by John Darer® CLU ChFC MSSC CeFT RSP CLTC
What is a structured settlement broker, consultant or expert?
What is a Structured Settlement Broker?
Traditionally a structured settlement broker is an individual who assists parties in claim disputes or litigation to effectuate a structured settlement transaction. As the majority of structured settlements are funded with custom designed annuities issued by life insurance companies, structured settlement brokers are (or should be!) licensed by the Insurance Departments in the various states that they conduct business and, in the case of variable structured settlements, licensed through the National Association of Securities Dealers and the state licensing authority where business is being conducted.
How Are Structured Settlement Brokers Paid?
Structured settlement brokers receive their compensation by way of commissions earned by the placement of the aforementioned custom designed structured annuities. This way they can be retained at no cost to the defendant's or insurer's claim file if hired by the defense and no cost to the plaintiff or plaintiff's lawyer. The commissions are paid out as a marketing expense of the annuity issuer or product provider and amortized, not deducted from the cost of the structured settlement. If there are multiple brokers or brokers representing each side of the case then it is customary for those brokers to share commissions in the way that such commissions might be shared by one or more real estate brokers involved in the sale of a property.
Who Hires Structured Settlement Brokers?
In the early stages of the industry in the United States, during the 1980s, the majority of structured settlement brokers were hired by the defense. The typical broker came out of the claims department of a casualty insurance company, with some type of legal training a few even had a life insurance background. Structured settlement brokers who worked on behalf of plaintiffs often came out of a more diversified financial planning backgrounds that might have included training and experience in more of the building blocks of financial planning, however they were often looked upon as pariahs.
In the United States It is now commonplace to see structured settlement brokers on both sides of a transaction representing the interests of their respective clients. If they are both doing their job it can really facilitate the settlement process for all parties. Some structured settlement brokers are experts at what they do and know little else, some are full service financial experts who offer considerably more than just brokering structured settlement annuities. The emergence of settlement planning as a profession continues to define and redefine these roles. A greater skill set is needed today to operate successfully and safely. With a greater skill set, the consultative expert model seems to winning out today over the "having to be the exclusive one way or another model" and I see the former as the way of the future.
Factoring Companies Are Not Structured Settlement Brokers
Factoring companies (those companies that pay a discounted present value for structured settlement payment rights and other cash flows from people who already have them, provided the Court approves the transfer of those rights) seem to have co-opted the terms "structured settlement broker", "structured settlement expert", structured settlements broker", "structured settlement consultant" and other derivative terms, to capitalize on the terms' popularity in an apparent attempt to rise up in search engine rankings on the Internet. It has only served to confuse the consumers. I know of only 2 factoring company representatives who have achieved the designation of Certified Structured Settlement Consultant. One twenty something self-billed "Financial Coach for structured settlement recipients" lists (on his personal web site) a world of experience to to draw upon in advising you. In all of his working years he lists the occupations of: Garbage Man, Lumber Grader, Floor Cleaner, Youth Director, Video Producer, Web Designer, Receptionist, Stock Clerk,Parts Picker, Carpentry Apprentice, Telemarketing rep, Missionary, Processor, Camera man among others. Exactly how is this experience relevant to make this person qualified to be a Financial Coach to anyone? None of that involves an insurance license.
Given the Internet clutter and confusion concerning the use of "structured settlement broker", plaintiffs and recipients of structured settlements should check for a license and make sure exactly who they are speaking to before accepting advice or engaging in transactions that could have a lifetime impact on them.
Useful Structured Settlement Resources
Structured Settlements | Ask The Expert (4structures.com)
Structured Settlements FAQ | Questions About Structured Settlements (4structures.com)
Structured Settlements | What You Need to Know About Structured Settlements (4structures.com)
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