Beyond Structured Settlements

Interview with SSP President Joe Tombs

Joe Tombs is currently completing the first year of a two-year term as President of the Society of Settlement Planners (SSP). SSP's 2017 Annual Conference is scheduled for March 1-3 in Las Vegas. As Tombs prepares for this event, he agreed to answer a few S2KM questions about SSP's current status and future direction. In a prior S2KM blog post, Tombs responded to the AIG Class Action Lawsuit - stating SSP is "neutral" and that SSP, as an association, has decided as a matter of policy to abandon taking any “political” positions.

S2KM: Joe, thank you for agreeing to this interview. To further clarify SSP's new "no political positions" policy, you have also stated that SSP is now neutral about single-claimant 468B Qualified Settlement Funds - one of the most contentious issues within the primary structured settlement market during the past several years. Just to confirm, are you saying the SSP, as an association, no longer supports and/or will no longer advocate for single-claimant 468B QSFs?

TOMBS: That is correct. Our refusal to take a position should not be misunderstood to imply anything about our individual members. The SSP has been a zealous advocate of the single-claimant QSF in the past and I doubt any of our members have changed their opinions on the subject. We are not asking our members to suppress or to modify their own beliefs.

S2KM: What about factoring which arguably represents the most divisive political issue within the structured settlement market? If SSP is neutral, how do you explain SSP's current membership policy which to use your own words "is open to anyone interested in comprehensive settlement planning as long as they are not engaged in factoring". Doesn't SSP's membership policy itself represent a "political position"?

TOMBS: The SSP does not have an opinion on factoring. Several years ago, we held a conference in which many participants from factoring companies attended and participated. Their presence at our meeting annoyed some SSP members and a special meeting of members was called to address this issue. At that meeting, the membership voted almost unanimously to close off new membership to those applicants who were active in the factoring industry. We also decided not to expel the very few of our members who had drifted into factoring. Our individual members' views on factoring are varied and generally quite negative, but the reason factoring representatives are excluded from membership centers on the fact that we want to focus on planning at the time of settlement. (Tombs' emphasis). My personal opinion is that there is nothing wrong with a person who ethically engages in factoring, but that the world would be a net better place if factoring did not exist.

S2KM: What do you consider to be your most significant accomplishments during your first term as SSP President?

TOMBS: Recognizing we still have more than six weeks left to achieve first year objectives, I am especially proud of four accomplishments: 1) SSP has substantially expanded its membership; 2) we have re-focused on professional settlement planning as our primary Mission and purpose; 3) we have pretty much put to bed the idea that we oppose the National Structured Settlement Trade Association (NSSTA); and 4) we have developed a new set of Professional Practice Standards which we will introduce during our 2017 Annual Conference.

S2KM: How large is SSP and where are you finding new members?

TOMBS: I anticipate we will meet our goal of having 300 members by the time of our 2017 Annual Meeting. Many of our new members are trust officers, financial planners, special needs trust attorneys and staff from settlement planning practices. The new face of the SSP is truly the new faces at the SSP and the different perspectives they bring are propelling us forward in an exciting new direction.

S2KM: Have structured settlement annuity providers supported the concept of "comprehensive settlement planning"? If not, why not?

TOMBS: I don't think most structured settlement annuity providers understand the significance of settlement planning - or how it differs and/or relates to structured settlements. They are just beginning to wake up to the concept and realize how important and how effective the settlement planning model can be. My experience has shown that whenever a plaintiff attorney sees and understands the settlement planning model, they will never again be satisfied with a structured settlement broker who only offers one product. Think about what happened to flip phone providers when smart phones hit the market. I predict the same thing will happen with settlement planning. If structured settlement annuity providers wait too long to transition, trust companies will have captured first mover advantage.

S2KM: At one time, the term "settlement planner" was viewed by many structured settlement stakeholders as an inflated synonym for "plaintiff broker". How would you differentiate a professional settlement planner from a structured settlement consultant?

TOMBS: Until recently, that view was entirely accurate. A plaintiff broker would simply order new business cards with the new title ("Settlement Planner") proudly displayed. Today, however, that transition creates changes in expectations, applicable standards of care, and required levels of disclosure. A structured settlement consultant approaches an engagement with a product in mind. By comparison, a settlement planner (with access to multiple products) first gathers information about the goals of the injury victims and his/her family, analyzes the data, works out a written plan, and implements the plan. A settlement planner does not play the role of a structured settlement broker, if at all, until the last step.

S2KM: What is a "comprehensive settlement plan" and how does it differ from a "structured settlement"?

TOMBS: A structured settlement is a product. A "comprehensive settlement plan" is a blueprint. It is a written document that contains a summary of the detailed analysis of the client's situation, capacities, goals, priorities, needs, and resources - and the strategies and products that will best help that client use the settlement proceeds to successfully transition into a post-settlement life in a way that allows them to accomplish their highest priority goals. The settlement planner uses the plan to guide the injury victim through the settlement process. Many of my settlement plans do not include structured settlements, but most do.

S2KM: What role(s) do you see for structured settlement annuities in settlement planning?

TOMBS: Structured settlements provide tax-free guaranteed cash flows that can be matched to the exact time that the cash flow is projected to be needed. It is a valuable tool in a settlement planner's toolbox. Carpenters love their hammers, but I would never hire a carpenter who showed up to work with only a hammer.

S2KM: What is SSP's current relationship with NSSTA and what would you like it to be?

TOMBS: Most of the SSP members who produce structured settlements are also members of NSSTA. The SSP's past opposition to a few of NSSTA's political positions has frayed the relationship despite great strides to mend the fences by both sides. Today, the SSP leadership fully supports NSSTA and its Mission to preserve and protect structured settlements. I believe the two organizations are symbiotic - if one does better, so does the other.

S2KM: How are SSP and NSSTA different from SSP's perspective? Do we need two associations or should their efforts be combined?

TOMBS: SSP and NSSTA are two very different organizations with completely different Missions. We share a common ancestry, but we have evolved into separate species. The difference, which is evident in our names, is not subtle, semantic, or political. Today, most of our members, sponsors and seminar attendees do not even sell structured settlement annuities. Let that fact settle in for a minute and you will begin to comprehend the extent to which the SSP and settlement planning have evolved.

S2KM: What is the scope of SSP's new "Professional Practice Standards"? Will they Replace SSP's current "Standards of Professional Conduct"? If not, how are they different?

TOMBS: At our 2017 Annual Meeting, we will announce and release practice standards that will define settlement planning and authoritatively set out the scope of the practice of settlement planning. Don't expect something complicated. SSP's Professional Practice Standards will be simple, profound statements. They will be different from a Code of Ethics or our Code of Professional Conduct. Our current Code of Professional Conduct is too structured settlement centric and is currently under review by an SSP committee. I suspect it will receive major modifications soon.

S2KM: What is the current status of the Registered Settlement Planner (RSP) Program? How many professionals currently possess the RSP designation?

TOMBS: The RSP designation is administered by a separate Board. The number of RSP designees is small - probably just over twenty. The program was dormant for a long time and has now been freshly updated with several students enrolled.

S2KM: Looking ahead to your second term as SSP President, what are SSP's greatest challenges?

TOMBS: We can't grow the number of professional settlement planners fast enough to keep up with market demand. This forces us to focus on two goals - increasing our membership and increasing the professionalism of our craft. We are making progress on both fronts, but we simply cannot go far enough or fast enough to meet the demand. Another great challenge is that we face resistance from entrenched businesses that actively try to slow us down to allow them to catch up.

S2KM: Joe, thank you for taking time to participate in this interview. Congratulations for your progress with SSP and best of luck for another outstanding SSP educational conference March 1-3 in Las Vegas.

SSP President Responds to AIG Class Action Lawsuit

Based upon the history of the Society of Settlement Planners (SSP), and the role of Richard Risk (an SSP founder and member) as one of the plaintiff attorneys, structured settlement industry participants might assume that SSP, as an association, supports the recently filed AIG Class Action Lawsuit. When asked by S2KM, however, SSP President Joe Tombs provided an unexpected response. Tombs' detailed response appears below. For context, however, S2KM first provides a brief background summary plus a summary of the AIG Class Action allegations.

Historic Industry Divisions

Although some structured settlement industry pioneers, including the late David Ringler, the first President of the National Structured Settlement Trade Association (NSSTA) envisioned NSSTA as "a place where everyone and anyone [could] sit down with each other and discuss the issues and viewpoints regardless of beliefs", that utopian environment never fully materialized as multiple divisions developed within both the structured settlement market and the larger personal injury settlement consulting market. Examples include:

• Plaintiff vs. defense structured settlement brokers.
• Primary vs. secondary structured settlement markets.
• Structured settlements vs. settlement planning.
• Settlement annuities vs. settlement trusts.
• Settlement planning vs. special needs planning.

Among other results, the structured settlement industry now has both a primary and a secondary market and structured settlement industry participants with alternative issues, viewpoints, beliefs and educational interests have formed two national associations in addition to NSSTA: the National Association of Settlement Purchasers (NASP) and SSP. Although numerous and divisive issues have created serious political conflicts among these associations historically, leaders of all three associations have increasingly recognized and addressed the problems created by these conflicts.

During his three successive one year terms as SSP President, Immediate Past President Neil Johnson served as a powerful advocate for structured settlement industry unity. For example, as a guest speaker during NSSTA's 2014 Fall Conference, Johnson condemned lack of structured settlement industry unity as "a drain - a drain on financial resources ... a drain on productivity ... a drain on our public image ... a drain on physical and emotional health. Lack of unity diverts attention from productive projects. It always focuses attention on the negative, never on the positive. Lack of industry unity shows no partiality or favoritism for either NSSTA or SSP."

At the same time, Johnson proposed a "solution" for achieving structured settlement industry unity including these core elements:

• Recognizing and accepting product and professional diversity.
• Identifying and pursuing permanent shared interests without necessarily agreeing on all issues.
• Engaging all perspectives to discuss industry problems and issues.
• Promoting and practicing settlement planning with the structured settlement annuity as a core strategic product.

Among other highlights and milestones, the Society of Settlement Planners (SSP) 2016 Annual Conference transferred association leadership from Johnson to Joe Tombs with Tombs promising to maintain Johnson's leadership direction, which focused on structured settlement "industry unity", and also, in a dramatic policy shift, to "pull SSP back completely from structured settlement politics."

AIG Class Action Lawsuit

Earlier this month, three plaintiff attorneys, including SSP founder and current SSP member Richard Risk, filed a Class Action Complaint in United States District Court District of Massachusetts. Among its allegations, the Class Action Lawsuit accuses Defendant American International Group, Inc. (AIG), a NSSTA member, and several of its affiliates of: 1) RICO violations; 2) fraudulent conduct; and 3) unjust enrichment.

Although not named as Defendants, the Class Action Complaint also identifies multiple structured settlement brokers (most, if not all, members of NSSTA) who, according to the Complaint, are "known as 'Agency Partners' [and] have been on the AIG Approved Broker List within periods relevant to this Complaint, and are part of the racketeering enterprise at issue..."

Plaintiffs characterize the primary AIG business practice they allege is illegal as a "short-changing scheme" which they describe as follows: "Defendants’ practice to fail to disclose to Plaintiffs and other members of the Class numerous material facts concerning how AIG conducted its Structured Settlement Program including, among other things, that:

• "Defendants participated in a short-changing scheme designed to allow them to recover the cost of their own structured settlement brokers, by deducting the brokers’ fees from that portion of the settlement that the settling parties had previously agreed would be one hundred percent (100%) invested in future payments;
• "Defendants accomplished this “short-change” by bundling the amount of the broker’s commission—namely, four percent (4%)—into the illustrated annuity cost;
• "Even when the broker’s fee was not 4%, AIG would keep for itself whatever portion of the commission was not paid to the broker; and,
• "As a result of the scheme undertaken by Defendants, the actual financial value of the settlement was materially lower than the value represented to injury claimants since four percent (4%) of the full amount of cash to be invested in annuity was, in fact, diverted by AIG to pay for its own Approved Brokers and In-House Brokers."

Other Plaintiff allegations:

• "AIG uses a structured settlement annuity software and quoting system that is represented by it and the Approved Brokers (and In-House Brokers) as illustrating future projected payments based on the amount of funds previously agreed between the settling parties to be invested in the annuity. But this representation is not true, because it does not reflect the commission that is paid to the broker, which is hidden in the cost or present value of the annuity communicated to the claimant or claimant’s attorney."
• "In fact, AIG trains its employees in the Structured Settlement Program, as well as its Approved Brokers and In-House Brokers, not to disclose to claimants (or their attorneys when retained) the fact that the broker’s fee is bundled into the represented annuity investment cost."
• "AIG’s employees, its Approved Brokers, and In-House Brokers are also trained to conceal this scheme, in the event of claimant inquiries about the payment of commissions, by avoiding a direct answer to the question or, sometimes, by indicating that payment of annuity premiums from the defendant’s AIG-affiliated liability insurer to American General avoids commission as a cost to claimant."
• "The AIG Approved Brokers are also required to fund periodic payments with an American General or other AIG-related annuity, if at all possible. This requirement is called the 'first and last right of refusal'.”

The Complaint includes a footnote #1 (page 1) explaining/alleging that: 1) most structured settlement "producers" are inappropriately referred to as "brokers" when in fact they are "agents" appointed by life insurance companies; 2) Use of the term "broker" is misleading and communicates a false duty of loyalty to the consumer/injury victim; 3) although a producer may hold a life agent's license, he/she cannot bind the life company when writing an annuity application; and 4) this distinction becomes important for defining a racketeering "enterprise" under the RICO Act when considering the relationship of structured settlement producers to issuers.

SSP President Joe Tombs Responds

Based upon the political history of the SSP, and role of Risk as plaintiff attorney, the AIG Class Action Lawsuit appears to present a significant test for SSP - especially in light of Immediate Past President Neil Johnson's advocacy for structured settlement unity and current President Joe Tombs' promise for SSP to avoid structured settlement politics. When asked by S2KM whether or not SSP supports the AIG Class Action Lawsuit, however, Tombs provided the following response (with S2KM emphasis):

• "We are neutral – SSP has no position at all and we will not take one in the future. A year ago, we decided to abandon taking “political” positions. Advocacy for victim’s financial rights had been a central mission of the SSP since its founding and so it was hard to let that go. A pillar of the “old” SSP’s advocacy mission was opposition to many of the features of some of the casualty company programs. Therefore, many people are confused that we don’t have a dog in this fight. Everyone expects the SSP to rush out and take its normal spot in the circular firing squad and start blastng away or at least provide the forum for a mob to form. I’m sorry to disappoint people but we are neutral - on the AIG Class Action Lawsuit or any political issue such as single claimant 468B Qualified Settlement Funds. Individual SSP members have the option to support or oppose specific political issues. SSP, as an association, however, will not. Our priorities are growth and the promotion of professionalism in the practice of settlement planning - both of which we are accomplishing successfully.
• "Dick Risk is a founding member and we once honored him with a lifetime achievement award at which time we granted him lifelong membership. The SSP makes no attempts to muzzle or restrain our members. They are free to think, say, or do what they wish. We used to carefully guard our roll and membership was open only to plaintiff-only structured settlement brokers. Today, membership is open to anyone interested in comprehensive settlement planning as long as they are not engaged in factoring. Our membership includes a diverse group of structure brokers from most of the larger groups, trust company officers, financial planners, special needs trust attorneys, plaintiff attorneys and many others.
• "Separate from my role as President of SSP, I have my own opinion about the AIG Class Action Lawsuit. Part of my opinion is based upon a lunch I was honored to have in 1997 or 1998 with Hank Greenberg (then CEO of AIG) and Ernie Stempel (then President of North American Operations for AIG Life & Annuity). I remember Mr. Greenberg talking about a huge high-rise building with several floors full of nothing but lawyers. He then informed me AIG spent millions on outside counsel and had other AIG lawyers scattered across the globe. In my opinion, if AIG is right, they are more than adequately equipped to handle this case without help from me or anyone else.
• "Another part of my personal opinion is that I hate structured settlement politics and I am not smart enough or educated enough to know which side is right in this lawsuit. It is a fact, however, that many of my clients cannot chose from a full selection of structured settlement products or product providers - and another fact that my market quotes include fewer companies than they did a few years ago. I wish I could still quote Hartford, for example, but we know what happened after their class action settlement. So, although I can see the AIG battle lines forming, I don't have time for the fight myself. I have an appointment with a widow this afternoon and I only wish I could offer her and her freshly fatherless children a greater assortment of structured settlement options. And if a lawsuit against AIG should ever cause American General to withdraw from the structured settlement market, I would have a still shorter list of companies to offer my clients."

Joe Tombs is currently completing the first year of a two-year term as SSP President. SSP's 2017 Annual Educational Conference is scheduled for March 1-3 in Las Vegas. As Tombs is preparing for this event, he agreed to answer a few additional S2KM questions about SSP's current status and future direction. That interview will appear in a follow-up S2KM blog post.