"Critics have depicted the payments as akin to kickbacks, putting the brokers potentially at odds with the interests of their clients. Brokers that accept the commissions say they're an ordinary part of their compensation and pose no threat to clients because they're disclosed upfront". (emphasis ours)
To paraphrase the late great John Lennon "They MAY have said I was 'dreamer', but I'm NOT the only one"
It's common knowledge within the structured settlement industry that some structured settlement brokers and settlement planners ask for and receive referral fees from factoring companies or brokers. The question is "are referral fees being disclosed?" In late 2007, the structured settlement watchdog started the Structured Settlement Transparency Initiative when information began leaking out about the extent to which members of the structured settlement industry sought and/or were being offered , and took fees from factoring companies. One source published at the time that the majority of its clientele took such fees. Woodbridge Structured Funding, LLC (nee Woodbridge Investments) continues to promote its structured settlement professionals program which they state has paid out MILLIONS OF DOLLARS in commissions! And it's not just structured settlement brokers. It is believed that other financial advisers are referring such business and taking compensation.Again the issue is disclosure.
The structured settlement watchdog believes that such commissions potentially put the brokers and agents receiving them at odds with the interests of those who put their trust in them. It is indisputable that compensation paid to brokers is a cost factor that reduces., or ha sthe potential to reduce, the ultimate payout to the seller of structured settlement payment rights. To what extent were these payments disclosed up-front and how much were not? How about today? Without disclosure, unsophisticated and even financially sophisticated sellers of structured settlement payment rights may again become victims. Given the information, selling annuitants then have the ability to negotiate the commissions, which are not regulated in factoring transactions the way they are when insurance is placed (those rates are filed with state insurance departments). In my opinion, the disclosure of commissions to the annuitant should be delivered no later than when initial paperwork is submitted to the claimant with the fine granular detail of each and every person who is getting paid as part of the transaction. Some may oppose this because it will then become part of the public record. I have also suggested that selling annuitants ask their broker how much they are making on the transaction.
The lawsuit above, filed on behalf of all clients of Mesirow in the same situation, requests that Mesirow pay damages based on the amount it received over about a decade in contingent commissions. The attorney for DOD Technologies estimates the total at about $70 million.
The Appellate Court effectively ruled that a 1996 state law that shields brokers in many instances from after-the-fact client complaints doesn't automatically protect them in contingent-commission disputes. The ruling potentially opens the door to additional litigation in this area, according to David Klevatt, a Chicago attorney representing DOD Technologies.