Factoring and structured settlements.

A few weeks back Earl Nesbitt, the general counsel for NASP, the National Association of Settlement Purchasers joined Mark Wahlstrom at the LB Network studios while in Phoenix for a judicial education conference.

As anyone who does any work in the structured settlement market knows, the impact of factoring companies such as J.G. Wentworth, Peachtree Funding and others in advertising to annuity holders to "get cash now"has been a major concern of NSSTA and others. We have entire blogs and private initiatives that attempt to address the key word purchase price inflation these companies cause for topics such as structured settlements, settlement planning and structured annuity. A quick scan of Google shows that those terms alone are among the most valuable on the internet, largely because of the huge margins a factoring company can make on the purchase of someone's future payments. I, as much as anyone, am aware of the fact that these terms have been usurped by factoring firms through this saturation of advertising to the point where many legislative and judicial leaders consider the factoring firms "the structured settlement industry" and not NSSTA and it's supporters.

However, as my readers and viewers know i'm actually quite neutral on the issue of factoring, particularly in light of the fact that it is legal, has a clearly defined process that is required to get it done and in a large number of cases is a result of lazy or careless planning by the annuity broker who sold it to the client with little thought toward their cash needs.

This two part interview with Earl Nesbitt goes into a lot of those issues, particularly advertising, the idea of judicial education on factoring process and cooperation between the primary and secondary markets. If you are curious as to what N.A.S.P is up to, what the factoring industry has planned given the recent turmoil in credit markets and the future of factoring issues, you might want to check out this video series.

I will be addressing in some length later this week the topic of NSSTA and it's minuscule investment in advertising, marketing and education, particularly in contrast to the aggressive approach taken by the secondary market. Unless the leaders of our profession had failed to notice, J.G. Wentworth, Peachtree and others are essentially crippled at the moment by the collapse of their banking, hedge fund and secondary market sales options. NOW is the time for NSSTA and it's members to commence judicial education on structured settlements, the value of annuity products, the safety of what we offer and why responsible factoring has a role in our industry. Now is the time to build bridges, move past our battles of the last five years and grow our business and part of that is going to be getting off the factoring company bashing routine that has been the primary focus of our profession for many years now.

Lets get proactive and start selling our product and it's virtues, reclaim the brand now that the factoring companies have fewer dollars to advertise, lobby and influence buyers and get out of the fox hole and build our profession.

Structured settlements, the right choice

In an earlier blog post I tossed out the concept of The Golden Age of structured settlements, and how I believe we are about to enter a period of incredible growth in the settlement profession. I got such an exceptional response to that blog post that I took the time to create a two part video presentation on the topic of the future of the structured settlement profession, settlement planning and the need for structured settlement annuity contracts for injured plaintiffs.

This two part edition of "Speaking of Settlements" goes into that post and the theory of a coming boom in structured settlements in greater detail. Obviously I'd like you to view the videos, but if you want the short hand argument as to why I think we are about to see a surge, the five points are as follows:

1. Tax rates are about to rise given the government deficit and Democratic control of the House, Senate and White house. High tax rates make tax free annuity payments such as offered under structured settlements more attractive and as such we will see a relative advantage to using tax free annuity payments over alternative investments that don't enjoy the same tax status.

2. Interest rates are going to rise substantially over the next 3 years as the massive government debt leads to inevitable declines in the value of the dollar and relative increases in interest rates on debt obligations. Again, when compared to alternative investments such as bonds and bank CD's, the high rate of return on structured settlement annuities will compare favorably with other choices that lawyers and plaintiffs have before them, making the structured annuity a favored choice for many.

3. Life insurance companies are going to come out of this financial crisis as one of the few entities that didn't fail and in fact stood strong during the turmoil. The performance of structured settlements in this crisis is going to contrast very favorably with money market funds, banks, stock brokerage and mutual funds, not to mention real estate. People will begin to realize the superior safety of life insurance companies which is going to make our selling job easier when we discuss safety, stability, etc. All one needs to do is look at the 100% gain in the price of Hartford Life's stock last week in a single day once it became clear the insurance industry is still making money, is not going to vanish and that the major life markets such as Met Life, John Hancock, Genworth, Prudential, Hartford and others are not going away, but in fact are going to get stronger. Even AIG looks to be a candidate for a successful work out at this point.

4. Tort reform is dead as a political issue on both the national and state level, which will ultimately lead to a stronger settlement market. The distraction of tort reform, the heavy handed claims and litigation tactics and other clubs used to push people into smaller settlements, poison jurys and reduce the number of cases filed will slowly begin to receed. Nothing huge at first but the pendulum that swung so far to the right over the last 10 years will begin to swing back to the middle as the political climate shifts to a more pro-plaintiff market.

5. The Structured Settlement industry cartel is in it's last days as the information age sweeps over our business and creates greater awareness of pricing, negotiation and access to markets by consumers looking to decide how to settle their claims. The last 25 years has seen complete dominance by defense interests and a few powerful brokers that limited information, access and entry to the structured settlement business. I can't think of any other major financial market that is so totally insulated and sheltered from outside competition, however, with the information age, the intrusion of other financial professionals and increased sophistication of consumers is going to continue to force greater transparency and cooperation on our business.

Take a look at both segments of Structured settlements, the coming Golden Age and watch for some other big news this week related to new marketing opportunities about to be made available to structured settlement professionals nationwide.