As someone who actually works in the area of designing, pricing and and closing structured sales annuities I have to confess that some of my most serious concerns regarding the marketing of this concept have begun to come true. With the demise of the private annuity trust market, and the vast array of online scam artists promoting that concept, I have for the past year consistently received about a phone call per week from "marketing experts" in the real estate exit business, or former PAT salesmen, asking to affiliate with my firm to promote the sale of structured sale annuity plans on a regional or national basis. While most of these are sincere and well meaning professionals, a great many fall into the familiar category of fast buck, exploitative sales practices that typically have ruined many a good financial vehicle through corrupt or careless marketing practices.
A quick review of the google and yahoo search of the term structured sale, structured sales or installment sale, pop's up the click through search engine marketers who are now selling "class room training", certification programs, marketing opportunities and big commissions for real estate and other professionals looking to cash in on this new and exciting program. These firms tout the coming wealth transfer of the WWII generation, the collapse of the private annuity business and the shear size of the real estate markets as a reason for people to rush into this area and affiliate with, or direct business through, their offices and general agencies. While many of the reasons why people should investigate this concept are valid, the theory that you can just listen to a few hours of audio tapes and start handing out sales material is in my opinion dangerous and potentially harmful to the long term success of this concept in the planning community.
Therefore, if you are professional that is looking into the facts behind structured sales and how they can be used in real estate installment sales I would urge you to consider the following before you start talking to your clients about them:
1. The structured sales market is currently controlled by the 30 appointed general agents who have access to the Allstate structured sale annuity and the Prudential structured sale annuity. These general agents are almost all universally grounded in casualty claims or life insurance, have strong backgrounds in court settlement annuities, but typically have little or no experience in real estate sales, estate planning or retirement planning that is typically at the heart of a clients desire to structure a real estate sale over time.
2. If you are going to partner with a GA or marketing organization to learn the ropes, you really do need to look at what it is they have done in the past, who they have coordinating their efforts and if those people have a prior track record in the previously discredited PAT and tax avoidance promotion industry. What exactly do they bring to the table as far as technical, sales and administrative support to help you with the complexities of actually closing a case.
3. A lot of these cases get opened. quoted, discussed and ultimately never close due to a lack of ability to understand the many facets of the transaction. If the general agent or marketing organization is providing you with most of the commission, you had better be prepared to do most of the work.
4. There is still no PLR or revenue ruling from either Allstate or Prudential, which to me is a glaring act of negligence in helping to build this market. While I personally feel, and have felt, that neither a PLR or revenue ruling is really all that necessary as the foundational tax aspects of this process are really pretty clear cut, but the facts are that most CPA's, tax lawyers and others doing the due diligence on your clients transactions are going to ask for it. Therefore, you had better be totally prepared in the foundational tax law and rulings if you have any hope of actually seeing the sale close.
5. This is not a simple transactional business that lends itself to a quick and easy sale. You have a buyer to educate, a buyers broker, a buyers tax and financial advisor, the seller, the sellers broker and agent, the sellers tax and financial counsel, the title company, escrow agents, etc, etc, etc. Again, if you are getting most of the commission you better be sure you are ready to do most of the work. There is no quick and easy class that gets you out selling and closing cases for big money all for the low, low price of $99 and a set of steak knives.
So what to do if you want to know more about this transaction, want to consider integrating it into your practice and wish to partner with one of the GA's or marketing firms? A few simple suggestions:
1. Do your research and homework. Now granted, most of the online resources are generated by sales organizations but there are some very good third party pieces from tax counsel, the life markets and others that can bring you up to speed on the basics of how these transactions work.
2. Don't expect a lot of big ticket sales. These are typically transactions of between $300,000 and $700,000, which while substantial are not the big million dollar programs that everyone talks about. You need to be prepared to work on modest size cases with long lead times and learning curves.
3. Understand it's not a quick transaction and is going to take a lot of education, salesmanship and sweat to get all involved parties to feel comfortable moving forward. It's a new concept, it's poorly supported by the life markets and the burden is going to fall on the agent to make it happen.
4. Recognize that deferral is only part of the process. You had better have a plan or the capacity to help the people involved to invest the proceeds in a rational and well thought out process or all you've done is set up a financial dissipation plan, not an exit strategy. Most GA's and marketing firms are utterly unprepared to handle that aspect so you better have the skills or acquire them if you don't.
5. Avoid firms that "made their bones" in the tax avoidance or private annuity trust business. They are popping up all over the internet purporting to sell and offer structured sales, when all they are really doing is taking the trade name and slapping it on to their most recent high commission creation. Not all PAT firms were bad, but enough of them were to make it a big red flag in who you are dealing with going forward. Carefully research the back ground, principal owners and others involved in the organization you are considering working through.
Bottom line is that this is a one sale at a time, time intensive market and you need to partner with a company that recognizes that and supports your efforts. Just as your clients were careful in selecting you to work with, be equally diligent in who you partner with to offer these uniquely powerful planning strategies with.