by John Darer CLU ChFC CSSC RSP CLTC
Increasing sales of recycled structured settlements by settlement planners and plaintiff structured settlement advisers have brought a potential conflict of interest question to the fore.
Recycled structured settlements are contractual rights to structured settlement payments that have been previously sold, but could very well include pending deals that are in need of funding. Some factoring companies will price out a deal without having a specific investor, but knowing the range that an investor would be willing to pay.
The fact is that when a structured settlement annuitant sells structured settlement payments rights for "cash now" he or she is doing so at a loss, sometimes a massive loss of capital.
Some settlement planners and plaintiff structured settlement brokers have been informing their clients for years about structured settlement factoring and encouraging their clients to come to them for advice if they find themselves with a need to raise cash. Such brokers may assist their clients in shopping around for the best deal or referring them to a settlement purchaser in exchange for financial compensation, which for the most part is undisclosed on their websites.
Some settlement planners and structured settlement brokers engaged by plaintiffs, have been incorporating recycled structured settlements as part of an overall cash flow solution to their client's settlement plan. Upon information and belief these recycled structured settlements are sometimes even acquired from companies whose advertising practices that many find so objectionable.
Some settlement planners and plaintiff structured settlement brokers argue that there is, or should be, a fiduciary standard as to the primary market.
If one applies a fiduciary standard to a settlement planning engagement where the settlement planner is recommending an investment in recycled structured settlements, doesn't the settlement planner have a duty to obtain the best possible yield consistent with the client's investment objectives and risk tolerance? If so, doesn't a higher yield bring a greater level of hurt to the selling annuitant?
One such settlement planner responded to this question by opining that there is no conflict of interest because they are not "making the market" as a direct purchaser.
Unfortunately the lack of regulation of the sales and solicitation of recycled structured settlement payment rights makes it all a bit murky.