Back to the future in Structured Settlements. Broker Innovation.

With apologies to Marty and Doc Brown, I've dragged the theme of Back to the Future to go into part two of my conversation on what is happening in the incredible shrinking structured settlement industry.

If the email and phone calls are any indication, I obviously touched a nerve in the settlement profession as regards the enormous shrinkage in capacity and life markets that fund both qualified and non-qualified annuity business. What i'd like to do with part two is clarify a few key points as to where the responsibility lies going forward to not only grow our business, but at this key juncture, essentially save our profession from marginalization in the financial community.

First, let me make clear that while I'm an equal opportunity basher when it comes to the two professional associations, NSSTA and SSP, I think most brokers expect far too much from each of these organizations and have unrealistic expectations about what they can accomplish to correct the current state of affairs. These associations both work on limited budgets and have limited membership relative to groups such at ACLI, The American College, Million Dollar Round Table and the Financial Planning Association. Lets look at some basic truths about each entity before we look to them to save the industry or find new markets:

1. NSSTA does a premier job of building allies in both Washington DC and in state houses around the country on a limited budget and with relatively minor assistance from members. As the recent meeting in Washington DC showed, NSSTA can roll out some heavy weight Congressman and Senators who both understand, support and promote our industry's mission of assisting personal injury victims in properly planning their awards and keeping their funds safe. Eric Vaughn does a superb job and has done it for years.

2. NSSTA also does an admirable job on PR and marketing given a minor budget and limited resources to get out the word about our profession. As a member of the marketing committee the last few years I can attest to the hard work and creativity with a limited budget that Peter Arnold works with to accomplish what he does.

3. SSP has developed a legitimate professional certification for settlement planners and a serious curriculum that elevates the settlement planning profession, and after a rough start, has evolved into a more moderate group with serious goals of promoting planning for injury victims. They have also done a very good job of building bridges to affiliated professions that strengthen the base of support for our core products and services, something NSSTA could learn from.

However, all that said, if you just go from the track record of premium being stagnant or declining over the last 8 to 10 years, coupled with the documented shrinking and retreat of life markets and lack of new entrants or products it is clear that if the measure of the success of NSSTA and SSP is the growth and expansion of our profession and markets, they have failed rather spectacularly.

Yet, the big question I ask now is whether this a fair measure of the roles of NSSTA and SSP? Does the responsibility of finding new markets, developing new products and expanding our business fall on the associations or does the fault lie in the mirror we all look into as brokers, agents and general agents?

I would suggest that the roles of NSSTA and SSP should properly be as follows:

1. Protect and maintain the status and integrity of section 130 and 104. However, this does not mean needlessly going after every perceived threat with a cannon and a phalanx of lawyers but carefully picking battles we can win. I would argue the factoring battle is largely over and we are cleaning up the scraps and keeping the more outrageous players in check at this point. I further propose that we could probably benefit from some detente between the responsible leadership of the factoring world and the settlement profession.

2. Continue to market the positive aspects and attributes of our core products through online marketing and viral marketing to our end consumers. 99% of what average people ever learn about a structured settlement is probably found through Google searches on the topic. As I've said many times, unless the profession stakes out the high ground and consistently puts out relevant content on our products, we deserve to be overwhelmed by factoring companies, structured settlement trust providers and others financial planners that sell against our product.

3. Strengthen the professional education and professional standards of behavior as to how to properly apply our product and sell it in an ethical and honorable fashion. These standards have to allow us to start calling out the bad apples in our midst who refuse to work cooperatively on either side of the transaction, needless threaten settlement negotiations and drag life companies and clients into our commission battles. Expulsion from the trade associations can be a powerful tool for un-ethical behavior such as rebating to trial lawyers or threatening to hold documents and create constructive reciept. As it stands right now we have no teeth in dealing with this.

4. The professional associations need to stay broker neutral as to how they promote the interests of our profession and instead promote their respective agenda's based on the merits of their products, services and value to the end consumer, be that a casualty claims department, self insured or the trial lawyer and his client.

You will notice I've not mentioned product development and market expansion. The reason why is simple:

" I believe it is the role and responsibility of the brokers, agents and general agents to develop new markets, create new products, reach out to life companies and other financial firms to build alliances and expand our profession. It is neither the obligation or the right of NSSTA or SSP to do this, nor is it the responsibility of the life companies to fund our sales, marketing and product development ideas either."

This industry was founded by innovative, aggressive and entrepreneurial life insurance agents who saw a problem, applied a few creative ideas and built the industry that we enjoy today. Similarly the use of non-qualified annuities, structured legal fees and 468B trusts were pioneered by brokers who kept looking for market opportunities and ways to creatively develop them. Yes there were some smart and politically savvy life company executives and others who took the risk to help build these products, but largely most of what we enjoy as a profession is the fruits of guys who took a risk, spent their money and then sold and persuaded markets to come in and work with us built our profession.We demonstrated opportunity and value to the life markets!

The sad fact is that we are now largely a profession of guys running out the clock and playing a prevent defense designed to end the game with a lead, rather then aggressively and confidently building our profession. As a result we are faced with the current situation of having almost no allies in the financial and life insurance world that would lose a dime in revenue if our entire profession vanished tomorrow. A few more points to ponder then I'll close up this discussion:

1. NSSTA has too long pursued the agenda of a few large and powerful brokers at the expense of new ideas and markets. We have over the decades continually seen artificial barriers of entry to our business created where it is next to impossible for a financial professional outside of "the family" to enter our business and develop as a professional.

2. Our best ideas and biggest areas for growth; non-qualified annuities, structured sales, structured legal fees and 468B trusts, have usually had to battle against their own association and the apathy and hostility of other members and life and casualty companies. Product development and marketing often feels like your swimming upstream with lead boots on in this industry as every new market is seen as a threat to some company or broker.

3. Our general agents by and large refuse to spend money on product development, marketing and broker education unless they can get a life insurance company to subsidize it for them. Our industry has grown accustomed to squeezing the life company departments for every bad idea or marketing event they don't care to pick up and pay for on their own. Not to cast stones but would a certain internet radio broadcast still exist if it wasn't largely subsidized by annual contributions from life insurance company markets? Should and could annual general agency firm meetings be more then subsidized sales calls from the life companies that are asked to contribute? I'm not saying either of these are wrong, but where is the personal money, the risk capital of the general agents and brokers in developing new ideas, marketing platforms, alliances and life company relationships? It seems that if you can't get a life company to front the check, it simply does not or will not get done, and if the life company is paying, that bad ideas or old concepts are simply carried along by inertia or tradition. There are notable exceptions such as the recent PLR that IFS/EPS went and got last year and my own firms on going investment and development of 468B tools and techniques used to expand our market. However, these are now rare exceptions in a business that use to be filled with risk takers WHO SPEND THEIR OWN MONEY.

4. The life markets don't need us and in some cases might not want us around much longer. The world as we knew it has changed and life companies need to make, and are making every day, serious business decisions based on ROI on their capital and the value of our profession to their over all corporate mission and business plan. As we have utterly failed to incorporate life insurance, estate planners and financial planners into our profession as allies, we now are isolated politically and financially in a world where the big life players make chess moves that often leave us stranded even when firms like Genworth, AEGON, Mass Mutual, Aviva and Pruco are doing a superior job. Our $5 billion market is a pimple on the backside of firms that collectively are worth trillions of dollars and unless we move fast to partner up with a broader base of agents and experts we will be facing increasing irrelevancy.

So my readers, do not expect the life companies to come riding over the hill along with NSSTA and SSP to save the day or our collective bacon. Instead take a long look in the mirror and ask if you are willing to do what it takes to build your individual practice or energize your general agency to make it more relevant and attract fresh players, thinking and capital to our business. I personally am doing all I can to persuade some key players to work on such an approach, but we continue to face the calcified thinking of people who are happy with the status quo and wish to reward the same limited and aging players who got us to this point.

The question you need to ask yourself today is if you were 30 years old and looking to start your professional life over, right now, today, would you choose to enter this profession knowing what you know about how the BROKERS and GENERAL AGENTS have conducted their affairs over the last twenty years? Would you trust them with your capital, your career and your future to build something of value for you and your family?

Think that one over and decide what you will do for your profession, but stop waiting for "others" to do it for you.

Posted on June 1, 2009 .