Earlier in February, “Speaking of Settlements” discussed the higher standard that has been applied to sales of investments to consumers and considered whether a fiduciary standard should be applied to members of the structured settlement profession. In this edition of “Speaking of Settlements,” host Mark Wahlstrom continues the discussion and explains why he believes the time has come for the fiduciary standard to apply in to the sale of structured settlements.
Wahlstrom points out that the AIG class action suit alleges some deceptive practices and nondisclosure of information on pricing and compensation. In addition, the Department of Labor by rule imposed a fiduciary standard on the sale of investments to prospective retirees. President Trump has recently directed the Labor Department to examine the rule and consider whether it should be relaxed. It seems apparent that many, perhaps most, of the DoL strictures will be eliminated or softened so that commission investment products sold to retirement account investors will not be subject to Fiduciary rule standards.
The question might then be asked: What does all of this have to do with structured settlement annuity funding? Wahlstrom points out that the structured settlement profession has historically been exempt from the fiduciary standard rule and from the more rules of the National Association of Insurance Commissioners requiring “greater training, compliance, disclosure and suitability standards for the sale of annuity contracts in twenty-seven states, a number which is certain to grow in the coming months, as more states adopt these standards as well.”
Wahlstrom, a thirty-year veteran in the structured settlement profession, notes that “our little niche profession seems to sit here in a quiet, sheltered place where the same rules applied to retirement investors, retail annuity investors and others, simply don’t apply to us.” Structured settlement sellers are not required to perform a suitability standard analysis as part of the setting up process. Structured settlement annuities are set up for people not always equipped to make sound investment decisions, and the annuities are irrevocable, but there is no regulatory oversight of the process.
Wahlstrom believes this situation will change. Inevitably, there will be a “move toward a fiduciary, full disclosure standard and a clear declaration of whether we are agents, brokers, advisers or registered representatives at the time a recommendation and sale is made.” He notes that a recent Wall Street Journal article reported that major banks and brokerage firms plan to keep the protections of the fiduciary standard even if the DoL rule is relaxed. “Most of the ‘Big Guys’ are deciding that self-policing and setting a higher bar is good business and will avoid issues in the future.”
It is time, says Wahlstrom, for the structured settlement profession to set a higher bar for itself and apply a fiduciary standard to structured settlement sales. “Full disclosure with honest and clear communication of what role we are playing when giving advice, coupled with a compensation model that makes clear who are clients are, as well as the cost of our services, is not just a good standard, it’s good business.”
Mark Wahlstrom, President of Wahlstrom & Associates, founded of one of the nation's first plaintiff only structured settlement firms in 1983 and is a renowned specialist in settlement planning, structured settlement annuities, structured legal fees, and the administration of large, complex multi-claimant settlements using qualified settlement funds and trusts. He has also become widely known over the last decade for his innovative development of an online broadcast platform, Sequence Media Group, upon which he has produced hundreds of hours of shows for The Legal Broadcast Network, and The Settlement Channel, with the content being of interest to attorneys, paralegals, judges and settlement professionals all over the United States. The Legal Broadcast Network is a featured network of the Sequence Media Group.