Litigation

Opportunities to buy structured settlement payment rights on live or warehoused structured settlement factoring deals are becoming more easily accessible to individual investors.

This author has seen a term sheet in the last few days offering rates of return of between 6.5 and 7.75% to factoring investors on the paper of Genworth, Symetra, Allstate and others in exchange for cash up front. Some investors may choose to fund the original deal and then resell the structured settlement payment rights to someone else for a profit.

Some say that in some case the net after tax rate of return of the "derivative" is better than a regular structure and that tort victims should consider this as a financial/ settlement planning option.  Placed in a Roth IRA or retirement plan these payment rights represent attractive conservative rate of return. After all isn't that what the insurance industry and structured settlement industry is selling?

I have had the opportunity to speak with a number of reputable financial advisors who ARE already doing these deals for their clients.

Are there any ethical or regulatory considerations of settlement professionals engaging in this business as:

 (1) an investor for their own account or qualified retirement plan? 

 (2) advising their clients to do so?

Naturally one wonders how fair is the effective discount rate the original selling structured settlement annuitant was charged? 

But one industry proponent sees no issue in that (1) the buyer/tort victim/trust/IRA has no direct connection to the annuity placement with the original annuitant (2) the seller/original annuitant needs liquidity and this simply provides it' and of paramount concern (3) the settlement planner/financial adviser or trustee, if applicable, must serve the best interests of his/her client.

The structured settlement and settlement planning industry cannot stick their heads in the sand on this issue. It is ripe for industry wide discussion.