In preparation for a quick chat about ratings with a journalist the other day, I had a peek at A.M. Best’s methodology for rating insurance firms. For non-industry people, A.M. Best is a ratings agency that has historically focused on insurance firms and has historically been quoted alongside Moody’s, Standard & Poor’s, and Fitch when insurers trumpet their financial stability. After having a quick look at the methodology document, I remembered having a version of the same document stored on my laptop from 2008, so I compared them quickly.
On Friday, May 28, New York Life and the Actuarial Society of Greater New York hosted Michael Fasano of Fasano Associates for a seminar called “Mortality Curves: Lessons from Life Settlement Underwriting.” This would not seem very shocking were it not for the enmity that life insurers generally show the life settlements industry. Life settlements, and particularly stranger-owned life insurance (STOLI), have in recent years been the bête noire of the life insurance industry.
Following my May 10, 2010 post regarding the alternatives managed account panel during the Spring HedgeWorld’s Fund Service Conference, a panel recap:
There was a lively discussion as panelists disagreed on the advantages and disadvantages of managed accounts. Panels are always more interesting when people disagree, aren’t they? Ours was the first panel of the day — great to get the adrenalin going first thing in the morning.
Whether financial advisors like it or not, the advice they provide should be their central value proposition. Advisors who focus solely on investment product sales without providing valuable advice backed by comprehensive needs analysis will become extinct. This is no longer just a corporate mandate, but a client-driven one. Only a couple of years ago, prior to the financial crisis, advisors who refused to embrace the new advice-driven model might have received a slap on the wrist from their manager for failing to complete their required number of financial plans. Today, their loss is likely to be more tangible, through declining revenues.
I’m feeling sad today. In fact, I lay awake this morning reflecting on dozens of conversations I’ve had with compliance officers at asset managers, hedge funds, and broker/dealers. It’s difficult not to empathize. I don’t recall ever feeling this way after interviews in other functional areas…
Here are people with a job that is growing in range and responsibilities, in effect expanding into operational risk, yet they have few to no resources. Compliance is considered a cost center — in and of itself a death knoll in a time of cutbacks — not that compliance departments had a budget before the crisis. Instead, the compliance officer must build a business case and go hat in hand to management, timing a good day of course. Few are optimistic.