BROKERS

The topics of broker assistance and compensation have been discussed at length in recent months. In late December this debate became heated when John Darer, a settlement planning consultant from 4structures.com, LLC went head to head with Rhonda Bentzen, a structured settlement factoring broker doing business as Bentzen Funding Solutions.

The debate between Darer and Bentzen revolved around whether or not it is acceptable for you as a settlement planning consultant to charge a fee when you refer clients to a factoring company. On this topic I would have to agree with Bentzen that it is not unethical, per se, for a structured settlement planner to charge such a fee provided such fee is reasonable in all of the circumstances. My reasoning for this is as follows.

Similar to Bentzen, I have been on both sides. I was a life and annuity sales agent for four years. I had created countless annuities for my clients and on occasion when their financial positions changed I was asked to help them find a way out of their annuity. This happened often enough that I found out about the structured settlement factoring business and eventually changed my orientation when I started Sovereign Funding Group in 2002.

Firstly as an insurance and annuities agent and now in the structured settlement factoring business, I have always put my clients’ best interest first. I think that it is reasonable for a structured settlement planner or an insurance and annuity representative to be compensated for his or her professional assistance to clients when seeking out a reputable factoring company and assisting with the sale details.

Where I disagree with Bentzen is when she states in her December 21, 2007 post that “…The referral fee ultimately saves the annuitant money and comes out of my pocket”. That statement is simply untrue. Contrary to her assertion, any fee charged adds to the overall sale costs and impacts the best price available to the client in the marketplace.

In light of the recent controversy I think that it is important to provide some guidance to structured settlement planners and annuity company representatives who want your clients to make an informed decision that best serves their needs, gets them the most money for their annuity as well as the fastest, most professional service.

1. There are many circumstances when a structured settlement may no longer be appropriate for your client. Times change. Your client’s assets must be flexible to weather these changes.

2. You have taken great care to design a structured settlement that best suits your client’s needs. The factoring company you choose to advise on the sale of your client’s annuity should take the same care in deciding:

(a) is a sale appropriate in the circumstances, and if so what compliment of payments ought to be sold;
(b) what is the best price available for these payments;
(c) what is the most expedient court process to complete the sale?

3. Each sale requires court approval based on the best interest test of the annuitant and any dependants.

4. Purchase price and service level can vary widely between factoring companies. Just as you would get competing quotes for structured settlement annuities, you should get at least two quotes from competing factoring companies.

5. Your client will generally get more money and better service if you consult with a factoring company that specializes in the insurance field and has legal expertise to complete the transfer process rather than a general buyer of receivables or an intermediary who lacks control of the transfer or funding process.

6. You should monitor the average length of time the factoring company you choose takes to complete the transfer process and disperse funds to your client. The benchmark is six to eight weeks. Unexplained delays beyond eight weeks will cost your client money.

7. Throughout the transfer process the factoring company should keep you and your client informed of the benchmarks and be proactive in resolving legal issues that may arise.

8. In the case where your client decides to sell only partial payments, be careful that your client does not agree to sell all payments in return for the factoring company servicing the remaining unsold payments back to your client. Servicing arrangements could jeopardize your client’s recourse against an annuity issuer in the event of a default. Furthermore, your client may not be able to sell the remaining payments at a future date if they are serviced by a factoring company.

9. It is acceptable for you to be compensated for your professional assistance to your clients and referral to a reputable factoring company. You decide. However, contrary to some assertions made in blogs, any fee you charge will impact the best price available to your client. You should be careful that your fee is reasonable in all circumstances.

Sovereign Funding Group has specialized in buying structured settlements for 6 years. We offer plaintiff brokers:

1. the benefit of six years of experience in buying insurance annuities and in-house legal expertise to make sure the transfer process is completed in a timely manner.

2. the most money for your client’s annuities by requiring our investors to compete for each case thereby establishing the best market rate.

3. the fastest service by guaranteeing your client a price quote within two hours of contact and sale documentation delivered the same day.

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