Predictable Income from an Unpredictable Source

Although interest rates seem slowly to be on the rise, it most likely will be years before consumers can purchase traditional fixed products with rates competitive enough to keep pace with inflation and taxes. This is why many have looked to the secondary cash flow market where through the process of factoring one can purchase traditional fixed products at a discounted rate from a seller, resulting in a more competitive fixed rate to the buyer.

This is a market that has been dominated by institutions for over thirty years where factoring companies like J G Wentworth and Peachtree have purchased structured settlements and secondary market annuities for their banking partners. Due to consumer demand a new market emerged about decade ago to offer secondary market pension plans. Like traditional factoring, a pension income stream is purchased at a discount from the seller and offered at competitive rates to a consumer. But unlike traditional factoring, an income stream is not paid directly from the financial institution but instead through a seller. As a result, these contracts carry unique risks, which need to be mitigated for the protection of the buyer.

One company that has financial planners talking is FIP, LLC. It is a unique factoring company that provides a contractual model for factoring pensions along with a proven program of risk mitigation through underwriting, collections and reserves.   FIP, LLC. is the only pension factoring model in the industry that can claim a perfect payment track record to their buyers making them, by far, one of the major players in this market.

Income returns from factoring can vary by the holding period, but in comparison to traditional annuity and CD rates, the returns are worth reviewing. Joe Hipp was a co-contributor to this press release.