It’s time to set the record straight on poaching. It’s a difficult topic to broach because nobody wants to criticize something that gets annuitants more money. I have always advocated for annuitants; however, increased payouts need to come from ethical and sustainable business practices. Poaching is neither. If you’re not familiar with the term, poaching is the search of court records to steal a competitor’s pending factoring transaction. It doesn’t matter if they take over the transaction entirely or simply act as a “negotiator”, it’s still the theft of a competitor’s work product.
Poachers spin the narrative that their actions are justified because they find and fix egregious transactions. I’d be inclined to agree if that’s all they did; however, the reality these days is there are far fewer truly predatory deals than poachers want you to believe. What these poachers and their advocates aren’t telling you is that they usually just prey upon the everyday marketing and staffing costs of the originating factoring company; expenses they don’t undertake.
You don’t need an Ivy League MBA to realize that poaching can’t last. Ultimately, somebody must invest the funds to get a case to where poachers can steal it, and with every stolen file driving up the originating company’s costs, it becomes a vicious circle that’s not sustainable. The entire factoring industry will go into a tailspin if poaching continues unabated. Unfortunately, the last ones standing will be these parasitic poachers; something you absolutely don’t want for your clients. They are truly the bottom feeders of an industry where the ethics bar isn’t set too high to start with.
You might remember some time ago the open question posed to the industry: Why is Berkshire still a NSSTA member? That question really teased out a larger issue that apparently prompted dozens of pages be written and dedicated to twisting and framing into far more acceptable, more marketablelanguage. Here’s some blunt, honest talk to fill in all the gaps in such smiley bend-over talk.
Did you know that it’s apparently acceptable for insurers to factor their own annuities, but not another’s? One’s OK because it’s called “servicing” whereas the other is called “factoring.” In other words, when someone else makes money, it’s “factoring,” which is bad for the client, but if the insurer makes the money, then it’s “servicing,” which is good for the client. This is merely poorly-veiled marketing-speak for insurers preferring to make money themselves in as many areas as possible, squeezing out as many competitors as possible. Giants have mighty appetites, after all.
The idea that insurers factoring their own annuities is somehow good for the annuitants themselves is a Robin Hood story; just as fictitious as the fairy tale. Many of you are opposed to factoring on principle, but argue that if the annuitant gets more money in the end, then hey, who cares if it’s the insurance company doing it? This approach is problematic because it simply doesn’t account for all the facts.
Insurance companies that factor their own annuities aren’t providing a service, they’ve got the proverbial golden ticket: the names, addresses, and payment details of every annuitant which, lest this be lost in translation, is a salesman’s goldmine. You can mine your list for as long as you keep putting structures together. But again, how’s that a bad thing, even from a business perspective? How is that damning? Because it’s a blatant conflict of interest for insurers.
Structures are put together in a careful way, with insurers as legally specified gatekeepers to factoring transactions. They are the second line of defense, behind the Courts, to securing a factoring transaction based on an annuitant’s demonstrative need, not simply desire, for structured funds. How are insurers, in their gatekeeping function, supposed to adequately gatekeep against their own profit motives? Are insurers going to object against making more money for themselves? Of course not.
Some may claim that no profit is made off these transactions. That’s silly to the point of foolish. No service line or product from any insurance company exists to not turn profit. As for measuring this profit, don’t look exclusively at the red or black numbers at the bottom of the sheet, but instead consider this: insurers get tax breaks for making secure, guaranteed payments to underwrite structured settlements, the same structures that they’re going to now purchase, at a discount, and still enjoy the tax breaks despite not paying out to injured parties anymore, thus enjoying huge profits. Beyond this simple rehash of how providing services actually does make money, there’s something more problematic at work: optics.
Structure brokers need attorneys to work with them to put these things together. Attorneys already have qualms with the mere existence of factoring, so that many won’t advise structures for their clients, the would-be annuitants. How does it look to these attorneys, then, for insurance companies – supposed benevolent gatekeepers – to have everything they need, that glorious golden ticket, to relentlessly market to their clients? Not so good.
Don’t believe any of this is happening, or that it’s just a twist on the benevolent intentions of your favorite insurer? Look at those who already do it: Visit Symetra’s website (symetra.com/clearscape) to see how unabashedly they sell factoring by marketing their familiarity as the insurance company and the ease of having all the required paperwork already. Allstate, too, has an ongoing factoring entity. Still others are taking it a bit slower, rolling into ‘test markets’ before unleashing themselves nation-wide, napkin and cutlery ready. The list goes on.
Insurers aren’t white knights bludgeoning the evil factoring industry; they’re foxes guarding the henhouse, gatekeeping be damned. Don’t like this new development? Speak up; stand up and object. Otherwise, you should remind annuitants to say ‘thank you’ while you assist them in bending over.
Fire and brimstone aside, we do have an industry-wide solution that can satisfy most, if not all parties. It just requires us all to be on the same page before we get there. The article is forthcoming.
Bentzen Financial is pleased to announce that W. Campbell Mears, CPA, CSSC has joined the company, effective July 2, 2018. Bentzen Financial has worked tirelessly to become the beacon of ethics in an otherwise controversial market-space. It’s rare to encounter someone with the level of integrity Mr. Mears demonstrates, so adding him to the company simply made sense.
Mr. Mears brings 25 years of structured settlement experience to the company. He has held senior positions at leading firms in the insurance industry, including AIG, Cambridge Galaher Settlements, and Crowe Paradis Services Corporation, and he was co-founder and CEO of StructureOnline, a provider of Internet-based structured settlement management systems. In 2010, he joined the factoring industry. His significant experience and expertise will help serve structured settlement annuitants whose financial needs have changed post-settlement and will greatly enhance Bentzen Financial’s unique capabilities.
“I’m excited to join Bentzen Financial because Rhonda and the team share my strong beliefs about factoring,” said Mears. “Structured settlements are meant to protect people affected by injury, but the needs anticipated at the time of settlement can change as life goes on. Factoring is a valuable tool to address these situations, but it must be provided as a consultative service that helps annuitants balance current and future needs. Factoring should be done with the same care, attention, and expertise that is used to put structured settlements together.”
Mr. Mears holds a BA from Wesleyan University in Middletown, CT and is a Certified Public Accountant. He earned his Certified Structured Settlement Consultant designation from the National Structured Settlement Trade Association (NSSTA) at the University of Notre Dame. He is former co-chair of the NSSTA Marketing and Technology Committees.
Berkshire, like Symetra and Allstate before it, has entered the factoring game. Unlike Symetra and Allstate, though, who jumped in all at once, Berkshire has opted for the slow creep. There is no difference between these players other than the way they’ve entered. The end game is the same. So why does Berkshire get a pass?
For the past couple of years Berkshire has acted primarily as a gatekeeper for annuitants seeking cash now providers. There’s no problem with that, and it’s certainly their prerogative, but last year they dipped their toe into the factoring waters of Texas as a special test market. Fast forward and they’re doing the same in a few other states. Really, it’s merely a matter of time until Berkshire is nationwide like the other insurance companies before them. I firmly believe this is a problem for one crucial reason: it’s a strong conflict of interest.
This conflict of interest centers around the fact that as the historical gatekeeper, it has a list of annuitants (read: customers), ready to go. This is the holy grail of any would-be player in the industry. Who doesn’t want a free list of people ready to go? Moreover, they’re not just prospective customers in some potential, hypothetical sales district, they’re existing customers, who aren’t protected by traditional consumer protections such as the TCPA because of their ‘existing customer’ status. In other words: they can, and likely will be contacted for ‘additional services’ when it’s nothing more than a veiled sales pitch from someone who already has their business in the first place. It looks like Berkshire is slowly but surely having their cake and eating it too.