In this weeks edition of Speaking of Settlements, Mark Wahlstrom looks at some of the regulatory issues facing structured settlement professionals and how lax business practices combined with increasing regulatory pressure could trap many professionals.
The structured settlement profession has historically been a "one trick pony" in that it sells only a fixed annuity product and the regulation is handled on a state by state basis under the supervision of State Insurance Departments. However as interest rates have plunged and appear to be staying low, coupled with a sharp decline in the sale of the fundamental annuity product, many brokers and planners are starting to branch out into other financial products to offset the loss of sales.
The risk in this, as Mark Wahlstrom points out, is that many structured settlement brokers have scant experience in the sale of equity based products such as mutual funds, variable annuity contracts and more ominously managed funds under the control of a Registered Investment Advisor who pays the broker a fee for delivering assets. Few of the brokers have the necessary years of experience handling diverse assets classes, programming future needs and representing possible investment returns in a manner that is compliant with current FINRA and SEC regulations.
Additionally, even in the core product area of life insurance and fixed annuity sales, many states are now requiring full disclosure of all compensation, completion of suitability questionnaires and writing laws and regulations related to the sale of products to vulnerable citizens such as seniors, incompetents and minors.
At the end of the day settlement planners who are rushing head long into alternative products may very possibly be setting themselves up for a disaster and one that will injure not only their professional practice, but the profession in general.
Watch for follow up shows and commentary on this topic later this month on The Settlement Channel.