Bentzen Funding Solutions

Sticking my nose in

John Darer recently commented that I have no dog in his “vig” fight; which I certainly concede is the domain of the structured settlement brokerage community and should truly be debated within that community in a civilized manner.  However, as an interested party on the sidelines, I have to stick my nose in and comment on two issues; the first of which I will address today.  That is, the fact that I believe John’s Ark is built on a fundamental design flaw.  Several of my broker clients do not accept referral fees because they feel that it is wrong reselling a product they sold to the annuitant in the first place.  I respect this point of view completely.  Conversely, John’s crusade is based on his belief that referral fees take money directly out of the hands of annuitants.  I agree that in my case, his argument would hold water if the number of referrals I received from brokers remained the same under his plan; however, it would be completely naïve to think they would.  This is where his Ark tends to list.  He can criticize, write false innuendos and poke fun at me all he wants but he just doesn’t get the fundamentals of this business, no matter how many times I’ve tried to explain them to him.

          

I operate a low overhead, referral-based business.  I don’t advertise on TV, have an army of commissioned sales staff, buy law society endorsements, send out expensive brochures, offer Mercedes or any of the other expensive marketing gimmicks that my competitors do.  My marketing is confined to conventions and travel for face-to-face meetings with broker clients.  Now, I estimate that my sales volume would drop significantly if John is successful in his campaign to stop brokers from accepting a referral fee.  Why?  I know firsthand that a broker’s time is very valuable.  Mediations, settlement conferences, client visits and other marketing efforts take first priority.  The corresponding drop in referrals would lower my economies of scale, which means that my internal cost per file would increase significantly.  Further, to offset the drop in broker referrals, I would have to ramp-up marketing expenditures, which in turn would have to be allocated to each subsequent case.  In the end, my average cost per settled case would be higher with John’s plan than it would be with the status quo.  It’s a paradox.  The referral fee ultimately saves the annuitant money and comes out of my pocket anyway.  John makes it look like I quote a deal with X profit and Y commission to come out with a price that an annuitant will accept blindly.  It doesn’t work that way because of competition.  I simply can’t charge whatever I want.

         

Similarly, there are probably tort victim advocates who would argue that a structure broker’s commission comes straight out of the annuitant’s pocket too.  That John’s yacht came right off some poor annuitant’s table, but it’s not true.   Without the broker network, business would decline and insurers would have to sell structured settlements like pharmaceutical companies sell their wares to doctors and patients; through legions of internal sales staff and massive television and print advertising, which ultimately has a higher unit cost than the broker model.  The claimant actually gets more money because of broker commissions.  This is the point that I have been trying to make to John, which he refuses to acknowledge, let alone accept.

          

Now, I have a spoiler for those of you that believe my receiving fewer referrals would be good for your annuitants.  I consistently beat the quotes of the “cash now” guys by very significant margins.  Just because a broker doesn’t refer an annuitant doesn’t mean that the annuitant won’t eventually sell his payments when he sees the “cash now” ads on TV.  This is the fundamental argument that I have been making to brokers that are reluctant to get involved in the factoring issue.  The fact is, these annuitants will sell their payments with or without your help.  I recently had a “vig-taker” secure an annuitant double the funds for his payments; to the tune of over $70,000.  If brokers don’t get involved and refer annuitants to “reputable companies”, they’re eventually going to end up in the hands of the “cash now” guys.  How is that putting more money in the hands of tort victims?

What is commissionable?

It seems you have enjoyed reading about the controversy between two different opinions with regard to whether or not it is right to take a referral fee for referring business.  Although, it makes no difference to me one way or another, as I have created my business with only what's best for the annuitant in mind, I can't help but have pondered other areas that perhaps should be of concern to some as well.  A broker suggested to me today that if 5 of you out there believe that accepting a referral fee to a reputable factoring company isn't right, then what about the referral you make to a trust company that also pays you a referral fee?

If we really wanted to worry about what's best for the injured party then what about the infamous 3:1 deals?  What about those casualty companies that insist you use their life arm to place the structure on their cases if you want to stay on their approved list? 

What if one of your attorney clients has a life settlement case or needs attorney financing or plaintiff funding?  All of those companies pay a referral fee.  Is it OK to accept it?

Where does it all end?  What makes those examples different from factoring?      

Making a list...checking it twice??

I’m not quite sure how I ended up on John Darer’s recent list of companies that don’t set up structured settlements.  Quite frankly, I’m upset about being lumped in with so many of those other factoring companies whose ethics and business practices I work hard to distance myself from.  I have never maintained that I do structured settlement quotes, only that I used to be a structured settlement broker.  As such, I know the difference.  Nonetheless, I would be pleased to edit any post that somehow did leave that impression.  I don't manipulate or conceal the fact that I factor structured settlement payments for annuitants who need liquidity.

Final retort

As I predicted, John Darer has attacked me in retribution for my article that dared to open up dialog on the commission issue.  For the last few years, John and I have debated issues for hours at a time and now he turns around and takes snippets of conversations and twists them completely out of context to make me out to be some malicious, gossiping school girl.  In one example, he conveniently omitted the part about how much work the broker did on the file and how I made no money on it at all.  Honestly, his article went beyond vicious and poor form; I think it was downright libelous. John keeps asking us all to join in his debate. I did what many have been afraid to do, namely, express the contradictory viewpoint that many brokers share.  In the end, he beats me down and calls me names like a schoolyard bully. 

John has told me many things over the years that would shed an interesting light on his supposed championing of fair treatment for tort victims; however, I’m going to take the high road on this one.  I truly don’t deserve this.  I work hard to give annuitants honest answers, fair rates and professional service.   He has called me his friend on many occasions and told me not to take his previous criticisms personally.  Well, if this is how he treats his friends………

Pinkos

I recently received a copy of a letter written by Michele Whitmore, a long-time broker and courageous soul that I am proud to call a friend.  She weighed in on John Darer's recent issue regarding commissions from factoring companies.  I believe her letter sums up many of the points that I have been trying to make in order to open up bilateral discussions on this issue.  Coincidentally, the same letter was recently posted on Jack Meligan's blog.  Check it out there, I think you'll find Jack's post quite interesting.

Full disclosure

John darer speaks of First Amendment rights, but I truly believe that his version is the one from the McCarthy era.  In other words, you’re either with him or you’re a pinko commie to be put on a list and persecuted.  Many brokers have urged me to write articles in response to Darer’s issues, however, I tell them time and again that by doing so I will suffer his wrath.  He will attack me, twist my words and then take them entirely out of context as a means to prove his point.  However, this time I cannot sit idly by while he attacks my reputation and that of my clients, whom I consider to all be outstanding professionals.  Mark my words; I will pay dearly for this heresy.

         

Most brokers I’ve spoken with have a viewpoint that is contradictory to Darer’s on this “vig” issue.  Their opinion is that they are financial professionals compensated by commission, and as such, their acceptance of a fee on a factoring transaction is not unethical as long as they don't solicit the business directly.  However, John Darer refuses to acknowledge this point of view, let alone debate it.  It can easily be argued that it is analogous to a financial planner being paid to liquidate a portion of a client’s retirement fund when he suffers financial hardship, even if it means that his client takes a loss to do so.

          

As I’ve previously stated, I leave it to the brokers to make up their minds with respect to this issue.  I make no judgments either way.  I also have to disagree with Darer’s contention that the “vig” is significant and comes out of the annuitant’s pocket.  I run a low cost referral network, and as such, can afford to offer a modest commission and still be the most competitive.  In the end, the money comes out of my pocket, not the annuitant’s.

       

Lastly, with respect to Darer’s advocacy of disclosure, I urge him to be proactive and post an affidavit on his site swearing under oath that he has never asked for or accepted a referral fee on a factoring transaction.

Referral fees

I know that many of you have been waiting patiently for me to post my opinion re John Darer's most recent issue de jour, namely, his decision that no structured settlement broker should take referral fees for passing on an old annuitant client to a decent factoring company.  Although, I am very eager to publicly utilize my First Ammendment right and voice my opinion, I fear it will be used or twisted on a blog post near you!

Seriously though, my opinion is that this is not my decision to make.  I have always let the structured settlement broker indicate to me how they would like to proceed on the issue.  I will say that probably about 90% of the brokers that I have worked with prefer to take the referral fee feeling that they have done their client good by referring them to me and not throwing them to the (TV) wolves where they wouldn't receive nearly as much money for their payments.  I run a very lean referral only based business and do not advertise directly to the annuitants, therefore, I can afford to offer a tiny little thank you for the business.  The "cash now" guys not only pay a referral fee but have to pay armies of sales men to constantly hound the annuitants all while advertising on TV!  Where do you think the funds for all of that come from? 

I would love to hear from all of my readers about this.  Please e-mail me, privately, at rbentzen@comcast.net and let me know how you feel about this topic.  As always, your comments (and names) will be kept stricly confidential.

Gossip Column

I think we all know that I am the "blogger in question" as stated in John Darer's posting today.  John tells me that he has received calls this morning from some of you upset with my latest gossip column addition about J.P. Steels and his current employment status.  For those of you that made that call, please understand that ever since I stopped putting structures together, I do not receive the e-mail memos giving information about hires and fires.  Instead I rely on my friends and colleages to pass on relevent information that is useful for my gossip column.  I received an e-mail late last night simply stating "J.P. Steele.  Fired by A.I.G.".  That was it.  So, I posted it.  After all, I have been told by many that it is my gossip column that you enjoy most!  My gossip postings are short and sweet as was this latest posting on J.P.  That does not mean that I do not feel bad for him and his family.  I am simply posting a fact, just like I have done on others.

In the future, if any of you have an issue with one of my postings, call me directly instead of complaing to John Darer.