More than 2000 personal injury plaintiff attorneys (plaintiff attorneys) converged on New Orleans this past week for the American Association for Justice (AAJ) 2014 Winter Meeting.
Most plaintiff attorneys view themselves primarily as litigators and therefore prioritize their roles and expertise as obtaining the largest possible amount of compensation for their clients. Personal injury settlement planning and negotiation, however, require different subject matter expertise than personal injury litigation. Plaintiff attorneys nevertheless perform multiple settlement planning roles which include:
- Recognizing settlement planning issues which impact their clients;
- Recommending appropriate settlement planning professional resources to their clients; and
- Retaining ultimate responsibility for effectuating settlements.
As one result, plaintiff attorneys represent a critical marketing target for settlement planners including structured settlement professionals.
From a settlement planning and structured settlement perspective, the two most notable features of the AAJ 2014 Winter Meeting were:
- The dichotomy between the general education program and the exhibitors; and
- The absence, among the exhibitors, of structured settlement or settlement planning professional associations.
Significantly, the AAJ Winter Meeting general educational program focused on litigation issues with no structured settlement, and almost no settlement planning, topics. Perhaps the AAJ addressed this educational omission during one or more of its many membership-restricted sections and litigation groups meetings.
Regardless, the most recent, transformative legislative and regulatory developments impacting personal injury settlement planning and structured settlements deserve greater attention when the AAJ plans its 2014 Annual Meeting which will take place July 26-30 in Baltimore.
AAJ Meeting Exhibitors
Contrary to the general education program, the 84 exhibitors at AAJ Winter Meeting featured many companies offering settlement planning services including nine primary market structured settlement brokers and one structured settlement factoring company. Some of the structured settlement brokers were also notable among the platinum, gold and silver AAJ Winter Meeting sponsors. With exhibit space oversubscribed, more than 25 wait-listed companies were denied any exhibit space.
In addition to "structured settlement services", the AAJ Winter Meeting program guide listed 24 exhibitor categories including:
- Case management software
- Client financing
- Computer software - including settlement analytics.
- Financial services
- Lien resolution services
- Life care planning
- Legal lending
- Special needs trusts
Expanding Products and Services
The nine primary market structured settlement brokers who exhibited at the AAJ Winter Meeting generally shared one distinguishing characteristic - product and service offerings which extend far beyond traditional structured settlements. By comparison, most defense structured settlement brokers remain "single product" purveyors who compete with "cash" (and commission splits) even though some now also offer lien resolution services.
Plaintiff structured settlement brokers, however, face direct and ever-increasing competition from financial planners and trust companies. A 2006-2007 survey of plaintiff attorneys conducted by the National Structured Settlement Trade Association (NSSTA) found that trust company or bank trust departments are consulted about 40% of the time, financial planners about a third, and structured settlement consultants close to 30% in cases where plaintiff attorneys use outside financial advisors.
As a consequence, plaintiff structured settlement brokers are expanding their product and service offerings - as evidenced by the following cumulative list S2KM compiled from sales materials of various exhibitors at the AAJ Winter Meeting:
- Structured settlements - qualified and non-qualified
- Structured attorney fees - income tax deferral strategies
- Treasury funded structured settlements
- Post settlement annuities - SPIAs and fixed indexed annuities
- Document drafting and review
- Periodic payment judgment and analysis
- Mediation and negotiation support
- Lien resolution services - for Medicare, Medicaid, ERISA, military & private healthcare liens
- MSA/Medicare secondary payer compliance services
- MSA allocation reports
- MSA estimates
- MSA trusts with professional administration
- Annuity funding options for MSAs
- Non-Medicare allowable calculations
- Special needs trust and trustee services
- Complex settlement planning
- Asset management services
- Qualified settlement funds
- Settlement trusts
- Special needs trusts - self-settled and pooled.
- Medicare set-aside trusts
- Spendthrift trusts
- Minors trusts
- Settlement preservation trusts
- Legacy trusts
- Settlement trust services
- Trust design
- Tax analysis: Affordable Care Act; Kiddie Tax; IRC 213 medical deductions
- Document provision review
- Investment planning - integrated annuity/structured design
- Special needs pooled trust options
- Uniquely-designed Minors Pooled trusts
- Domestic asset protection trusts through multiple fiduciaries
- Separately managed special needs, revocable, and irrevocable trusts
- Ongoing monitoring of trust partner
These expanding product and service offerings, and the resulting "blended products" and emerging business models, raise fundamental questions:
- Who monitors and regulates settlement planning companies, products and services?
- What laws and regulations apply?
- What product suitability and disclosure standards apply?
- What licensing and certification are required?
Business Practices and Standards
Historically, regulation of structured settlement business practices has fallen short of compliance requirements applicable to other financial and insurance product providers. For example, both the NAIC Model Annuity Disclosure and Annuity Suitability Regulations specifically exclude structured settlements.
Without substantiation, the following assertions from AAJ Winter Meeting structured settlement sales materials would almost certainly be prohibited by compliance directors at securities firms and/or trust companies:
- "...90% of injury victims dissipate their entire settlement within 5 years of recovery....."
- Our company is "... the premier settlement planning firm in the United States..."
- Our company "provides the following services, free of charge:"
- Our company has "delivered an unparalleled expertise and understanding of the laws and practices that have shaped [the structured settlement] industry"
- Our company provides "the most innovative and comprehensive solutions to the challenges you and your clients face".
- Our company offers "the most cost effective and comprehensive lien resolution service anywhere."
- "A structured settlement ...[avoids] .... the risk of fraud".
- "A structured settlement provides a higher rate of return than other funding vehicles."
- "A structured settlement offer is more likely to be accepted than a lump sum offer."
- "UNMATCHABLE RATES OF RETURN: Structuring your fees gives you an unmatchable rate of return with annual tax equivalent guaranteed returns that can reach:
- "20+% for a 5-year investment
- "15+% for a 10-year investment
- "10+% for a 20-year investment"
The emerging settlement planning profession, featuring structured settlement annuities as a core product, provides increasingly important services for personal injury plaintiff attorneys and their clients. To justify their professional standing, settlement planning individuals and associations, including the AAJ, must continue to improve their related educational programs as well as their business practices and standards.
For S2KM's complete reporting about settlement planning and structured settlement professional association educational conferences, see the structured settlement wiki.
For detailed analysis of primary and secondary market structured settlement business standards and practices, see "Structured Settlements and Periodic Payment Judgments" (S2P2J).