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

Recaptured Settlement Streams Hitting the Mainstream (a/k/a In Force Structured Settlements)

I've got to admit that positioning yourself as if you were the "shelter for battered structured settlements"  is a creative marketing strategy. 

I was pleased to obtain a copy of a September 13, 2011 approach letter that the loquacious President of the Society of Settlement Planners sent to a plaintiff lawyer in which he stated:

" After much discussion on the topic, we decided that we did not want our feelings about the factoring industry to deprive our clients from an income replacement option that could pay them as much as 50% more than the current interest rates available from traditional  structured settlement annuities. We now have a way to go into the  secondary marketplace to "recapture" these previously-owned investment-grade settlement streams for new clients who will gladly give those payment streams a new, loving home".

 When you're down and troubled
And you need some loving care
And nothing, nothing is going right
Close your eyes and think of me
And soon I will be there
To brighten up even your darkest night

cue James Taylor "You've Got a Friend"

Whether you call them recaptured investment-grade settlement streams, in-force annuities, structured settlement retreads or recycled structured annuities, in my opinion the concept of using secondary market cash flows to finance a portion of a plaintiff's future needs is a valid one in some circumstances. The strategy can be used on a stand-alone basis or in conjunction with traditional structured settlements. Yet because that segment of the industry is unregulated (there is no license requirement for the factoring company that arranges the deal or the brokers or advisers it deals with and for the most part, no regulatory oversight to protect investors) its use should be evaluated carefully.

Furthermore, it is critical to understand that because there is a finite supply of structured settlement payment rights on the "used car lot" because less than 10% of the holders are selling,  it may not be possible to immediately fill a specific need using this strategy.

It also appears that holders of transferred structured settlement payment rights do not enjoy the same consumer protections as the original payees.

In my opinion, the structured settlement industry would be wise to embrace this concept and to air out and set standards of ethics regarding its practice.

 

SSP Goes Where NSSTA Dares Not Go with Education Program

by John D. Darer CLU ChFC CSSC RSP

Although I won't be attending I was impressed with the educational program put together for the Society of Settlement Planners Annual Meeting. It appears filled with topics that can immediately be put into practice, such as:. 

• Liability Set Asides in 2011
• Liens-How to Speed Up Resolution
• Qualified Settlement Funds-What You May Not Know
• Taxation of Damages
• Dissecting a Settlement Plan
• Allocation of Medical Expenses and the Impact of Different Types of Settlements on Plaintiff's Beneficiary
• Equity Indexed Annuities and Settlement Planning; 

and a series of topics and featured speakers from the LBN /Brook-Hollow Educational Seminar in Scottsdale last Month

• Use of Electronic Media and Social Networking
• Use of Structured Settlement Annuity Payment Rights; and
• Expanded Use of Non Qualified Assignments

Note: Members of the settlement community, including this author, received SSP invites this week, although the invite expressly states that the SSP reserves final approval for each registrant's application for attendance.

The NSSTA upcoming educational program also looks great (I will cover it in another post),  but I will say this.

The SSP has taken the bold step of creating a rigorous graduate level professional certification program, Registered Settlement Planner, which tests the ability to put knowledge into practice, although it appears unwilling to relinquish board seats to anyone but core SSP members.

The SSP took a bold step and, for better or worse, in 2010  has individuals with factoring business interests on its Board of Directors. 

The SSP has taken the bold step of including in its 2011 program. how to use structured settlement payment rights to help tort victims, a topic that I have extensively researched, written and podcasted about  (see video links at the bottom of this post). The topic may be horrifying to some, but how can you criticize it if you don't know anything about it? Perhaps you are content giving people a neglgible rate of return in the short term?

In 2007 a slew of candidates for the NSSTA Board of Directors trudged up to the microphone in Toronto pledging to do something about factoring if they were to be elected.  Some did elected. Did they fulfil their campaign promises in this regard? NO.  Every year candidates step up and say they are going to do something about it and don't. At this point it is simply not credible.

What is most disappointing with respect to the effort of NSSTA is the widespread failure to find the most efficient focal point for their efforts on the factoring front. Instead of focusing on a licensing standard to rein in bad sales practices concerning advertising and solicitation of tort victims (which is what REALLY offends people in the industry and trial lawyer community), NSSTA has supported what is in my opinion a very poorly researched Wall Street Journal article in July 2010 and predictably one sided presentation on the purchase of stuctured settlement payment rights at its Fall 2010 meeting in Las Vegas that built on the message in article.

Whether or not such efforts are part of a grand display of "sweeping under the rug ", the reality is factoring is not going to go away and a number of NSSTA members already do one or more of the following:

• Assist sellers of structured settlements for compensation, disclosed or undisclosed
• Assist sellers of structured settlements pro bono
• Buy structured settlement payment rights for their own accounts
• Sell structured settlement payment rights to trial lawyers and others
• Facilitate the sale structured settlement payment rights to trial lawyers and others
• Facilitate the use of structured settlement payment rights to help tort victims
• Display some of these services on their websites (although very few)
• Have "clandestine" relationships with factoring companies

It's time for NSSTA to step into the new reality. In my opinion it is doing its membership a great disservice by not staging a quality comprehensive "uncensored" education program on the subject for its members.

Exploring the In Force Structured Settlements Market-1

Exploring the In Force Structured Settlements Market-2

By the way, stay tuned for the  podcast of my debate with Matt Bracy of Settlement Capital which was shot last month. LBN tells me it will be released "any day now".

 

 

Supporters of Trial Lawyer Associations "Cannot Join The SSP". How About Incumbents?

New applicants to the Society of Settlement Planners must certify that they, individually will not participate or benefit in any way-whether directly or indirectly in finder's fees or payment of any form to a defendant, insurer, in-house agency of a  defendant or insurer; defense attorney  OR claimant's attorney, or any of their respective associations.

Download Society of Settlement Planners Membership  (note emphasis added)

And I thought the Society of Settlement Planners was looking to attract new members instead of lose incumbents. But then, wait for it...

Doesn't that rule out at least three of the current officers of the SSP and decimate its incumbent directors and members who "benefit in any way"-whether directly or indirectly, and/or make "payment of any form" to trial lawyer associations in one or more asundry ways such as association sponsorships, "Friends of Eagle" website listings, site sponsoships, golf tournament sponsorships, exhibits at trial lawyer meetings, leaders forum suites, advertisements, theater tickets, raffle prizes, suites at baseball games, suites at football games, payments to TLA mortgages, payments to political candidates that help plaintiff lawyers, and memberships in Partnerships for Justice?  This author has in his possession a copy of a message from a trial lawyer's association list serve email regarding a firm that one SSP member is the President of,  where a trial lawyer went on a list serve and essentially solicited structured attorney fee business for them on the basis of the amount of contribution of the firm to that State's Partnership for Justice. Doesn't that look to you a whole lot like "benefiting in any way-whether directly or indirectly" from a "payment in any form"?

The SSP professional membership application has been craftily worded to attempt to effect the maximum "wiggle room". by saying  "My membership application is an individual and not as a representative of my employer; firm or brokerage with which I have a contractual relationship. It shall not be presumed or inferred by this organization that my acceptance of the Mission statement as my personal belief is necessarily the position of my employer, firm or contractual brokerage. I am also free to reject as my personal belief the terms of any resolution adopted by this organization that is not incorporated in the Mission Statement".

Unfortunately if one is to read the literal meaning of what the SSP themselves placed into circulation, such wiggle room surely cannot be granted to those who are owners and principals in firms. How can one be excused just because the name on the check is an entity in which you have ownership and rather than you personally? It's a credibility killer for the Society to be sure.

Yet when it comes to factoring, all bets appear to be off. While, the Society of Settlement Planners, to its credit, includes in its Standards of Professional Conduct for Settlement Planners adopted March 7 2008 [at Rule 9 (c)(2)]Download SSP_SPC, that a settlement planner may accept an engagement to provide advice and assistance in connection with a structured settlement factoring transaction "provided he/she confirms in writing the existence of and the basis or rate for determining any compensation to be paid to the settlement planner for providing such services", such payments have been proven to come out of the gross amount to be paid to a selling structured settlement annuitant. Moreover,  a Director of the SSP who is the principal in a factoring company not so long ago published a missive defending the practice of making such payments (to settlement planners, who it was once alleged in a publication by the Director asked for them) as ostensibly being in the selling payee's best interest.

The message is, if you you want to grow your organization and take it from "the plateau" to the next level, don't insult the intelligience of those you are trying to recruit as members.

That being said, the SSP is doing a few things right which will be covered in another post.

 

 

Structured Settlements Industry Trade Associations: We Expecting Too Much?

Do we expect too much from our trade associations?

Patrick Hindert raises some interesting points in his discussion of healthcare reform in a generally well written article posted on the S2KM blog. The good however, is tainted by Hindert's customary bashing of the settlement industry trade associations educational programs following his return from some other trade association's conference.

From the tame "While the Academy of Special Needs Planners (ASNP) and the National Academy of Elder Law Attorneys (NAELA) are providing their members with detailed analyses of health care reform, the structured settlement industry has not yet addressed this historic legislation in their educational programs" Hindert then suggests the following reasons:

• Product focus instead of customer focus;
• Circumscribed scope of knowledge;
• Limited strategic thinking or analysis;
• Retrospective and inside-the-box orientation;
• Protect and preserve mentality.

While I admire Hindert for his self confessed mind expansion, perhaps he has too great an expectation of the settlement industry's trade associations.  This author admits that at times his own expectation of the National Structured Settlement Trade Association has been well above what has actually been delivered.  Yet, in common with Hindert, I have not depended on the industry's trade associations to help me achieve my knowledge leadership goals.  Nor have I depended on them to stay ahead of and keep me apprised of new ideas and information that impacts my business. They are just one important ingredient in the mix and serve a role, a very limited but critical one.

Judging by the number of calls I receive from competitors and industry colleagues about technical issues and information i live in comfort that I am not alone. 

There are a number of innovations coming into the fore in the next few months. Were it not for industry discourse among the industry's knowledge leaders or prospective knowledge leaders, these innnovations would not be happening. The LBN/Brook Hollow taxable damages educational seminar in Scottsdale, Arizona April 12-13 (which I will be attending) is a perfect example of an alternative.

 

The Great Pretender: A Little Embellishment from SSP Founder

by John Darer CLU ChFC CSSC RSP

Picture Jack Meligan belting out the Freddie Mercury classic  "The Great Pretender" as part of his latest scare tactic,  the conclusion of which is to misrepresent that the best settlement planners are members of the Society of Settlement Planners (SSP). 

Meligan's credibility is undermined because the SSP is a professional society of 40 or less AND the majority of whose members Meligan fails to disclose, are part of Meligan's company. The membership of the organization has stayed stagnant for several years in part because of  the perception of de facto control of over the top extremists like Meligan and his and others perpetual use of outdated scare tactics.  These are apparently accepted standards of the SSP.

While some talented settlement planners are members of the SSP, in an industry of over 1,000, the majority of the most talented settlement planners in the country ARE NOT members of the Society of Settlements Planners.

This author is a Registered Settlement Planner who chooses not to be a member of the Society of Settlement Planners for the aforementioned reasons, among others.

Meligan should focus on his own personal talents in the settlement planning area.

Plaintiff Lawyers Warned Of Legal Malpractice From Settlement Planners Who Can't Read Cited Cases

by Structured Settlement Watchdog®

A Society of Settlement Planners Board member needs to get their facts straight. Based on what appears on the Settlement Professionals Inc. website today, former SSP President Jack Meligan, gifted settlement planner from Oregon and yellow highlighter "black belt", could never be confused for someone who actual read the two legal cases that he cites,and uses, in an attempt scare plaintiff attorneys into doing business.

On the subject of Limiting Plaintiff Liability, Meligan writes (highlights included):

In Macomber v. Travelers Property & Casualty Corp. and Lyons v. Medical Malpractice Insurance Assoc., plaintiff attorneys have been sued for the harm sustained by their clients at the hands of the defense-provided structured settlement brokers.

Reality

• No plaintiff attorneys were named Defendants in the lawsuit captioned Macomber v Travelers Property & Casualty Corp.

Download MacomberTravelersII040406[1]

• Meligan's "analysis" of Lyons v MMIA is a bit simplistic, just like his affiliate Bill Tilley's chestnut from September 2009 (see below)
  

Download LyonsvMMIA286AD2d711

Bill Tilley Dishes Out "Old Rag" on Settlement Planning Blog

The settlement profession has evolved over the years. It is important for plaintiff attorneys and their clients to have someone who is qualified, and that they feel comfortable with, to advise them on settlement planning and transitional financial planning issues. That being said there's no excuse for the likes of Settlement Professionals Inc. or anyone else to promote themselves using unreasonable scare tactics, such as citing facts that don't exist.

 

 

Spencer v Hartford Settlement: For Some Reality Can Only Be Seen When The Mirror Is Clean

Some of those in the structured settlement and settlement planning industry who have aspirations to use the Spencer v Hartford case in their marketing schemes ought to look themselves in the mirror. A specific class carved out of the class action lawsuit included those who settled with Hartford insureds with a Hartford Life structured settlement BUT, were represented by a plaintiff structured settlement broker or settlement planner.

While you can count me as someone who had  disdain for The Hartford's erstwhile "all or nothing" structured settlement business decision, there are questions to be asked of those who now have aspirations to burn The Hartford and other insurers in effigy.

Inconvenient Questions

1. How many of those now using Spencer v Hartford as a tool with plaintiff lawyers accepted a share of commission on structured settlements from Hartford insured cases THEN, when they had knowledge that there was "deal" in place?
2. How many of them were affiliated, at any relevant time covered in the lawsuit, with general agents who signed agreements with The Hartford to accept a lower rate of commission on cases settled with Hartford insureds?

Ironically, one of the plaintiff attorneys in the class action, Richard B Risk, Jr., who was recently given a lifetime achievement award by the Society of Settlement Planners in part due to the  result of the suit,  was a licensed insurance agent and structured settlement broker for the early portion of the relevant times covered by the suit.

I find it pathetic that some in my industry have chosen to go down this road.  Yet I find it amusing to know that at some point the dots will be connected between these over the top marketers and their own failure to disclose.

"Reality Is Only Seen When The Mirror Is Clean"-Unknown

Registry of Settlement Planners Board Top Heavy With Settlement Professionals Inc.?

by John Darer® CLU ChFC CSSC RSP

Is it appropriate to have a board of directors composed 62.5% from one company? That is exactly what the story is with the Registry of Settlement Planners Board  (RSP Board) , five of whose eight members are affiliated with a single company, Settlement Professionals,Inc. This is not to take away from the knowledge that these individuals have, or years of experience that might make them an asset to such Board, but it seems to have the potential to create a major conflict of interest. There are enough RSPs to create greater diversity on the RSP Board than there is today.

I'm proud to have earned the designation of  Registered Settlement Planner (RSP) and was the first one in the United States to earn the designation. Yet I am concerned that the RSP Board lacks the level of diversity that will give it greater credibility and foster future growth of the RSP designation.

I hope that those that are responsible for creating this potential conflict of interest on the Registry of Settlement Planners Board make things right and soon.

NSSTA & SSP Annual Meetings: Pedantic Pat's Droning "Emission" Contains Glaring "Omission"

Like a campy horror show, Pedantic Patrick Hindert posted an unprecedented 9th blog post about the SSP and NSSTA 2010 annual meetings. While Hindert continues to fill his commentary with factual but predictable filler and drivel like "approximately 10 people attended portions of the SSP and NSSTA meetings", HIndert continues to avoid the controversial and big news that the Society of Settlement Planners named a factoring representative to its Board of Directors.

Ironically it was Hindert who expressed (in previous blog postings going back years) that factoring is the key to structured settlement industry growth. Hindert challenged this author to a debate on the topic in May 2008 and then famously chickened out when I accepted. Now that the dog can have his day he is famously avoiding his own scent mark. See Patrick Hindert Called On The Carpet For Specifics

What I really want to know is does Hindert see having representatives of factoring entities (which buy structured settlements from tort victims) on the Board of a trade association (whose members place structured settlements) as a positive thing or negative thing? Why? Moreover, now that the industry's cherry "has been popped" as it were, is it appropriate for the credibility of the group, that the subject member on the Board is apparently the only member (and apparently can be the only member) when there may be other factoring entities who offer alternatives in educating the public.

He does a better job in posing post-conference leadership questions:

• How will SSP's and NSSTA's new leaders respond to industry changes, challenges and opportunities?
• When and how will SSP and NSSTA transition their educational strategies to embrace the Internet?
• What shared interests exist between SSP and NSSTA to improve and grow the structured settlement industry?

Benefits of Purchasing Structured Settlements From Tort Victims by Burt Kroner

by John Darer® CLU ChFC MSSC RSP

Less than a year ago Burt Kroner, CEO of Client First Funding published Benefits of Purchasing Structured Settlement Annuities Directly from The Annuitant in NuWire Investor.

It's a well written article.

Here are just a few excerpts:

Kroner: Purchaser has control throughout the process; Purchaser receives assignment of the Structured Settlement payment rights directly from the seller through an approved court approval process, and the Purchaser receives the future cash flows directly from the rated insurance company that is obligated to make the payments. At no time during the lifecycle of the asset should the broker have possession, or control, of the Purchaser’s money

The security of the annuity is directly related to the claims paying ability of the insurance entity. The designation of an annuity as a “claims paying” obligation means that these obligations supersede obligations to bond holders, stockholders and other debtors. The insurance entities are required to hold capital to support these obligations as required by the applicable state insurance regulator. To date, a situation has not been reported where an insurance company rated A, or better, by Standard & Poors has defaulted on an annuity obligation that supported a structured settlement, and a concomitant loss has resulted to the payee. However, as the current financial markets illustrate, past history is not a guarantee of future results, and there could be future issues that arise relating to Structured Settlements that have not existed in the past. 

Comment: Kroner has not accounted for Executive Life of CA shortfalls resulting from that company's 1991 financial problems and the Executive Life of New York shortfalls following its liquidation in 2013.

Kroner: Annuities, depending on the amounts owed, are partially or fully guaranteed by state insurance funds, and are designed to protect annuity holders from loss. This may provide an additional level of security to the potential Purchaser. 

Comment: Licensed insurance agents are forbidden by state law from discussing the existence of state guaranty funds in sales presentations. Yet in an article that holds the product out as an annuity, in the title of the article) it's a virtual free for all. For some reason regulators have ignored a requirement to have a licensing requirement for factors, factoring brokers and the like, even though they refer to these purchases as annuities. The restrictions on guaranty fund solicitation are being made mockery of as a result. Why is there no symmetry for the protection of insurers AND investors?

Kroner: Because most state guaranty funds have dollar limits on the amount that they can be obligated to pay in respect to annuities and life insurance policies issued by insolvent insurance companies, Purchasers should be cognizant of the size of the underlying annuity that supports the Structured Settlement relative to those limits. 

Comment: Ditto to the immediately previous comment. Furthermore, the 2017 revisions to the Life & Health Guaranty Associations Model Act (#520) expressly exclude the type of investments that Kroner sells. The 2017 revisions have been adopted in 34 states as of March 11, 2022, with 2 more under consideration. The alarming part for investors is that the Model Act applies the revisions retroactively. So, if you bought factored structured settlement payments rights (possibly marketed to you as a "secondary market annuity" you could be in for a world of hurt in the event there is an insolvency.  Eventually all 50 states will adopt the provisions.

Message to Structured Settlement industry from Burt Kroner?

"These structured settlements normally earn more than two times the yearly rates of Municipal or Corporate Bonds, Bank Issued Certificates of Deposit  (CD’s), or Government Issued Treasury Securities . Investors can certainly purchase an annuity directly from an insurance company, but these Direct Annuity Investments are backed by the same insurance companies as the Structured Settlements arranged by a broker, and THEY are typically originated with large sales charges or commissions, and offer substantially lower yields".

 GUESS WHO NEEDS A WAKE UP CALL? 

 

Last updated May 30, 2022