Structured Settlements 4Real® Blog: Structured Settlements | Settlement Planning News and Commentary

A Little "Kennel Knowledge" On "Plaintiff Brokers Who Stray Off Path"

by John Darer CLU ChFC CSSC RSP

Industry colleague and LBN CEO Mark Wahlstrom has been running a 2 week online "pep talk" to settlement industry professionals on how to work out the kinks in the structured settlement industry. During this time he has been meting out barbs about excesses on both sides of the fence.

This week he has turned his turrets on the plaintiff settlement brokers.  The structured settlement watchdog would like to remind readers that he supports a centrist position where the settlement consultant is, and is perceived as,  a qualified expert. As I stated recently, in my opinion, the "orientation " of your structured settlement expert doesn't matter if he or she is not reliable and the information he or she provides isn't good.

For a period of time the left wing extremists of the structured settlement industry have hocked the "wolf in sheep's clothing theory" to elevate themselves to trial lawyers, or the even more cynical "we were here first so we're better" nugget.  While I certainly don't count Wahlstrom among this group in his recent piece, he warns of "Brokers who state they are a “plaintiff experts” when in fact they are opportunists who work for whomever has the power in a particular case or transaction.  One of the biggest trends of the last 5 to 7 years is the almost comical rush by previously "defense exclusive" structured settlement brokers to re-brand themselves as plaintiff experts. In many cases their only pitch to trial lawyers is that " we worked for the casualty companies for years and we can get your case settled faster because they know us and trust us." Really? If your competitive position is that you are exploiting your long standing relationship with defendants for your new "friends" in the plaintiff bar, simply so you can get a commission, can I also assume you would just as quickly sell out a plaintiff if it meant you getting paid by a defendant. In short, these guys blow with the wind and who ever pays best and are no more friends of plaintiffs then a fox is friends with a barn full of chickens".

"Food for thought"?

1. (a)A number of leading plaintiff lawyers were once defense lawyers and some use the same marketing pitch to plaintiffs. (b) A number of lawyers I know are Vietnam vets. Some might have been subjected to being branded as "child killers" by the ignorant masses of the time (c) a number of prominent "plaintiff" structured settlement brokers, including some of the aformentioned left wingers cut their teeth on the defense side.

I don't consider it comical if the person is is rebranding, if they possess the knowledge,  integrity, professional qualities and desire to learn new things and stay current, can articulate the fundamentals and advanced concepts properly and generally, enhance the profession.

2. The orientation of your broker or settlement consultant doesn't matter if the information they provide isn't good. As I have pointed out in this forum over the last 5 years, financial faux pas have been observed on both sides of the settlement industry spectrum.

3. Trust is something that is earned, individual by individual.

4. Since structured settlement brokers are paid by commission and the commission is the same, regardless of which life insurance company the structured settlement is placed with, the defense client cannot pay you more than the plaintiff and vice versa.

5. One prominent plaintiff broker, a former military guy even took the mantra  "improvise , adapt , overcome" to new levels by purportedly offering to be the exclusive plaintiff broker for a leading New York medical malpractice insurer.

 

 

Structured Settlement Payment Rights: Does Buying Them Help Tort Victims?

by John Darer CLU ChFC CSSC

Way back my Northwestern Mutual general agent, Gerald N. Gilberg used to say that "you can't sell what you don't own", the rationale being that it's easier to ask for the premium on $1,000,000 of life insurance* if you own it yourself. While a certain amount of this was self serving, in it enabled Gilberg to build a significant annuity off each new recruiting class, the theory actually represented some sage advice. Yet in the structured settlement industry we can't sample any of the product we sell, OR can we?

I'd love to be a fly on the wall when a few industry old timers read this, but we CAN sample our own product through the ethical players in the secondary market. I opine that by "by doing so" you can do your part to :

1. Help tort victims, annuitants and lottery winners get a much much better deal, IF the situation warrants, than they might get through the big advertisers; and
2. Act as a catalyst to drive down discount rates and provide a direct threat to opportunists in the factoring industry who "lie in wait" for the unsophisticated, the ignorant, the lazy, who do not know how to shop, to apply the "bite wound" of 18% discount rates on their necks, when much better deals are available;
3. Give your own retirement plans and those of attorneys you know a solid alternative;
4. Help grow the market by being able to show in a tangible way that you personally have confidence in the product and/or company. If someone has concerns over the "A" rating of the company with competitive rates,  would it not be a confidence builder to be able to say that you believe in the proposed company to such an extent that you own structured settlement payment rights yourself? 

At this point it is generally accepted that factoring is sometimes necessary due to lack of available financing alternatives. Those who think otherwise are kidding themselves. An estimate based on JG Wentworth's 2009 bankruptcy filing, and its April 2010 securitization press release, implies that less than 5% of all structures are factored.  Why not seek to help some of the less than 5%?

The trade associations' and members' primary concerns have been two things:

1. Abusive advertising

2. Abusive discount rates

 

Thornton Melon, played by the late Rodney Dangerfield

  As Thornton Melon (left) once said in a commencement speech "Got to look out for number 1, but don't step in number 2". 

How about it? Let's help these folks to NOT STEP in "number 2"!

* in the days when $1,000,000 life insurance was considered a large number

Note Investments in structured settlement payment rights are not annuities and bear transaction risks not present in legitimate annuities. For this reason they may not be suitable for unsophisticated or inexperienced investors, including injury victims.

Matt Bracy Says Structured Settlement Servicing Is The Fault of Life Insurance Companies Issuing Structured Annuities

by John Darer CLU ChFC CSSC RSP

In response to our open market letter concerning structured settlement servicing I  received a response from Matt Bracy, General Counsel of Settlement Capital Corporation whose finger points squarely at the structured settlement annuity issuers, although he does not name names.

Before we get to Bracy, let's make it clear that structured settlement servicing ONLY affects those annuitants who chose to sell a part, however small, of their structured settlement payment rights.

Bracy states that the root cause of servicing is the unnamed structured settlement annuity issuers who do not want to split payments. This means that even if the tort victim does not want to sell all payments they must give up their abilty to deal directly with the annuity issuer and must instead deal with a third party. Moreover, it is unclear what happens if the servicer goes belly up.

Ergo, the resulting savings in administrative cost is allegedly at the expense of the tort victim who was sold on the qualities of the structured annuity issuer by the settlement planner or structured settlement broker. WHY?

The issue of structured settlement servicing is particularly disturbing because I have the sickening feeling from several conversations with some people whose competency I respect, that this critical issue may be lost on the majority of the structured settlement industry.

So I am going to continue pounding the table on this issue until it is solved. I ask any life insurance companies that are currently issuing structured settlement annuities to come out and let the industry know what their business practice is with respect to splitting annuity payments.

As an aside, the need for such practices would be mitigated if the structured annuity issuers handled commutation internally.

Shouldn't NSSTA Collect "Sub-Broker"Dues From Member Companies with National Pipelining Arrangements?

by John Darer

A number of structured settlement master general agencies who are member companies have national and/or regional sub-brokering arrangements with wire houses in which such wire houses representatives are directly, or indirectly given access to structured settlement quotes produced on software (that is distributed only to appointed agents of structured annuity companies) and a share of compensation.

Fortunes are purportedly being made by such arrangements, yet is NSSTA seeing a dime of dues from the estimated thousands of stock broker and wealth managers who have been given the "keys to the kingdom" by NSSTA's own membership? This is happening at the same time the organization has had a tough time pulling the trigger on essential marketing expenditures.

Is something wrong in Washington folks? Is it fair that a company with say 50 or 60 dues paying members (or paying dues on behalf of 50-60 members) at $1,000 a head, gets away with a $60,000 hit when it actually has a sub-broker footprint of 500 or 750? How about if the company has only  3-4 NSSTA dues paying members with a much larger sub-broker footprint? Perhaps there is a way to tax revenue streams!  A sub-broker tax! Yep, I thought that would grab your attention!

Some fear having every Tom Dick & Harry and part timer in the structured settlement business, but the alternative is "time to tax the rich". That's what they want to do in Washington isn't it?

Tom Nomako No Sense on American Airlines 1256 LaGuardia Bird Strike

Sorry to go off point here but I just can't shut up about Tom Nomako's shoddy reporting in Wednesday's New York Post about the above captioned incident that Nomako calls "similar to the one that force a US Airways plane to splash down in the Hudson in January".

I've compiled a comparison of the two incidents to show just how "similar"

                     US 1549                                                   AA1256

Wikipedia Page Yes                                                       No
Pilot               International Hero "Sully"                         No details available
Aboard           155                                                        138
Aircraft           Airbus 320                                              Boeing 737
Birdstrike        On Climb Out                                         About to Land
Elevation         3,200 feet                                              900 feet
Fuel Tank        Full                                                       Pretty empty after 3 hours of flying
Fate               Controlled ditching                                 Landed safely
Damage           Both engines taken out                           Damaged landing gear
Injuries           5 serious,  73 minor                                None
Passenger
Awareness      100% aware, saying prayers                      Nobody aware
Smell              Barbecue                                             Salty peanuts
Culprit           Multiple Canada Geese                            A Seagull
Max weight     7-14lbs male 5.5-12 (female) each              4.2ox -3.8lbs

 

             

Notable quotes:

US 1549

"Got any ideas?"

" We're gonna be in the Hudson"        

AA1256            

"The passengers came off the plane and after coming inside the terminal...only then did they    learn about the bird strike"                                     

It's kind of frightening. When we landed I was kind of sleeping and jolted me" 16 year old passenger                                                            

"No one panicked," said Ariana Serpico, 26, who was aboard with her 2-year-old daughter. "We didn't  even  know what was going on."                                                             

Sources: New York Post, Daily News, Wikipedia

In conclusion

• Thankfully nobody died in either incident.
• As someone who has 30 or more years of experience with the often jolting "kerplunk" nature of landings at La Guardia I find myself a bit skeptical of the 16 year old's "story", as reported.
• After The Post recently went into the sordid details of the Avian Gestapo "death squads" rounding up Canada Geese into cattle cars bound for the gas chambers at Goosewitz, Nomako notes that Canada Geese aren't flying around as much because they are molting (didn't he mean "molten"?)
• The point is that "Nomako no sense" would "mako" much more sense if he simply reported the facts instead of trying to sensationalize a frickin' 3.8 lb bird to sell a newspaper.

                                                                   

Should You Be Able To Use Taxpayer Money on Lottery Tickets?

The PPI Cash Blog reports that the Tennessee legislature "has looked to make living difficult for those reeling under poverty". A committee hearing on Wednesday is likely to discuss a bill which would prevent anyone receiving federal or state assistance (i.e. welfare) from winning $ 600 or excess in Tennessee state lottery payments.

The gist of the proposed bill is that those who cannot afford basic necessities and rely on public assistance should not be spending money on lotteries.  PPI says that "people say that the government need not tell them how to spend their money".  PPI suggests the Bill is inequitable because it treats those who are unemployed and those on welfare differently.

PPI goes on to say that "recent studies have concluded that the poor spend most percent of their income on lottery tickets than wealthier people. It's the old "dollar and a dream" concept, an effort to get out of poverty, even if winning odds are extremely slim.

According to PPI, the State of Tennessee review has found that nearly 50% of those individuals who received food stamps from state purchase lottery tickets. Nearly half of them are expected to stop playing if the bill is passed. PPI hopes the Tennessee legislature will not try to expand bill that prohibits large lottery winnings to those people who get state unemployment checks. The operative quote is "though remaining unemployed is difficult enough, remaining poor and unemployed is still worse".

Comment

So let me get this straight. It's not OK (and gives rise to Congressional hearings) for public corporations who take "welfare" (a/k/a TARP) from the United States Treasury to spend money on business development that could potentially create jobs, but it's OK for some poor bastard to spend the government's money on a one in $%^&ing million chance at a fortune. And if he or she doesn't win the taxpayer will have to pay anyway.

Boy, the way Glenn Miller played. Songs that made the Hit Parade.

Guys like us, we had it made. Those were the days.

Didn't need no welfare state. Everybody pulled his weight.

Gee, our old LaSalle ran great. Those were the days.

And you know who you were then. Girls were girls and men were men.

Mister, we could use a man like Herbert Hoover again.

People seemed to be content. Fifty dollars paid the rent.

Freaks were in a circus tent. Those were the days.

Take a little Sunday spin, go to watch the Dodgers win.

Have yourself a dandy day that cost you under a fin.

Hair was short and skirts were long. Kate Smith really sold a song.

I don't know just what went wrong. Those Were The Days.

Lyrics: Lee Adams and Charles Strouse

Rated Age Abuse of Insurers By Structured Settlement Brokers Under Investigation

by John Darer CLU ChFC CSSC RSP

The number of rated age requests going to structured annuity underwriting departments without legitimate intent for business to follow (on the rated age lives) is a blood gorged clot, clogging the structured settlement service artery and affecting everyone's ability to service business in the structured settlement industry.  IT HAS TO STOP!

Several firms, including life companies have been approached by workers compensation service providers offering money to obtain rated ages with feigned promises of business. Most turn these "opportunities" down. Apparently some structured settlement brokers are submitting meds, 20 or so at a time. ( each approximately 5-20 pages long) over long periods of time and the annuity markets are seeing no business from them.   Is this ethical? Is this and what is described herein an unfair trade practice?

In 2007, Protocols, LLC, a Colorado firm that provides Medicare Set-Aside, Workers’ Compensation, Medical Case Management wrote this blog post addressing the crisis. The warning alarms have been sounding. Who is listening?

As I've begun an investigation into this serious problem that affects everyone, it is obvious that the flood of workers comp medicals for what I will dub "phantom MSA annuity induced cases" has reached such a critical juncture that one cannot just sit still. In some cases it is now taking as long as 48 hours to get rated ages on legitimate cases when it used to be a few hours. 

I don't expect the number to be huge BUT, the structured settlement service artery clogging who are found to be responsible for continually flooding the medical underwriting departments of annuity issuers concealing that they (rogue brokers) can make multiples of $50 to $100 (on the back of salaries that they don't pay and at the expense of timely service to the rest of the industry) need to be held to task and will be. I'm not talking about a one off case, or where there is a legitimate intent to place annuity business. I'm talking about serial abusers.  Rest assured the problem is not going unnoticed by the annuity issuers and now it's not going to go unnoticed by anyone else. The situation must be addressed as stakeholders expound on the implications of MMSEA.

How about the structured settlement general agents?  Do you have knowledge of what your employees or affiliates are doing?

What business decisions should the life markets be making with regard to the abusers' appointments? The clogged arteries need a strong response "statin" now!

An investigation is underway into this corrupt business practice. Those agents and/or agencies who abuse the system and affect everyone else will be publicly identified.

To those who think identifying them will be difficult, consider the power of a FOIA request which will be made to a certain federal agency.

Postscript:

Comments from industry members: 

"I've been trying to start an initiative to minimize these abuses.  My suggestion is to charge brokers, at least those that place relatively small amount of premiums in relation to rated age requests, for the costs of medical underwriting.  I've said these abuses have got to stop and/or we need to pass the costs on to those that have little ability to place business.  Please consider my proposal as I think it will not only minimize abuses but help weed out those that are not true settlement planners".

 

Structured Settlement Lingo | What is A Qualified Assignment?

by John Darer® CLU ChFC MSSC RSP CLTC

A qualified assignment is an assignment of an obligation to make future periodic payments which satisfies the requirements of Internal Revenue Code §130. The periodic payments must represent damages payable by the defendant, its liability insurer, or a QSF and excludable under §104(a)(1) or §104(a)(2). 

In a structured settlement agreement, the original obligor (the defendant, insurance carrier for the defendant, or the trustee of a qualified settlement fund, assigns its obligation to make the future periodic payments called for in the settlement agreement to a "qualified assignee". Generally, a qualified assignment company is a special purpose company, which does little more than hold an annuity as a qualified funding asset to back up the obligations it assumes from Defendants, Insurers or qualified settlement fund trustees. A qualified assignment company may actually be an insurance company itself. The qualified assignment company is usually related to the life insurance company issuing the structured settlement annuity. The qualified assignment company typically purchases an annuity from the related life insurance company as a qualified funding asset pursuant to IRC §130(d). A qualified assignment requires the plaintiff's consent.

 We've noticed that some in our industry state incorrectly (for example, see below) that the qualified assignment is "to a financially secure insurance company", or "an assignment to the life company".

"From the plaintiff’s perspective, an assignment to a financially secure insurance company gives them the assurance that future payments will be made as promised. For many plaintiffs, this assignment to the life company alleviates the stress of future contact with the defendant, their insurer, or any party responsible for the injury".

Of the companies offering structured settlements only the qualified assignee of New York Life (New York Life Insurance and Annuity Corporation) is a life insurance company. That being said many annuity issuers provide a wraparound guarantee of periodic payment obligation assumed by the affiliated qualified assignment company.

 

Structured Settlement Industry Now Turning to Cash Now Pushers Like JG Wentworth For Advice?

by Structured Settlement Watchdog®

Evidence continues to mount that a segment of the structured settlement industry, led by former NSSTA Executive Director Patrick Hindert IS teaming up with the cash now pushers.

• First, Patrick Hindert has long yakked that the growth of the structured settlement industry is through the factoring industry without being able to articulate any justification.
• Second, Patrick Hindert has demonstrated through his writings and actions that he promoter of cash now pusher JG Wentworth
• Third, few structured settlement firms have made any statement one way or another about how they handle factoring of structured settlements. As this author will soon inform every trial lawyer association in the United states, 95% of the industry HAS NOT made a written disclosure, on their website or through the structured settlement transparency initiative declaration. The 95% statistic falls coincidentally in lock step witha published report, by a factoring representative that 90% of structured settlement brokers take referral fees (disclosed or undisclosed?)
• Fourth, a certain number of structured settlement brokers have relied on a factoring broker to speak for them and justify their actions.
• Fifth, given Hindert's writings and JG Wentworth's summary of the Cash Now Pushers Thought Leadership Conference-mislabeled by JG Wentworth and Patrick Hindert as the "structured settlement industry thought leadership conference",it appears that the factoring industry is being prostituted to help push through Treasury guidance on single claimant qualified settlement funds 468B due to 6 years of utter failure and exhaustion of funds of its previous proponents.

Consider some of the points from JG Wentworth's VP Marketing Kenneth Murray taken from the JG Wentworth web site

Note: This author does not recognize the Patrick Hindert delusion of primary and secondary market for structured settlements. The structured settlement industry (what Hindert classifies as the primary market) involves a professional licensing requirement. The factoring industry has no licensing requirement. The only thing in common between the two is that neither primary trade association enforces the code of ethics it and its members use to solicit your business. This author neither subscribes to nor incorporates the ideals of a company that leads its own industry in proven fraudulent cash now advertising. Why should he? WHY SHOULD YOU?

Selected points from the "Cash Now Pushers Thought Leadership Conference"

Education
The ability for the cash now pushers to educate the structured settlement industry on how to grow the structured settlement industry?

The ability for structured settlement industry to capitalizes on lessons learned and competence developed by the cash now pushers (SEO, etc.)

The ability for the structured settlement industry to sell the positive features of the cash now pushers. Should we simply ignore the fraudulent advertising?

Growth

The ability of (cash now pushers) to educate plaintiff attorneys about the resource available through and with settlement planners. Who needs JG Wentworth for that?

The ability to generate market penetration in excess of 7%

The ability of Treasury to approve 468B funds <---------------

The ability of the cash now pushers to co-develop the structured settlement brand with the structured settlement industry

The ability to develop and finance the growth across the entire continuum of the structured settlement industry

Download SSTLC From JG Wentworth website Ken Murray CMO

Gregorian Chants and Structured Settlements?

What is the structured settlement credo? asks Patrick Hindert with the word "credo" linked to this Wikipedia definition:

The credo (Latin for "I Believe"; pronounced [ˈkɾeːd̪oː]) is a statement of religious belief, such as the Apostles' Creed (or, less often, another creed, such as the Nicene Creed). It especially refers to the use of the creed in the Catholic Mass, either as text, Gregorian chant, or other musical settings of the mass.

Obviously, with his follow up question, "who controls the structured settlement credo?", Patrick Hindert has taken the recent "Patrick Hindert is Jesus" comment too seriously. What a shmuck!

Setting the record straight

1. Structured settlements are available to people of ALL faiths, to those who may be non- observant and to those who are agnostic. Religion has absolutely NOTHING to do with structured settlements.

2. Structured settlements, where available, are entered into without regard to the color of your skin, or country of origin.

3. Structured settlements are available without regard to your economic status

4. Structured settlement brokers and settlement planners come from diverse socio economic and religious backgrounds. Religious affiliation is neither a prerequisite, nor barrier of entry into the structured settlement field, settlement planning, litigation recovery management, or primary trade associations.

"Believing with you that religion is a matter which lies solely between Man & his God, that he owes account to none other for his faith or his worship" Thomas Jefferson, 3rd President of the United States, 1802