Structured Settlements and Annuities

Annuity cash outs are a common type of brokered transaction for note brokers and cash flow cash flow brokers.  Almost everyone has seen one of the numerous ads on television for companies such as J. G. Wentworth or Peachtree Financial but very few know that such companies pay handsomely for referrals.  There are basically three primary areas of focus when it comes to such annuity cash outs.

Structured Settlements

A structured settlement is an insurance annuity arrangement, defined by Internal Revenue Code as periodic payments.  Under a structured settlement, a claimant accepts to resolve a personal injury, wrongful death or product liability claim by receiving a cash settlement.  Instead of a lump sum cash payment, such court awards are usually structured as a monthly payment by an insurance company.

Gaming Awards / Lotteries / Annuities

Typically, the same institutional buyers of structured settlement will also purchase other annuity products such as lottery winnings and gaming awards.  These types of annuities are much less frequently found than structured settlements but brokers and consultants should be aware of them for the occasional opportunity.

Brokering Opportunity

Occasionally, those receiving such payment streams find the need for a lump sum of cash instead of the monthly or periodic payment stream and the opportunity then exists to purchase (at a discount) the stream of future payments and provide the seller with a lump sum cash out.

All sales of structured settlements must be approved by the court and have the blessing of a judge and this has effectively capped the amount of discount available to be taken on such lump sum transactions.  Additionally, the time necessary to settle these transactions is now an average of 4 weeks.

Structured settlements are a lucrative and fast growing Cash Flow area and an excellent product for brokers.  It is important you become knowledgeable in its application.  Recent statistics from major purchasers of structured settlements document that the average commission paid to referring brokers is a whopping $9,500.  Typical commissions run in the 3% to 8% range of the funded amount.

Marketing for Structured Settlement Business

The vast majority of structured settlement business you will uncover will be as a result of networking with those you meet and especially accounting professionals, personal injury attorneys, and investment planners and advisors.  To capture this type of business, make certain you maintain your website and focus heavily on staying active on both Facebook and LinkedIn.  Its easy to install “Follow Us” icons for both of these powerful social mediums on your DataMax Discount Note Broker Website but you must generate the HTML code to make these links “active”.

The exceptional commission earnings potential as a result of referring a structured settlement transaction to an industry buyer is a perfect example of why you should always maintain a business presence in the industry and keep your website operational.  The referrals may only be occasional, but a single structured settlement deal can easily add $5,000 – $10,000 or even more to your annual income.

Tomorrow’s Lesson

Structured Settlements are an important product for all Cash Flow brokers to become familiar with.  Another is Seller financed Business Notes which we will learn about in tomorrow’s email.  Make sure to watch for it.