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.
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 are liquidity sources in the structured settlement secondary market that pay a percentage of the discounted present value for structured settlement payment rights and other cash flows from individuals following court approval.
Some structured settlement factoring companies appear to have misappropriated terms like "structured settlement broker," "structured settlement expert," "structured settlements broker," "structured settlement consultant," and related designations. This seems to an effort of merchants to leverage the popularity of these terms to boost their search engine rankings online, leading to consumer confusion. To my knowledge, only two representatives from factoring companies have earned the designation of Certified Structured Settlement Consultant. A self-proclaimed "Financial Coach for structured settlement recipients" in his twenties lists a range of occupations on his personal website as his for offering. His listed roles include Garbage Collector, Lumber Grader, Floor Cleaner, Youth Director, Video Producer, Web Designer, Receptionist, Stock Clerk, Parts Picker, Carpentry Apprentice, Telemarketing Representative, Missionary, Processor, and Cameraman, among others. It is unclear how such experience qualifies this individual to serve as a Financial Coach, especially given the absence of an insurance license.
Amid the prevalent internet clutter and confusion surrounding the term "structured settlement broker," plaintiffs and consumers of structured settlements are advised to verify the broker's license and confirm their identity before accepting advice or conducting transactions that may have a lifelong impact.
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