Question. How much commission does a structured settlement broker get paid when they place an annuity to fund a structured settlement?
You would think this would be a fairly routine question asked on every single personal injury settlement involving a structured settlement payment schedule, but the fact is that few if any lawyers ever ask this question. In fact in my career I can state that in maybe ten or twelves cases over a 30+ year time frame I might have been asked that question by either my trial lawyer or their client.
Structured settlement brokers and experts know that answer is 4% commission on the total premium written on an annuity. It's been that rate since the 1980s, there is no residual or ongoing compensation and the commission is essentially "baked into the rate" so that the client sees a net payout and no disclosure of the commission or how the pricing was arrived at on the annuity.
While I see nothing nefarious about this long-standing practice, I've also observed over my 35+ year career that commission and compensation programs on other types of investments have evolved due to regulatory and consumer pressure, while this very basic, vanilla type annuity has never changed or modified in the least.
In this weeks Speaking of Settlements commentary I look at what I consider the two biggest issues facing the structured settlements. The first is "Transparency is Pricing" and the other is "Product suitability and Fiduciary standards in annuity design." While those might seem to be somewhat obscure issues, each of which will be covered in greater detail in a subsequent commentary and blog post, I feel they are major issues which together could permanently alter the process by which structured settlements are priced, sold and provided as a solution in settlement planning.
Enjoy the video, it should give you something to think about, and watch for the more comprehensive analysis and videos on each of those two issues during the rest of January. Big changes are being imposed on the structured settlement profession by outside forces, so it would be prudent for the profession to act proactively to address them in a way that is positive vs our typically reactive approach to change.