by Structured Settlement Watchdog
A structured settlement factoring origination firm associated with a New York structured settlement primary market agency seem to suggest to investors, that factored structured settlement payment streams have the same risk profile as United States Treasury Bonds. Is this an Ice to Eskimos moment, or is it grounded in reality?
6 Big Reasons Why Factored Structured Settlement Payment Streams May Not Have The Degree of Safety Suggested by the Picture Below
- A factored structured settlement payment stream is not backed by the full faith and credit of the United States of America, which has been "in business" independently for 243 years
- Factored structured settlement payment streams are not annuities or insurance products according to the National Association of Insurance Commissioners.
- Investments in factored structured settlement payment streams bear transactional risk to the investor that could result in a loss of money. There are documented cases where investors in such instruments (which again, ARE NOT annuities) have lost money.
- Factored structured settlement payment streams are very likely not covered by State Insurance Guaranty Funds in the event of the insolvency and liquidation of the obligor. More and more states are amending their state guaranty laws to remove any doubt.
- Factored structured settlement payments streams are not liquid like equities, corporate or treasury bonds.
- 12 month CDs are available for up to 2.3% at time of posting. That's more than double what is represented in the chart below. On further inspection the company that published the chart cites a source that ends with April 2016 rates. 30 Year Treasury's have lower yields. The cited link is to current yields which differ. The Equities chart cited a 50 year average ending in 2009, a decade years prior to the publication of the chart. Are we looking at Comparison by Discombobulation" or " Apples to " Kumquats"?
The picture below is a screen shot of part of a web page used by the firm in question, to solicit investors in factored structured settlement payments streams.
On September 28, 2019 I published a blog post in which we found that the structured settlement calculator on the site in question suggested a 6.9%-7.5% discount rate on two hypothetical deals to the seller. Thus one can deduce based on the test cases we ran, that the margins are between 1.9-3.4 % on the low side and 2.5%-4% on the high side.
Don't be baffled or bamboozled by impressive looking charts. Factored structured settlement payment streams are what they are.