Senior Life Settlements & Self-Directed IRAs

Avoid the Impact of the New Department of Labor (DOL) Fiduciary Standards

On Big Government…”The most terrifying words in the English language are: I’m from the government and I’m here to help.”

The Capstone Platform’s value proposition is the knowledge and expertise available to the advisor through the Capstone Consultancy to be able to leverage the Self-Directed IRA structure in a manner that allows the advisor access to a higher margin product with attributes that their clients will find desirable. Educating the client about Senior Life Settlements and with the proper disclosures in the issuer’s Private Placement Memorandum (PPM), the advisor can avoid the fiduciary standard required in the DOL Rule, increase his/her personal income and serve their clients’ best interests.

The Capstone Platform is your access to the Senior Life Settlement asset class and the Capstone Business Model. Delivering safe, reliable yield to your clients without the worry of regulatory compliance, market volatility or geo-political upheaval will help your clients sleep better at night and after all, isn’t that what the fiduciary standard is designed to achieve? Do well by doing good and teach your clients about Senior Life Settlements because many of your already limited options to serve your clients are going away. Merrill Lynch recently announced that they will no longer offer mutual funds in traditional retirement accounts in light of the implications of the DOL Rule (http://www.wsj.com/articles/merrill-lynch-ends-mutual-fund-purchases-in-commission-iras-1478040836). How is that good for clients saving for retirement? The Capstone Platform is a practical, value added solution to help you and your clients navigate the new normal of invasive government regulatory compliance requirements.

In April 2017, the newly minted DOL Rule will go into effect and will likely usher in a wave of changes to the way the financial advisory community works, and further, is subjected to more costly regulatory compliance and potential liability under the new Fiduciary Rule standards.

As with many legislative initiatives, the road to ruin is paved with good intentions. The laws of cause, effect and unintended consequences come into play and the DOL Rule will certainly be no exception.

At the center of the new standard is actually what should be a common sensical mantra for any financial advisor to embrace which is to categorically and unconditionally put their clients’ best interests ahead of their own. The new DOL Rule, in short, automatically elevates all advisors who work with IRA’s or retirement plans to the status of a fiduciary for the dispensation of investment advice.

Investopedia – “A fiduciary is a person or organization that owes to another the duties of good faith and trust. The highest legal duty of one party to another. It also involves being bound ethically to act in the other’s best interests.”

Of the unintended consequences anticipated by many in the financial community by the implementation of the DOL Rule is that by employing new, more rigorous ethical standards to protect the investor, it will actually manifest itself by significantly increasing the cost structure associated with providing retirement advice. Additionally, and perhaps more importantly, it could potentially expose the advisor to liability if the rules and reporting standards are not met with surgical precision. In short, less and more expensive retirement advice all in the name of making life better for the investor.

Changes in increased cost structure to accompany the DOL Rule are widely expected to push more middle-market clients into the Self-Directed IRA space because the new fiduciary standards generally do not apply to these types of accounts since the client acts as his or her own fiduciary according to a recent article published by ThinkAdvisor (September 20, 2016 – Self-Directed IRAs: Avoiding DOL Rule Liability – http://www.thinkadvisor.com/2016/09/20/self-directed-iras-avoiding-dol-fiduciary-rule-lia).

A Self-Directed IRA (SDIRA) is a retirement account that many investors use as a means to invest in non-traditional alternative asset classes like precious metals, real estate and more to the point, Senior Life Settlements. Despite the fact that the SDIRA is excluded from the DOL Rule, it is still of paramount importance that the advisor understands his/her role relative to the DOL Rule to avoid potential liability with respect to these accounts.

The DOL Rule allows advisors to continue to provide general retirement education to clients without triggering the fiduciary standard. The Rule provides guidance that an advisor may provide general information about their asset allocation based on age, income and other circumstances surrounding their financial life. An advisor may also provide general information like historical rates of return for instance. The advisor must exercise caution in providing this advice because information about specific investment options can cause the advisor to make an investment recommendation and become a fiduciary with respect to that advice.

If an advisor does become subject to the new DOL Rule, he or she will be required to comply with the best interest contract exemption and execute a formal agreement with the client that commits the advisor to act in that client’s best interests. The client acting as his/her own fiduciary should also carefully study and understand the rules around prohibited transactions (https://www.irs.gov/retirement-plans/plan-participant-employee/retirement-topics-prohibited-transactions). While SDIRA’s may provide clients the opportunity to invest in more non-traditional (stocks, bonds, mutual funds, etc.) alternative asset classes, it is now more important than ever that advisors and clients alike understand the complexities of both the DOL Rule and the IRS requirements to avoid potential liability.

For those advisors that do not need the government to tell them that it is their responsibility to be thoughtful stewards of their clients’ best interests, educating your clients about the Senior Life Settlement (SLS) alternative asset class as a means to achieve safe yield and grow their retirement assets can be beneficial for all concerned.

An SLS is a no longer wanted, needed or affordable life insurance contract sold by an insured to a third party who assumes responsibility for the payment of premiums until the policy matures at the insured’s passing.

An SLS functions very similarly to a zero-coupon bond. The purchaser is buying future dollars at a significant discount.

SLS’s are assets that are highly non-correlated to market forces. The only trigger affecting the purchaser’s receipt of the death benefit is the mortality of the insured. SLS’s function like a performance contract. The purchaser is the contractual beneficiary of the death benefit upon the passing of the insured provided all premiums have been paid and the policy is in good standing with the carrier.

Relative to other risk-adjusted fixed-income investments, the return characteristics are attractive and there are no human or other variables like manager performance or geo-political upheaval that affect the outcome.

SLSs provide exposure to a unique non-correlated asset class with a known cost and a known yield, with only one primary risk…time. These characteristics make them particularly appropriate for high-net-worth investors in search of portfolio diversification and low-volatility, risk-adjusted returns.

The Capstone Platform delivers a complete product and service solution that includes access to our custom tailored suite of Senior Life Settlement solutions, marketing, and full-service consultation. Capstone gives advisors all of the tools and support they need to focus their valuable time on building relationships…not managing a business. 
How do we do this? By combining advanced technology with an unparalleled level of expertise and knowledge. With The Capstone Platform, your firm will 
have a complete, sales, marketing, service and administration platform.