by John Darer CLU ChFC CSSC
Settlement planners should not accept paid referrals from financial planners without defining the scope of the engagement, or they risk professional liability exposure. The increasing convergence of disciplines is fraught with both obvious and unrealized potential liability traps.
Consider this scenario:
- After you consistently hold yourself out as a settlement planner or structured settlement planner in advertising or on your website, you get a call from a financial planner who it is evident is not a specialist in settlement planning or litigation recovery management. He claims to have total control over the proceedings for plaintiff Sally Jones.
- You are asked to run some structured settlement quotes for an annuity with life and 30 years certain, perhaps a question or two about Medicare Secondary Payer or other topic.
- You fail to ask critical questions that would be a standard part of the settlement planning process but you do agree to split your commissions 50/50 with the financial planner.
- In all your self promotion, you fail to define the scope of your engagement with the planner, the plaintiff attorney or the plaintiffs.
- You subsequently acquire knowledge through observation or otherwise that leads you to believe, in your professional knowledge and experience, that what your referral source (or the attorney) is recommending may not be in the best interest of the plaintiff. You elect to say nothing out of fear of losing the commission or fee that you will be earning by placing the structured settlement or other financial product.
- Don't you have a duty to inform?
- Some time after the case is resolved things don't turn out as planned. The plaintiff hires an attorney with a national reputation for prosecuting people who mislead seniors and disabled persons. You blame it on the financial planner. He blames it on you.
- Think your case will hold up in court?
How about another version of this scenario where you observe and do speak up, but the financial planner, or attorney, ignores your recommendations? How have you documented your suggestion and the fact that it has been rejected?
Settlement planners with pride in their profession and a "love of their own hide" should not call themselves settlement planners unless they are planning to follow through.
"Attorneys on both sides of negotiations, while they may be expert in prosecuting or defending claims on behalf of their respective clients, are increasingly aware that they cannot, in many instances, also competently represent their clients in the intricacies of settlement planning. Some attorneys who have successfully negotiated large settlement amounts have been successfully sued by their own clients for failure to provide competent representation in planning other aspects of the settlement." Society of Settlement Planners Press Release March 31, 2008