Beyond Structured Settlements

PFAC 2016 Annual Conference

Fiduciary standards, as they relate to product suitability specifically, and to business practices generally, can be expected to become more significant factors in product sales for the traditional structured settlement market as it continues to expand into, and interact with, the larger, more complex personal injury settlement planning market.

Multiple developments support this prediction. They include the expanding role of fiduciaries as settlement planning stakeholders and decision makers. In that context, fiduciaries most often serve as trustees, but also as guardians, conservators and/or executors.

Any person acting in a fiduciary capacity has an obligation to act in the "best interest" of another party. A fiduciary duty requires a high standard of honesty and full disclosure including any potential conflicts of interests. A fiduciary must not obtain a personal benefit at the expense of his or her client.

Regardless of who sells/provides a financial or insurance product to a settlement trust, and what independent duties that product provider might have to a trust beneficiary (i.e. injury victim), the settlement trustee's own fiduciary duties arguably should require the settlement trustee to evaluate specific trust products, trust product providers and their related business conduct utilizing that same fiduciary standard which requires honesty, full disclosure, and best interest.

In personal injury settlement planning, several types of trusts are utilized - any of which may be funded with, or utilized to fund, structured settlements: qualified government bond trusts; reversionary grantor trusts; settlement preservation trusts; special needs trusts including pooled trusts; Medicare set-aside trusts; and IRC 468B Settlement Funds.

As one related result of the expanding use of settlement trusts, a unique settlement trust market is evolving in the United States characterized by:

• Specialized knowledge about government benefits required to serve "special needs" beneficiaries and their families.
• Willingness to consider structured settlements as trust assets and knowledge related thereto.
• Willingness to accept corpus amounts less than minimum requirements of traditional corporate trustees.
• Professional individual trustees as well as corporate trustees.

To S2KM's knowledge there does not yet exist any national association of settlement trustees. Instead, settlement trustees participate as members, speakers, sponsors and/or exhibitors at various structured settlement, settlement planning and special needs national conferences such as: NSSTA, SSP, NAMSAP, NAELA, ASNP, SN Alliance, Stetson SNT, University of Texas SNT among others.

PFAC Conference

There exist, however, state fiduciary associations the largest of which is the Professional Fiduciary Association of California (PFAC). To learn more about fiduciaries and fiduciary standards, from a structured settlement perspective, S2KM attended the 21st Annual PFAC Conference, which occurred June 1-4, 2016 in Indian Wells, California and featured 74 exhibitors, more than 600 attendees plus four days of speakers and breakout sessions covering a multitude of topics.

PFAC is an affiliate of the National Guardianship Association (NGA). California Court Rules define education and qualification requirements to serve as guardian, conservator or trustee in California. Attorneys and CPAs with current, active licenses to practice in California automatically qualify. To retain their license, professional fiduciaries must also meet continuing education requirements. Approximately 680 professional fiduciaries are currently licensed in California.

Not all professional fiduciaries, of course, work in personal injury settlement planning. In fact, relatively few of the PFAC Conference presentations and/or exhibits were even relevant to structured settlement and/or settlement planning professionals.

Uniform Prudent Investor Act

Perhaps the most important and relevant lessons S2KM learned during the PFAC conference concerned the duties of care and the investment considerations imposed upon trustees by the Uniform Prudent Investor Act (UPIA). Understanding these UPIA trustee duties and investment considerations will almost certainly help structured settlement and settlement planning professionals improve their sales success when personal injury cases include settlement trusts.

The UPIA , which was adopted by the National Conference of Commissioners on Uniform State Laws (NCCUSL) in 1994, has been enacted, with some state-specific modifications, by 44 states and the District of Columbia. In those states, the UPIA, external to the trust document itself, serves as the most important reference defining a trustee's investment responsibilities.

Prior to the UPIA, courts applied the "prudent man rule" when evaluating trustee investment performance. The UPIA, by contrast, adopts "modern portfolio theory" as a different and more appropriate standard for trustees. Compared with the prudent man rule, modern portfolio theory promotes a holistic view of trust assets by focusing on the total return generated by a trust as opposed to viewing a trust's income and principal separately. This newer standard allows for greater investment diversification so long as the risk/reward ratio matches the purposes and terms of the trust instrument.

In his PFAC conference presentation titled "A Trustee's Duty of Care Under the UPIA", Josh Yager addressed how a trustee can demonstrate prudence and good faith, and thereby avoid a lawsuit, by fulfilling six trustee duties required under the UPIA:

• Duty to have a plan.
• Duty to monitor risk/return.
• Duty to diversify.
• Duty to pay only fair fees.
• Duty to prudently delegate.
• Duty to monitor agent's activities.

Yager never mentioned structured settlements or personal injury settlement planning during his discussion. Within the context of his presentation, however, here are some follow-up questions worth considering at future educational conferences:

• How should life contingent structured settlements be compared with other investment alternatives when trustees calculate rates of return needed to accomplish trust objectives?
• How can structured settlement and settlement planning professionals better anticipate and address trustee risk objections that many structured settlements include too much concentration, as well as a lack of liquidity?
• What are "asset classes" - and should structured settlements be promoted/evaluated as a distinct and necessary "asset class" within settlement trusts?
• Assuming trustees have a duty to evaluate compensation arrangements related to trust assets, should structured settlement professionals be required to disclose their case-specific compensation, including compensation sharing agreements? To whom? When?
• How do "industry standard" four (4%) percent structured settlement commissions compare with commissions and fees charged by other financial product providers? Are these commissions "fair" or "excessive"?
• Why was a given structured settlement design and/or settlement professional selected in a specific case? Does he/she possess appropriate licenses and credentials? Is he/she subject to any undisclosed conflicts of interest? Has he/she been the subject of any prior lawsuits or client complaints? Does he/she understand the trustee's duties under the UPIA? Has he/she accomplished what they promised?
• What legal options does a trustee have when confronted with a structured settlement or structured settlement consultant that the trustee believes violates a fiduciary standard or duty for a specific settlement trust under the UPIA?

Although not specifically discussed in any of the PFAC presentations S2KM attended, Section 2(c) of the UPIA identifies eight additional factors a trustee should consider when making any investment:

• General economic conditions.
• The possible effect of inflation or deflation.
• The expected tax consequences of investment decisions or strategies.
• The role that each investment or course of action plays within the overall trust portfolio.
• The expected total return from income and appreciation of capital.
• Other resources of the beneficiaries.
• Needs for liquidity, regularity of income, and preservation or appreciation of capital; and
• An asset’s relationship of special value, if any, to the purposes of the trust or to one or more of the beneficiaries.

When settlement trusts play a role in a personal injury settlement, structured settlement and settlement planning professionals should be prepared to address these factors as part of their sales strategy. Significant for structured settlements, the UPIA's list of investment considerations fails to mention mental or physical disabilities of a trust beneficiary. From a settlement planning perspective, injuries or diseases that create special needs or reduce an individual's normal life expectancy arguably should receive important consideration when a trustee makes investment decisions.

Comparative Business Standards

How do current business standards of structured settlement and settlement planning professionals measure up to the "best interest" standards required of trustees and other fiduciaries? Although various members of both the National Structured Settlement Trade Association (NSSTA) and the Society of Settlement Planners (SSP) are appointed as independent agents representing many of the same structured settlement annuity providers, the two associations address the issue of product suitability differently.

NSSTA, whose members include defense and plaintiff brokers, has adopted a "Statement of Ethics and Professional Responsibility" (Code of Ethics) with "guiding principles" for its members and member organizations. The Preamble provides: "Implicit in the acceptance of this Statement is an obligation to act in a professionally responsible and ethical manner when providing structured settlement services." Although Principle VI directs NSSTA members to:"…comply with all material federal and state laws and regulations applicable to the structured settlement services that are provided", NSSTA's Code of Ethics does not specifically address either fiduciary or product suitability standards.

By comparison with NSSTA, SSP's Mission Statement provides, in relevant part, that "[m]embership is open to all individuals with a genuine interest in the profession of settlement planning." However, "[c]andidates for membership must attest to their .......striving to ensure plans are consummated to a fiduciary standard." (emphasis added). Unlike NSSTA, almost all of SSP's members represent injury victims and their families and attorneys as opposed to defendants and liability insurers. Many SSP members also sell financial products as well as structured settlement annuities.

Plaintiff structured settlement brokers generally, and SSP members more specifically, regularly face direct competition from non-structured settlement financial advisors. Currently some financial advisors (Certified Financial Planners and Investment Advisors) are held to a fiduciary ("best interest") standard while other financial advisors (broker-dealers) provide services under a “suitability standard” which requires only a reasonable belief that any recommended product is suitable for a client.

Consumer protection concerns appear to be favoring broader application of the fiduciary standard. Acting under authority of Dodd-Frank, the SEC submitted a "fiduciary standard" study to Congress in 2011 recommending the adoption of a uniform fiduciary standard for investment advisers and broker-dealers when providing investment advice to retail customers. Congress has not yet adopted this uniform standard. More recently the U.S. Department of Labor has proposed a rule requiring fiduciary accountability for all investment advice related to retirement assets.

CONCLUSION

For most of its history, the primary structured settlement market has developed its business standards and practices based upon a "claim management" model which limits the scope of its representatives' duties of care toward injury victims - the ultimate customers for its products. Within the larger "settlement planning" market, which encompasses structured settlements, fiduciaries and other participating professionals are superimposing a more demanding "best interest" duty of care. To successfully compete in the settlement planning market place, therefore, structured settlement professionals need to acquire a better understanding of fiduciary and UPIA duties and requirements - and learn to re-shape their product sales accordingly.

S2P2J Release 59

Despite historically low interest rates and negative PR (most recently this Washington Post Editorial) resulting from the unconscionable business practices by some secondary market companies, the primary structured settlement market continues to experience incremental growth since hitting an annual annuity premium nadir of $4.82 billion in 2012.

The "Growth Initiative" developed by the National Structured Settlement Trade Association (NSSTA), under the leadership of Presidents Michael Goodman and Len Blonder, has helped to sustain primary market growth by prioritizing specific objectives the first of which have included: 1) rejuvenate defense programs; 2) amend the Federal Employee Compensation Act; and 3) develop convertible deferred lump sum product options.

Other factors contributing to recent primary market growth ($5.3 billion of annuity sales in 2015):

• Increased industry unity - Advocated by the Presidents of NSSTA, the Society of Settlement Planners (SSP) and the National Association of Settlement Purchasers (NASP), these associations recently have taken significant steps to overcome their historic acrimony which had divided plaintiff and defense brokers as well as the primary and secondary markets.
• Legislative collaboration - One result of increased industry unity has been a proactive and collaborative legislative strategy by NSSTA and NASP to add consumer protection amendments to targeted state structured settlement protection statutes with preliminary success in Illinois, Wisconsin, Florida, Maryland and Virginia.
• Expanding education - NSSTA continues to expand and improve its educational offerings adding new programs such as Structures 202, the Masters Structured Settlement Consultant (MSSC) certification and Structured Settlement University. SSP recently sponsored a joint educational program with the Academy of Special Needs Planners (ASNP) providing attendees an opportunity to evaluate structured settlements within the larger, more complex personal injury settlement planning market.

Consistent with these growth initiatives, recent updates of "Structured Settlements and Periodic Payment Judgments" (S2P2J), including newly issued Release 59, highlight multiple opportunities to expand the structured settlement market, providing technical guidance and practice advice, in addition to describing related industry developments and issues.

Publisher Law Journal Press distributed hard copy supplements for S2P2J Release 59 earlier this month with online S2P2J subscribers receiving their update automatically and simultaneously. Online S2P2J includes a search feature and download capability as well as link features to access individual book sections, appendices, footnotes, cases and statutes.

First published in 1986 and updated semi-annually, S2P2J is co-authored by Daniel W. Hindert,  Joseph J. Dehner, and Patrick J. Hindert (S2KM's Managing Director). Both NSSTA and SSP have utilized S2P2J as an educational resource for their certification programs.

Release 59 Highlights

"Release 59 for 'Structured Settlements and Periodic Payment Judgments' features analysis of the Wrongful Convictions Tax Relief Act of 2015. This new federal legislation, enacted December 18, 2015, creates an exclusion from gross income for civil damages, restitution, or other monetary awards that are received as compensation for wrongful incarceration. The Act includes an important one-year time-sensitive retroactivity provision.

"This Release also outlines recommendations to defense counsel for seeking court approval of settlements whenever parties have a duty to consider the provisions of the Medicare Secondary Payer Act (“MSP”). The advice is applicable whether or not the claimant has a legal disability that mandates such court approval or if doing so as a means to reduce risks of a finding of MSP noncompliance and its attendant possible sanctions.
"Noteworthy new case law in Release 59 includes:

• "An important 2015 decision by the U.S. Court of Appeals for the Third Circuit which includes in-depth analysis of 'safe harbor' annuity rules under the Deficit Reduction Act of 2005 when annuities are sought to be used to preserve Medicaid eligibility.
• "Review of new cases under state Structured Settlement Protection Acts ('SSPAs'), where courts have identified standard questions to assist judges in making the determination of whether a proposed transfer of future payment rights is in a given claimant’s 'best interest' as required for court approval under the SSPAs.

Previous S2P2J releases have highlighted and addressed the following recent structured settlement developments and primary market growth opportunities:

• Non-qualified assignment issues - including tax and security issues raised by off-shore assignment companies.
• Templates for: 1) approval of MSAs; and 2) disclosure of consultants' roles and compensation.
• Expanded coverage of Workers Compensation MSAs.
• Summary and discussion of recent PLR for indexed annuities and commutation riders.
• Summarized results of CLM Advisors surveys commissioned by NSSTA to determine the value claims executives, claims professionals and plaintiff attorneys place on structured settlements and structured settlement consultants.
• Introduction to ABLE Accounts.
• A new section to introduce and explain federal and international regulatory developments and entities resulting from the 2008 global financial crisis.
• Updated analysis of the changing role of and standards for plaintiff attorneys engaged in personal injury settlement planning and when negotiating structured settlements.
• Summary and analysis of recent U.S. Treasury Regulations for IRC 104(a)(2).
• Practice tips for minimizing the risk of an IRS settlement challenge.
• Updated summary of lessons learned from the Executive Life Insurance of New York (ELNY) insolvency.
• Periodic payment reinsurance as an alternative means of funding structured settlements.

For S2KM's most recent analysis of the structured settlement industry, see: "Structured Settlements 2015":

• Part 1 - Market Metrics
• Part 2 - Market Issues and Developments

NASP 2015 Annual Conference

Patricia LaBorde, President of the National Association of Settlement Purchasers (NASP), opened her association's 2015 Annual Conference last week in Las Vegas with a provocative description of its prior 12 months: "a year of unimaginable successes and challenges".

Founded in 2004, NASP identifies itself as "a leader in setting standards and implementing best practices for the structured settlement purchasing industry. Our association safeguards the rights of settlement recipients to readily access their funds through an efficient, fair and transparent judicial process."

NASP Presidential Panel

Subsequent conference presentations detailed NASP's successes and challenges including an historic President's Panel, moderated by Robin Shapiro, and featuring LaBorde and Michael Goodman, the first sitting President of the National Structured Settlement Trade Association (NSSTA) to attend a NASP conference.

Goodman has identified "growth opportunities for the structured settlement industry" as his number one goal as NSSTA President. He also characterized his remarks and opinions as personal and not representative of official NSSTA policy or positions.

Goodman highlighted the need for "responsible factoring" and mentioned the consumer protections that have been put in place in Wisconsin, Maryland and Illinois. Based upon his own professional experience, Goodman gave multiple examples of what he considered appropriate and inappropriate transfer activities.

Among Goodman's other noteworthy comments:

• "Factoring is not a zero sum game. What is bad for the secondary market is not necessarily good for the primary market."
• "Both NSSTA and NASP need to improve/correct the branding of "structured settlements". Confusing the primary and secondary markets is not beneficial for either association."
• "I am proud we have been able to create more consumer protections for injured annuitants. I am hopeful that by the end of this year, we will have improved the Structured Settlement Protections Acts (SSPAs) in five states.”

Both LaBorde and Goodman acknowledged business practices within their own markets that have created problems for the structured settlement brand. Some of the worst of the secondary market business practices were publicized nationally in an August 25, 2015 Washington Post front page article (featuring a non-NASP company) which more than one industry observer called "a perfect storm" for the factoring industry.

Legislative Collaboration

Even before the Washington Post article, however, and as a direct result of the 2013 Brenston case, which temporarily shut down the secondary market in Illinois, NASP and NSSTA initiated a proactive and collaborative legislative strategy to add five consumer protection amendments to targeted state structured settlement protection statutes:

• No forum shopping.
• Payee required to attend hearing.
• Stricter application of approval requirements.
• Advanced notice of transfer.
• Required disclosure of prior transfers.

The first success of NSSTA and NASP's legislative collaboration resulted in amendments to the Illinois statute. The Brentson case propelled the two organizations to negotiate and work a compromise that improved the Illinois SSPA. From the perspective of LaBorde and NASP, the result in Illinois represented "the biggest victory since the Model Act".

To memorialize the success in Illinois, NASP honored Illinois State Representative Michael Zalewski as recipient of its 2015 Alexander Hamilton Award. Representative Zaleweski, who sponsored the new Illinois structured settlement legislation, praised its "clarity and protection" compared with the "ambiguity" of the prior law.

NASP has bestowed its Alexander Hamilton Award eight times "to distinguished individuals who have supported and defended the right to free alienability of property rights." NASP considers this right to be its own cornerstone and the foundation of the structured settlement factoring business.

Further highlighting the success of NSSTA and NASP's legislative collaboration, LaBorde and Goodman jointly announced that Governor Scott Walker had signed, just prior to their panel discussion, Wisconsin's first Structured Settlement Protection Act - thereby becoming the 49th state (all except New Hampshire) to have enacted such protective legislation.

During his Legislative and Regulatory Update, NASP lobbyist Jack Kelly, who serves as point person for the NSSTA / NASP collaborative state legislative strategy, provided additional details concerning both the political aftermath of the Washington Post article and the collaborative state legislative strategy.

Without dismissing the negative public relations impact of the Post article, Kelly does not see any immediate Congressional threat despite letters making headlines. "NASP's primary federal concern is the tax bill," Kelly stated, "and it's not on the calendar."

As for state legislation, "good planning has made the difference", according to Kelly. He spoke about "mutual respect" for NSSTA and identified Florida, Maryland and Virginia among priority states for joint future lobbying to improve consumer protection.

Additional Conference Highlights

In his Litigation Update, NASP Executive Director Earl Nesbitt summarized recent court decisions addressing statutory "no-split" payment provisions, judicial "best interest" standards and various lawsuits involving Rapid Settlements.

Nesbitt allocated significant time to In re: Rains, a Texas case in which the appellate court determined the trial court: 1) could not force MetLife into a contract with the transfer company, directly or indirectly, by imposing a servicing arrangement on account of the Texas statutory "no-split" provision; and 2) abused its discretion in approving the transfer citing a "severe discount rate" among other factors.

The Rains case featured an extensive "best interest" analysis establishing a new judicial precedent in Texas. This analysis requires a judge to consider a "penumbra" of information including "future yet foreseeable liabilities; domestic, economic, physical, medical and educational needs of payee and dependents." Also at issue: how much and what type of evidence is required to place into the court record to justify a transfer.

Matt Bracy reprised his role as moderator of NASP's popular Judicial Panel - this year featuring Judges Daniel Buckley (California); Laura Inveen (Washington); and Jeremy Warren (Texas). The two hour program included questions to and from the judges addressing such transfer topics as:

• Interpreting the best interest standard;
• Common mistakes at transfer hearings by attorneys, factoring companies and sellers;
• How to best present a transfer;
• How judges consider objections to transfers;
• What documentation judges want to see at transfer hearings;
• How to best protect the seller's privacy;
• Information judges are not seeing presented that should be;
• Significance of the origin (type of personal injury) to the judge's analysis;
• Impact of prior transfers on assessments.

Two separate NASP presentations addressed unprecedented and changing perspectives of risk. Discussing Privacy Issues in Structured Settlement Transfers, Shawn Tuma spoke about risks due to cyber attacks. Citing the FBI, Tuma divided corporate America into two company types: those that have been hacked and those that will be - including many that have but don't realize it.

Health records, according to Tuma, are more valuable than financial records because they are rarely modified. Regardless of how you obtain health information, Tuma emphasized, you are obligated to protect it. These obligations include: stewardship, legal and public relations.

Tuma reported that both the SEC and the FTC have developed legal requirements that encompass prevention, detection, response, training, and third party access - and companies cannot insulate officers and directors from personal liability for related damages.

The lessons to be learned, according to Tuma: 1) document a record of compliance; 2) you will be breached; 3) Its not the breach, its your diligence, that matters most. Steven Fox supplemented Tuma's presentation with a discussion of ID Theft and Domicile Determination.

As secondary market transfers have expanded to include life contingent annuity components, mortality underwriting has become a critical skill set. Michael Fasano focused his presentation about Mortality Review / Process in Life Contingent Underwriting on unhedged life contingent secondary market structured settlement transactions.

Fasano emphasized that traditional medical underwriting practices utilized for life settlements or normal life insurance and/or annuities won't work for this class of individuals. Reasons include a high frequency of:

• Low income demographics. Most are unemployed.
• Rx and illicit drug issues.
• Incarceration and other behavior issues.
• Anti-selection and/or lying.

Fasano approximates that, as a class, mortality impairment of life contingent structured settlements results from: accident and behavioral (55%) vs. medical (45%). In addition to medical reports, Fasano utilizes targeted questionnaires to obtain underwriting information and makes adjustments for lack of candor and non-disclosure.

Completing NASP educational program: Jason Sutherland moderated a Servicing Panel featuring Melissa Bolling and John Enyart. Additional Breakout Sessions offered the following topics and speakers:

• Successfully Managing Difficult Payee Issues - Brian Dear; Duane West.
• Strategies for Securing Approval From Tough Judges - Samuel Cortes; Abagail Adams.
• Primer on Special Needs Trusts and Medicare Set-Asides - Patrick Hindert.
• Spousal Consent Issues in Transfers - Elyse Strickland; Shannon Harvey.

Congratulations to NASP, especially Conference Chairman Doyle Chisholm and Association Administrator Susan Barnes, for organizing such an informative and well-attended conference.

For additional, related S2KM reporting, see the structured settlement wiki plus these prior S2KM blog posts, see:

• Structured Settlements 2014 - Secondary Market
• NASP 2014 Annual Conference
• Michael Goodman Interview

NSSTA 2015 Fall Conference

Although the National Structured Settlement Trade Association (NSSTA) did not promote a specific theme for its 2015 Fall Educational Conference, one of the speakers succinctly captured the program's overall purpose and accomplishment when he described NSSTA's new Industry Growth Initiative as "changing the focus of our future."

Industry Growth Initiative

NSSTA's website description of its Industry Growth Initiative highlights "a significant decline in production since its peak at $6.3 Billion in 2008" and asserts "we do an excellent job protecting our industry" before announcing that "this year we want all NSSTA members to focus their time, energy and resources on new opportunities to expand the use of structured settlements-to grow our industry."

NSSTA President Michael Goodman utilized his Opening Conference Comments in Phoenix (as well as a preconference interview with S2KM) to describe the status and organizational structure of the NSSTA Industry Growth Initiative.

"My first priority as President of NSSTA," Goodman stated, "is to identify growth opportunities for the structured settlement industry. First, we asked all NSSTA members to submit ideas for growth at [email protected] . Second, I tried to put together a NSSTA Growth Committee consisting of a highly talented cross section of industry leaders with diverse perspectives. Third, the Committee evaluated all of the 28 (to date) NSSTA member growth proposals and selected three for NSSTA Board of Directors approval to develop immediate implementation plans with success metrics."

Goodman introduced the NSSTA Growth Committee members including co-Chairmen William Goodman, Sean Coleman, John McCulloch and John Arendt. Speaking for the Committee, Coleman enthused: "I love our change of focus. Historically, NSSTA has been reactive, dodging bullets. The Growth Initiative redirects our mindset and focus. It encourages us to become proactive. The Growth Committee has already surpassed by highest expectations."

Goodman and the Committee co-Chairmen identified the following three NSSTA Growth Initiatives already selected and approved:

• Rejuvenate Defense Programs (including casualty insurers, commercial insureds and TPAs) - Originally the prime movers for structured settlements, many defense insurers have reduced or completely abandoned their structured settlement programs citing a variety of reasons. Beginning with three target carriers, the Committee plans to analyze the causes, and ultimately revitalize the programs, to create new prototype defense program models. Note: NSSTA recently commissioned surveys of Senior Claims Executives; and front line Claims Professionals which S2KM summarized and evaluated in prior blog posts.
• Amend the Federal Employee Compensation Act (FECA) - FECA, which provides workers compensation like benefits for federal workers, currently does not permit structured settlements. With payouts totally approximately $4.5 billion per year, FECA represent an attractive potential market for structured settlements with administrative cost savings being one justification for a legislative amendment. Based upon preliminary interviews, the Growth Committee believes FECA stakeholders view structured settlements favorably. The Committee is gathering statistical data to support its proposal and building grassroots support.
• Convertible Deferred Lump Sums - As a sales response to "low interest rates", the Growth Committee is proposing a new structured settlement feature. As envisioned, the convertible deferred lump sum would allow a structured settlement recipient to select a future lump sum that would automatically convert on its payment date into a series of predetermined periodic payments payable at whatever annuity rates offered at the time of conversion by the issuing life company. A Canadian broker attending the NSSTA conference stated that at least one Canadian life company already offers this structured settlement product feature. The Committee anticipates whichever annuity provider introduces this product feature in the U.S. will probably also seek an IRS private letter ruling.
• Note: NSSTA's Growth Committee identified a fourth preliminary initiative (Dissipation Study) - to confirm that injury victims squander lump sums. However, this initiative is currently on hold. For background, see this 2009 S2KM review of Jeremy Babener's legal research paper analyzing historic dissipation studies.

Factoring Update

Goodman also addressed the state of the structured settlement industry including a "factoring update". As part of this report, Goodman confirmed that NSSTA and the National Association of Settlement Purchasers (NASP) have agreed to cooperate legislatively in several states to seek the following consumer protection amendments for state structured settlement protection statutes:

• No forum shopping.
• Payee required to attend hearing.
• Stricter application of approval requirements.
• Advanced notice of transfer.
• Required disclosure of prior transfers.

Supporting this cooperative initiative, NSSTA has begun offering its members a new Judicial Education Training Seminar - taught in Phoenix by John McCulloch and Stephen Harris. Goodman also announced he will be a featured speaker at NASP's 2015 Annual Conference next week in Las Vegas - the first serving NSSTA President to do so. Perhaps anticipating his NASP appearance, and cognizant of the recent Washington Post article ("a perfect storm for factoring"), Goodman advised the NSSTA Conference attendees: "Factoring is not a zero sum game. What is bad for them is not always good for us."

Additional Conference Presentations

Many structured settlement participants believe control of the primary structured settlement market, and future market growth, have shifted from the defense to plaintiff attorneys and their injury victim clients. Although NSSTA has been slow to embrace plaintiff-focused personal injury settlement planning, NSSTA's Fall Conference included two presentation featuring plaintiff representatives:

• A Trial Lawyer Panel - moderated by Ryan Garrison with plaintiff attorneys Julio Zapata and Francisco Gutierrez; plus
• An introduction to the National Association of Trial Lawyers Executives (NATLE) by Gayle Bennett, Deputy Director of the New Mexico Trial Lawyers Association.

Both plaintiff presentations emphasized opportunities to expand the market for structured attorney fees. Both plaintiff attorneys expressed a preference for advisors who are "knowledgeable not just about structured settlements but also other investment vehicles."

In addition to the Judicial Education Training session mentioned above, three other NSSTA presentations addressed educational issues and programs:

• Best Practices for Structured Settlement Case Resolution - During her excellent review of structured settlement fundamentals, Betty Gregware expressed serious concern about the general quality of structured settlement documentation and the need to increase competence across the industry.
• Professional Broker Education - Gregware, Melissa Price and Debbie Sink introduced a new educational program NSSTA is developing primarily for individuals who are new to the structured settlement industry. They also provided an administrative overview of "NSSTA University" whereby NSSTA partners with members to secure CE credits for member-sponsored educational seminars for insurance claims departments or law firms.
• MSSC Paper Presentation - Mal Deener moderated a panel featuring Trish Fairhurst, Richard Carroll and other members of the first graduating class of NSSTA's new Masters Structured Settlement Consultant (MSSC) professional designation. Each MSSC graduate is required to submit a paper and these papers will be published on NSSTA's website. NSSTA will offer its next MSSC program beginning April 27, in conjunction with its Certified Structured Settlement Consultant (CSSC) program, at the University of Notre Dame

Separate from, but related to, NSSTA Growth Initiative, NSSTA's Board of Directors has appointed a Special Needs Attorney Task Force to develop strategic relationships with special needs attorney professional associations and to identify collaborative marketing opportunities with special needs attorneys more generally. NSSTA member Carola Davis and Special Needs Alliance attorney Patty Sitchler initiated a NSSTA presentation/discussion in Phoenix which hopefully will continue and expand to the benefit of both professional communities.

A critical factor, both challenge and opportunity, for growing the primary structured settlement market concerns succession planning. What new generation of distributors, or distribution channel(s), or business models, will emerge (and when) to replace and build upon the accomplishments of the pioneering generation (now in their 60s and 70s) who originated the structured settlement market in the late 1970s? NSSTA's Fall Conference featured two presentations addressing these issues:

• Succession Planning - Presenter Jim Early looked at the succession issue primarily from the point of view of the individual producer. Among his observations: "nepotism works in the structured settlement industry" and "a lack of capital has prevented the primary market from bringing in and training new people."
• Diversity Discussion - Angel Viera and Stacy McCall offered a convincing case for promoting greater diversity among new structured settlement professionals as a key component for future growth. Their presentation included and elicited several thought-provoking observations including: 1) "From a demographic perspective, our industry should mirror the people we serve" and 2) "Our industry suffers from a lack of diversity of thinking. Where do we find new voices and perspectives?"

Lifetime payments represent a valuable, optional structured settlement benefit which can be further enhanced from a pricing perspective when rated ages are applicable. Kevin Puckett and Ken Kiefer expounded on these important issues during their presentation about Mortality, Morbidity & Rated Ages.

NSSTA members Susan Clark and Robert Caples introduced Arnie Begler and Scott Henry, representing Pipitone Group, NSSTA's new public relations firm, and together they discussed NSSTA's Communications Program. Because journalists, as well as their readers, frequently confuse the primary and secondary structured settlement markets, Pipitone's "first test" was responding to the aforesaid Washington Post article. Pipitone's stated assignment is "to find the best communications practices and bring them to NSSTA" which will include designing a new NSSTA website. Among NSSTA's priorities, and Pipitone's challenges, will be attempting to reclaim the "structured settlement" brand inclusive of Google searches which currently are dominated by secondary market companies.

NSSTA Executive Director Eric Vaughn concluded NSSTA's Fall Conference with a Government Relations Update - his characteristically insightful and energizing overview of structured settlement legislative and regulatory activities. Among other accomplishments, Vaughn was recently named Vice Chairman of the American Association of People with Disabilities (AAPD).

Other recent NSSTA-related S2KM blog posts:

• Michael Goodman Interview
• NSSTA Marketing Surveys
  • Senior Claim Executives
  • Claim Professionals
  • Plaintiff Attorneys
• NSSTA 2015 Structures 202 Conference
• NSSTA 2015 Annual Conference