Secondary Market Annuities Purchasing FAQ

Investors who want to save for retirement use annuities as fixed-income investments to help them live comfortably after they stop working. However, lottery winnings and legal payments from damages or personal injury claims also often end up in annuities. People who want access to their money right away instead of receiving structured payments for months or years to come may opt for fast cash at less than the face value of their contract.

Only a few decades after its creation, the secondary annuity market has grown into a large, well-regulated industry. The market serves to connect annuities that go up for sale with investors interested in buying the rights to long-term payment streams. It’s at this point that the cash flows become secondary market annuities, or SMAs.

See below for the answers to frequently asked questions about purchasing secondary market annuities through SMA Hub.

Why does the annuity transfer process require the use of a trust?

At no time does SMA Hub hold the rights to receive the cash flows from our inventory. Instead, Hub Business Trust is the entity named in the transfer process. Using a trust adds an important layer of confidentiality for your client, as the transfer approval is a matter of public record. Once your client executes the “irrevocable assignment of cash flows,” SMA Hub legally forfeits all rights or titles to the payments.

Should I hire my own attorney?

While not required, you are free to hire outside legal counsel. If you do, our legal department can answer any questions your attorney may have.

Why is it preferable not to be named directly in the court order?

If you or your client are named, all your personal details and those of the purchase are made public. Allowing Hub Business Trust to be the entity named in the court order does not affect the title transfer or payments guaranteed to your client; it simply ensures privacy.

When do funds transfer?

SMA Hub only asks for funds once the payment stream is fully vetted and transferred to the Hub Business Trust. At that time, only a single document is needed, irrevocably assigning the payments from the trust to your client.

In the case of In-Stock annuities, we can close within 24 to 48 hours, pending liquidity of funds. With Pre-Order cases, the date of funding varies, with anticipated closing dates indicated on each case. Either way, funds must be transferred to the Hub Business Trust within two business days of you receiving the closing book.

What does the closing book contain?

After SMA Hub has completed its legal review of the case, a Closing Book will be prepared and sent electronically to you, the agent. Funding is required within two days of receipt of this Closing Book. The amortization schedule showing the final purchase price will be enclosed along with wiring instructions.

The contents of the Closing Book show the complete chain of title to your client and are as follows:

  • Summary Cover Page – Wiring Instructions, Final Purchase Price
  • Review Checklist – Legal Review Letter & Specific Case Findings
  • Amortization Schedule – Specific Transferred Payment Stream
  • Irrevocable Assignment – Between Hub Business Trust and Purchaser
  • Servicing Agreement – How Cash Flows Are Handled
  • Acknowledgement Letter or Stipulation Agreement – Carrier Confirms Transfer of Payments and Court Order
  • Court Order – Approves Seller’s Transfer to Hub Business Trust
  • Purchase & Assignment Agreement/SMA Purchase Agreement – Between Factoring Company and Hub Business Trust
  • Purchase Agreement/Absolute Assignment Agreement – Between Original Seller and Factoring Company
  • Current Benefits Letter – Carrier Confirms Currently Available Payments

Why are payments serviced by GoldStar Trust Company?

Use of a servicing agent is required by some carriers and is rapidly becoming the industry standard. When coupled with our purchase process, payment servicing offers a host of benefits, including purchaser anonymity, ease of account servicing, and increased transferability.

SMA Hub has entered into a long-term relationship with GoldStar Trust Company to perform payment servicing, account management, and policy service for our agents and their clients.

The Hub Business Trust establishes a payment servicing account with the GoldStar Trust Company for each cash flow that it buys. Whether it be an In-Stock case or a Pre-Order case, the servicing platform at GoldStar Trust Company ensures you always have a human interface to work with when your circumstances change. Moving and need to update your address or decide to change banks? Whatever your needs, GoldStar Trust Company will handle them directly with you and the carrier. The setup costs for this service are paid by the Hub Business Trust, and a copy of the GoldStar servicing arrangement is included in each case closing book.

Who is GoldStar Trust Company?

GoldStar Trust Company began as Colonial Trust Company, incorporated on August 19, 1989, in Phoenix, Arizona. In 2004, Colonial Trust Company was acquired by Happy State Bank of Amarillo, Texas and emerged as GoldStar Trust Company. In 2006, GoldStar Trust Company acquired American Church Trust Company in Houston, TX and later relocated all operations to Canyon, TX. Since then, GoldStar has enjoyed substantial growth due to strong executive leadership and keen financial foresight. GoldStar Trust Company is backed by the financial strength and confidence of Texas-based Happy State Bank, founded in 1908.

GoldStar Trust Company offers unique retirement solutions and investment options that allow investors to diversify their IRA portfolios with precious metals and other alternative investments. A trusted resource, GoldStar Trust Company also serves as Paying Agent and Trustee for issuers of Church Bonds and Municipal Bonds in 38 states.

GoldStar Trust Company is highly respected in the Structured Settlements market as both an IRA Custodian and as a Disbursing Agent for investor payments. From ACH processing to online access, GoldStar Trust provides unmatched customer service.

How safe are my payments?

You are protected by U.S. contract law. When you and Hub Business Trust execute the Irrevocable Assignment of Cash Flows, all rights and title to the payment stream are passed from the trust to you. As of that moment, Hub Business Trust has no ownership interest in the cash flows going forward. When payments start, they are sent directly from the insurance carrier to GoldStar for servicing, with no involvement from Hub Business Trust.

Subsequent actions of the Hub Business Trust or SMA Hub have no effect on the payment streams irrevocably assigned by us. They are not our property once sold, and neither we nor any creditors or parties would have any claim to the payments.

GoldStar Trust Company is the independent payment agent. It is able to receive funds from Insurance Carriers but each and every dollar is accounted for and subject to our Irrevocable Assignment of Cash Flows. Even though the insurance carrier sends your payments to GoldStar Trust Company, they never receive ownership of those payments.  GoldStar Trust Company is used to independently verify the amount and payee, resolve discrepancies, if any, and then send the payment to you. At no time does GoldStar Trust Company obtain legal ownership of your funds. Thus, in the unlikely event that a creditor of GoldStar Trust Company ever attempted to make a claim against GoldStar, your payments would not be considered a GoldStar Trust Company asset.

In short, GoldStar Trust Company is a nationally recognized, professional payment servicing platform used broadly by companies and institutions to accurately receive payments and service policies and accounts.

Who is SMA Hub?

SMA Hub, Inc. is the leading wholesale distributor of secondary market annuities, meaning we only work with agents and advisors, not retail clients. The company was founded in 2013 by veterans of the secondary annuities market. Today, the Hub serves as a source of exclusive In-Stock SMAs ready for immediate purchase. Our services offer quick closings, reassurance for advisors, and high returns for investors.

How does SMA Hub help advisors and their clients?

SMA Hub was created to serve advisors and process cases in a manner that protects their clients to the highest degree. By streamlining the purchase process, offering immediate availability of In-Stock inventory, utilizing a professional payment servicing provider and thoroughly reviewing each payment stream, we offer proven and vetted SMAs to our advisors and their clients.

Our purchase process is carefully designed to reduce the fallout rate associated with SMA transactions by offering exclusive In-Stock inventory. Advisors benefit by working with experienced industry veterans and their clients benefit from superior protections and guarantees.

What is unique about SMA Hub’s process?

SMA Hub’s unique procedure serves many purposes.  First, it protects your client’s confidentiality. Second, it reduces the failure rate of cases, which stem from the court process, documentation issues, and payment stream verification. Finally, our procedure frees you and your client from complex and time-consuming paperwork.

With every case, the Hub Business Trust acts as the principal buyer and commits capital to buy each case prior to marketing. We have a deeply vested interest in making sure that the purchased payment streams are meticulously vetted before placing them In Stock.

Only after we have painstakingly scrutinized and thoroughly vetted each payment stream is it made available to your client to fund and close. SMA Hub’s closing book details every aspect of our procedures and your client’s transaction.

Register with SMA Hub for Access to In-Stock Annuities

Whether you have investment clients who are already interested in secondary market annuities, or you recognize the value of these products and want to propose them to your clients, SMA Hub is the right place to look. Once you register on our website, you’ll have access to our In-Stock inventory and Pre-Order cases, giving you plenty of options to consider for your clients.

You can also ask us for specific product recommendations based on your clients’ investment needs and budget. Because we’re able to customize each annuity we acquire by dollar amount or term, our investment products are appropriate for every type of investor, from introductory net worth individuals to accredited investors.

To learn more about our process, or for help registering on our website, please contact SMA Hub today.

Read More +
  • What Are SMAs?

  • The Benefits of SMAs

  • SMA Hub Difference

Annuities are financial products that pay out a fixed stream of income to individuals, usually retirees. The money comes from a substantial lump sum or monthly payments put into the annuity during the accumulation phase. Once payments commence at a specified date, the contract enters the annuitization phase.

Secondary market annuities originate from existing annuities that become available for purchase. They offer fixed-term payment streams, up to several decades long, from top-quality insurance carriers.

SMAs could be the right fit for your client’s profile if he or she is looking for above-average returns with relatively low risk. Investors must also have enough resources to tie up funds in this illiquid investment.

SMAs offer many of the same benefits as primary market annuities—including payment certainty and a guaranteed yield—without all the restrictions associated with insurance contracts. While insurance products often translate to low returns for the investor, SMAs routinely provide yields 1-4% higher than comparable original issue annuities at a lower cost and without introducing a high level of risk.

SMA Hub is far from merely a “middleman” in the process of transferring structured settlement cash flows. We acquire original issue annuities in their entirety using an independent business trust. Then, our experienced, on-staff attorney navigates the complexities of transitioning the financial product into a secondary market annuity.

Only once the review process is complete and the sale of the payment stream has been court-approved do we list SMAs in our inventory. This adds additional layers of protection to your practice and ultimately your clients. By the time you see SMAs for sale on our website, all due diligence has been performed. Therefore, you can expect to close your client’s case within 24 to 48 hours, pending liquidity of funds.