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How to successfully sell your endowment policy in today’s TEP market

The Traded Endowment Policy (TEP) market has been around, in one form or another, for over 100 years. Over this time, there have been significant developments in the way the market interfaces with customers. For example, improvements in technology has allowed the market to operate more efficiently, with websites such as Surrenda-link’s providing policy holders with 24/7 access to policy valuations.

However, despite these front end improvements to the efficiency in dealing with customers, the way that the market fundamentally ‘ticks’ has remained largely unchanged over the years.

For example, there is no universally accepted market trading and clearing system, hence little in the way of standardisation of market practice. Each market player is free to dictate its own terms of business with customers, and as such, it can be very difficult for customers to compare prices on a “like for like” basis. To further complicate matters, the route to market can be somewhat confusing, with it not always being immediately apparent to policy holders whether they are dealing with an Advisor, Agent, Broker or Market Maker in a TEP transaction.

Matthew McQuaid, responsible for trading at Surrenda-link explains, “We act as both Agent and Market Maker within the UK TEP market. As Agent, we have a range of institutional ‘top level’ buyers on our books at any one time, and we look to source policies direct in the market according to the buying criteria they provide us with. Policies are legally assigned direct from the policy holder to the institutional buyer, who pays Surrenda-link a fee for each policy sourced.”

“In terms of our Market Maker activity, we will occasionally buy policies as Principal; in other words buying policies in our name onto our own books; with a view to trading these on at a later date. However, this forms a much lower proportion of our business than it did perhaps 15 years ago.”

Acting as Agent allows Surrenda-link to remove the financing cost and risk of holding policies on our books, and enables an efficient transaction to happen between the buyer and seller, maximising the value that both parties achieve. In its Agent and Market Maker capacity, Surrenda-link acts on an execution only basis, and offers no Advice to policy holders on whether to make the sale or not. This is the role of Advisors in the market, and they’ll happily engage with policy holders requiring advice on a sale; for an appropriate fee of course.

Brokers (or Price Comparison companies as they often refer to themselves) tend to steer clear of providing advice to policy holders, and concentrate on trawling the market for the best deal for the policy holder.

Matthew McQuaid says, “Back in the 1990s, when there were multitudes of buyers in the market and the internet was in its infancy, Brokers used to perform an important function in helping policy holders to obtain the best deal for their policy. However, with policy holders now having direct internet access to the handful of major buyers in the market, the benefit of Brokers in the supply chain is less clear”.

Surrenda-link’s top three tips for policy holders looking to secure the best deal for their endowment are:

1. Ensure that you are clear who you are dealing with in the supply chain. The closer you can get to the ultimate buyer, the lower the overall transactional costs become, and the better value both policy holders and secondary investors achieve.

2. Determine whether there is a definite buyer for your policy with cash. Some market players will make an offer to purchase, but will simply place your policy onto their stock list or auction with no guarantee of a sale being made. Surrenda-link offers are backed by institutional clients with immediate cash.

3. Check the regulatory status of the party you are dealing with. Companies regulated by the Financial Conduct Authority (FCA) are required to adhere to a strict rules and regulations regarding how they deal with customers. As such, policy holders using FCA regulated companies, such as Surrenda-link, to sell their endowment can be confident that their transaction will be dealt with in a fair, clear and transparent manner.

For more information on how Surrenda-link can help you to sell your endowment, please contact us on 0800 919 021.

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