International, said: “Advisers recognise that they have an obligation to their clients to possess a full understanding of life settlements so that they are in the best position possible to offer informed advice, whether they are recommending them or dismissing them.
“As an industry we have an equal duty to help advisers build up this understanding of life settlements. That includes the FSA, to whom IFAs are clearly looking for guidance. It also includes providers such as us.”
Since the FSA raised concerns about life settlements, the European Life Settlement Association has launched a code of conduct. PDL International is also using online guides, tests, microsites and presentations to fill the knowledge gap surrounding the life settlements asset class.
Mr Kuhlbrodt said: “With economic uncertainty set to continue into 2011, advisers are increasingly considering products that are uncorrelated to traditional markets. Life settlements are one such product. PDL International is committed to working with advisers, addressing their concerns over transparency and risk, and opening up this asset class to investors.”
PDL International recently launched a life settlements product, Cascade Portfolio, and investors can purchase interests in a range of life settlement policies, which the firm claims addresses many of the FSA’s concerns about transparency, longevity risk, counterparty insolvency and liquidity.
Christopher Wicks, director for Manchester-based Bridgewater Financial Services, said: “I am not an expert on life settlements and I do not use them, but I did investigate the asset class before I rejected it because there were too many uncertainties about the way life settlements work.
“There are also risks incurred when people invest that are too unpredictable and the asset class went badly wrong last year.”
In February last year, Peter Smith, head of investment policy in the FSA’s conduct policy division, said: “We are monitoring the provision, marketing and uptake of these products.
“Where we have discovered issues with the firms involved in the production or distribution of these products in the past they have been subject to supervisory actions and, where necessary, enforcement proceedings. This is an approach that we will continue to pursue in future.”
Commentary by Michael Abraham:
Education is definitely necessary but why oh why doesn’t the FSA, rather than keep complaining and acting like spoiled head teachers, actually do something and insist that all IFAs take extra courses on products such as Life Settlements and furthermore ensure that they must pass the relevant exams in order to retain their licence. It is so simple and if only the Life Assurance Association and Sir Mark Weinberg had been listened to in the early 80s licensing and continuing education would have become mandatory and many errors and frauds avoided.
