“Shares of life insurance settlement provider Life Partners Holdings Inc. (LPHI: News ) went down by over 13% at close of Wednesday’s trading, after an analyst research report called its fees egregious and non-sustainable, and put out a warning to potential investors.”
Citron advised investors to consider carefully as the company had “too many red flags”. The analyst termed the high-level fee of $500 thousands per transaction that was being charged by the company as “egregious” and not “sustainable”.

The report claimed that Life Partners’ gross commissions were 14.4% of the face value of policy settlements in its third quarter that ended on November 30, 2008. But, on an average, the fee is only about 6.0% of the face value or 30% of the gross sale price for such companies.

The report further claimed that investors of life settlements normally seek target of an Internal Rate of Return or IRR’s of 9%-13%, but Life Partners promised as high as a 16% IRR to its investors.

Citron infers, “If Life Partners is forced to cut margins even by half to approach industry norms, its net profit will sink by 63%.” The report concluded that Life Partners sustained their high-level fee income only by “concealment.”

This weekend’s edition of the Wall Street Journal includes a cover story about many 60+ seniors looking for jobs. I have written about this a couple times in my blogs, and “seniors working longer/more” is a story that is covered by the media weekly. What is different about this story is that there is an acknowledgment that while maybe some senors continue to work because they find it rewarding or fun, many seniors are looking for a job out of necessity.

If you, a friend or a loved one is feeling the impact of the stock and housing market drops – share the good news with them. Investors are still making offers on life insurance policies for seniors 65 and older. Don’t expect your life insurance agent or even your financial advisor to recommend – both are discouraged from recommending due to their relationships with the major insurance carriers. Use our calculator for a free life settlement estimate and print it out and bring to your fee-based financial planner.