As we enter 2019 with a degree of uncertainty in some economic arenas, money-market funds, also known as MMFs, are making a comeback.
Before the financial crisis of 2008-2009, money-market funds had the potential to yield 5 percent, and sometimes, even more.
Then, the Great Recession hit. This greatly affected the money-market funds’ profit, immensely minimizing their yield. In September 2008, the Reserve Primary Fund broke the buck. The Federal Reserve’s interest-rate decreases rendered market-money funds unreliable. Cash was no longer king.
Cash is Looking Better Than it Has in a Long Time
Now, the Federal Reserve’s interest-rate increases are changing the narrative: money-market funds are back. Peter Crane, president of Crane Data, predicted in 2017 that “money-market funds will become more attractive than they’ve been in a decade.” So far, this prediction has turned out to be accurate, causing optimism among many.
Federal Funds Rate Target at 1.5 to 1.75 percent
As reported in WealthManagement.com, The Federal Reserve has “raised rates six times over the last two-plus years... leaving the federal funds rate target at 1.5 to 1.75 percent.” Federal officials also “indicate another two to three rate increases are likely this year.” As of December 20th, 2018, The Crane 100 Money Fund Index is “at 2.10%, up 4 basis points from 11/30/18 and up 23 bps since 9/30/18.” The Crane 100 is predicted to surpass “2.25% by mid-January.” In sum, as the Federal Reserve continues to increase rates, money-market fund yields will continue to grow. Money-market funds are reclaiming the role they held before the Great Recession.
Money-Market Funds and Life Settlements
Due to demographics and the increasing amount of awareness among Baby Boomers, financial experts agree that the life settlement market is an ever-growing one.
Selling one’s life insurance policy, as opposed to surrendering the policy or letting it lapse, is a highly advantageous choice for any one of your clients who qualifies. By receiving a cash payout--and one that is higher than a cash surrender value--your client can break free from expensive premium payments, reallocate funds towards short-term and long-term care, reclaim their independence, gain peace of mind, and so much more. Your clients need not be confined to a policy that no longer makes sense for them. One shouldn’t have to make nonessential payments during retirement. At Ashar Group, we know that a life settlement can be truly life-changing.
You might not have considered the option of your client selling their life insurance policy and distributing their earnings to a market-money fund. Money market mutual funds are known as “the lowest-volatility types of investments” and yet, still offer more than worthwhile returns. Money-market funds don’t require substantial purchase requirements. In fact, as Richard Loth writes in Investopedia, requirements for money-market funds fall below “average mutual fund minimum requirements.”
At Ashar Group, we believe that you and your client should be aware of all the information available regarding finances post-employment. Depositing the proceeds of a life settlement into a money-market fund is only one suggestion. We believe that you, as your client’s advisor, are in the best position to give financial advice. Ashar Group does not give financial advice or sell insurance. We are an independent life settlement brokerage with a fiduciary duty to you and your client to force competitive bidding between multiple life settlement buyers in order to obtain the best value for your client.
If you would like to learn more about the process of selling a clients’ policy in a life settlement, please don’t hesitate to reach out. We are here to answer any and all questions you may have.