Posts tagged #Mark Wahlstrom

Structured Settlement reform called for. Opinion article in The Hill

Earlier this week an opinion segment was published in the widely read Washington news entity, The Hill, that brought up the issue of Structured Settlement reform and looked once again at the AIG class action lawsuit and issues related to transparency, commissions and business practices in the light of how things are done in comparable financial transactions. 

Credit: The Hill

Credit: The Hill

Authored by trial lawyer and former structured settlement planner, Dick Risk, it is entitled "Why Congress needs to reform structured settlements" and it examines crucial issues that are rarely discussed by trial lawyers, Congress and structured settlement professionals. For anyone in the structured settlement profession Dick Risk is a familiar name as a determined advocate for the rights of plaintiffs in settlement to select the adviser, planner and funding company that set's up their structured settlement. This has often brought him into sharp conflict with NSSTA (National Structured Settlement Trade Association) leadership and members, as the type of transparency and plaintiff control Dick advocates directly threaten's the business model upon which the structured settlement profession largely exists and operated on over the last 40 years. 

Further, Dick Risk late in his career went to law school, obtained membership in the bar and commenced lawsuits against the industry and these practices. The most notable being one against The Hartford Insurance Group regarding an undisclosed commission arrangement they had as part of their claims practice. Then more recently Attorney Risk is one of the plaintiff attorney's at the center of the AIG class action filed earlier this year. As a result of his advocacy in this area, many would tend to dismiss this article and it's points as hopelessly slanted given the back ground and career of the author. 

I believe ignoring or trying to minimize this article would be a huge mistake for trial lawyers, but even more of a mistake for the leadership of the Structured Settlement profession as the issues he highlights are at the center of a wave of change that is going to soon overwhelm the structured settlement planning profession. 

While most will want to "shoot the messenger" I am strongly of the opinion that much, if not all of what is being proposed here is totally consistent with the broader trends toward a fiduciary standard, full disclosure to clients and the BICE, Best Interest Contract Exemption, standard that is now being applied to fixed index annuity sales under DOL standards effective June 9, 2017. Just yesterday the Secretary of Labor essentially conceded that it would be disruptive to further delay the implementation of the fiduciary standard of care when dealing with any retirement accounts. This decision came after an avalanche of opposition to the rule from the annuity industry to rules that require them to clearly disclose all compensation, state any conflicts and make clear that the recommendation is in the best interest of the client. Clearly the tide has shifted as such a lobby effort in the past inside a Republican administration would have produced the desired results that life companies are use to getting. 

My questions is how could any reasonable person be opposed to such a standard being applied to the planning of a structured settlement for a badly injured, disabled or impaired individual? Well, the reality is that standard is not applied currently and if you look at the litigation mentioned in the article, it is clear that this important transaction is not even governed using the NAIC standards for suitability. However, there is a sea change coming and articles such as this one by Attorney Risk are just the first warning bells to both trial lawyers and planners that a fiduciary standard eventually needs to be applied on these irrevocable annuity programs. However, as the article makes clear, until the business relationships that prevent trial lawyers and plaintiffs from having the sole choice of who their settlement planner is, what life company they use for the annuity and the control of casualty companies in the decision is removed, these changes simply won't arrive any time in the near future. 

I'll be covering in greater detail in coming posts some of the current conflicts and issues that are stripping away the rights of plaintiffs to control their financial futures, largely due to troubling trends in some federal cases that take all choice of planning away from the client at settlement and during the life of their annuity. It is up to trial lawyers and their state and national organizations to raise the profile of this issue so that a contemporary and transparent level of diligence is required on all structured settlements and that plaintiffs are sufficiently empowered as to their choice of advisers and companies they wish to work with when putting these essential annuity programs into place. 

Structured settlement suits discussed in Thinkadvisor article

Earlier this month, one of the leading online publications covering financial planning, investments and life insurance/annuity issues did an exhaustive review of many of the issues facing the structured settlement profession. Written by long time industry expert Senior Editor Warren S. Hirsch, the article looks into several key issues and quotes Settlement Channel commentator and structured settlement industry expert, Mark Wahlstrom, President of Wahlstrom & Associates. 

Photo Credit: Think Stock and ThinkAdvisor

Photo Credit: Think Stock and ThinkAdvisor

The article, Titled "Suit puts structured settlements in spot light" initially focuses on the recent lawsuit filed against casualty giant AIG, alleging among other things that commission's were not disclosed properly and that certain members of the structured settlement profession had worked in unison with AIG to with hold information from plaintiffs about their choices in annuity companies, design of the program and compensation agreements for defense brokers. 

However, the article takes a deeper dive into the issue that is starting to really raise it's head in the structured settlement profession, that being whether the Fiduciary Standard that is being increasingly forced upon other annuity product sales, such as Fixed Index Annuities, will begin to be applied to structured settlement transactions as well. 

Wahlstrom commented that he feels it is inevitable that the structured settlement profession would be brought into the new world of open disclosure of commissions, business relationships and clear conflict of interest avoidance when a structured settlement is being proposed to a client. Regardless of the outcome of the litigation in the AIG class action, the momentum, in his opinion, has swung in the direction of disclosure and a fiduciary standard. This of course would upset the long standing fixed commission of 4% that is paid on all structured settlements, as well as other sales support provided by life and annuity markets to the agents working to place annuity contracts that fund structured settlements. 

Clearly change is coming to structured settlements and no matter how hard the industry pushes back, a new standard is going to be imposed at some point by outside forces looking to bring the sale of structured settlements on an equal footing with the sale of other financial products.  Check out the full article at the link above and share your thoughts with us here. 


Will the AIG Structured Settlement RICO case destroy the structured settlement brand?

Earlier this week a tidal wave of what some might deem as shocking news rolled over the structured settlement profession in the form of a lawsuit filed in the US District Court, Boston MA, alleging a RICO type conspiracy by AIG and the structured settlement brokers who are part of their Agency Partners or approved list programs.

The case was filed by the nationally respected class action firm of Hagen Berman and is focused on the contention that the format and business practices of the AIG program were part of a scheme that rose to the level of a RICO type conspiracy. Whether or not this is in fact the case will be determined by the courts in the coming months and years. However, given the sheer size and scope of the AIG program, you can’t underestimate the importance and impact of this news on the settlement profession as well as claims professionals and trial lawyers nationwide.

Over the last few days many different people and organizations in the structured settlement profession have contacted my office to not only see what I thought of the suit, but also to ask how I felt settlement planners, structured settlement experts and others should address what is now a huge elephant in the room any time they are on an AIG case.

I’m not going to comment as of yet on the merits of the suit or the details of the complaint, although I might do so at a future date. Instead I want to discuss how best to handle this from a communication standpoint, which is the immediate problem facing the structured settlement profession.

Crisis management is an art, as is salesmanship and the skill of persuasion. Too often in the past when other cases or crisis have arisen, the settlement profession chose to ignore, minimize or gloss over the matter at hand, believing that by discussing it, they gave it more weight than necessary. That might have worked in a pre-social media, non-Google search era, but now that EVERYTHING is searchable and everyone can express an opinion, different tactics are required or the profession runs the risk of allowing the narrative on this case to spin out of control. Careless attacks on the concept from those who looked to damage the structured settlement profession may could potentially brand many of the major names in our profession as alleged members of a racketeering scheme.

The terms “racketeer” “Conspirator” and “fraudulent enterprise” are powerful and very sticky. They can cling to a lawyer, a company, a professional or firm like stale cigar smoke in a room with out windows. When people have been conditioned by media, movies and writers to assume the worst of large financial companies, they already have a narrative in their heads, subconscious though it might be, that plays like a repeating video clip confirming their bias that “all big banks/insurance companies” are crooks. Whether this suit succeeds or fades away, the branding damage can already be done.

So what to do?

First, ignoring the “Structured settlements are crooked” branding message from those looking to benefit from this lawsuit and the negative publicity it created, simply won’t work. The image is too sticky, evocative and plays to a long standing confirmation bias.

Second, denying the “Structured settlements are crooked” branding won’t work either. That just opens us up to debating details and only serves to harden the association of the term structured settlements with a bad image. Not only that, but broad debate produces a huge volume of internet searched, keyword specific content that further damages the brand when people look up that story. All people hear, as they did in the Freddie Gray/Washington Post stories, is that “Structured settlements are bad and sold by bad people” and denying that we aren’t like THOSE structured settlement guys doesn’t work at all.

So if you can no longer ignore the issue and you can’t effectively deny it without creating further damage, what do you, as a structured settlement professional need to do?

Well, lucky for you, the only option left, going on the offensive, is the BEST option in a new media world, a reality that was on full display during a raucous pre-presidential press conference earlier this week. Just as Donald Trump knows to go on offense against a destructive narrative by flipping the table and making the people who are use to attacking, i.e. "The Press" the bad guys, you as a professional need to do the same. You have to totally scramble your opponents narrative and get them playing defense and denying your attack, instead of you being in a defensive crouch all the time.

While the members of The Settlement Channel professional directory have access to these new media tools and tactics, most settlement planners and brokers don't. Therefore, here are some immediate suggestions you can implement if you don't have a new media platform in place where you can go on the offensive:

1. Contact your clients so they hear about the lawsuit from YOU, rather than a listserv, insurance news web site,online media source or worse, one of your competitors who wants to associate you or your product with the negative elements of this lawsuit. You MUST be the one who brings it to them, not your opposition.

2. To recognize the built in bias of the RICO title which everyone associates with Mobsters and remind people there are CIVIL RICO laws and this isn’t a criminal RICO case. It helps to have a sense of humor on these things so go for a lighter touch. For example, this isn’t John Gotti being cuffed and perp walked, it’s a lawsuit looking into a long standing, well known claims practice that will be decided by the courts, not public debate.

3. Offer to keep them informed and that you will continue to update them on this lawsuit so that your attorney is not put into a situation where they are working on a case and are not aware of the implications of this litigation. Be the one that protects them from professional embarrassment and continues to assist in planning to protect the assets and settlement award of their clients. This also allows you to counter destructive attacks or misinformation by positioning yourself as the expert source of information on this matter. 

In conclusion, the Structured Settlement brand is at risk. The damage from the factoring news of last year on Freddie Gray was harmful, this in my opinion, is much worse. Every firm will need to decide on how they want to either capitalize on this news, or be a victim that allows a valuable planning tool to be forever tainted in the eyes of consumers, lawyers and the courts.

I’ll be back next week with a look at another big topic, the issue of disclosure of commissions, asset management fees and fiduciary duty standards. Many people are wondering if they are going to be imposed on the structured settlement profession. Check back next week or follow us on Twitter or Facebook and find out. Also if you want to learn how you can be part of The Settlement Channel and have access to a powerful new media platform that positions you as an expert in your city, state or region, email us using the contact form and I'll be happy to give you the details.   


Posted on January 12, 2017 and filed under AIG Class Action.