About Consumer Alternative Litigation Capital Funding.

About Consumer Alternative Litigation Funding

Site Information
(is listed below. The financial planning software modules for sale are on the right-side column)

Confused? It Makes More Sense if You Start at the Home Page

Financial Software Price List

How to Buy Investment Software

Discounts for Financial Advisers
(and how to subscribe to the full Bundled Deal for $100 a month)

Lifetime and 5- to 15-year Extended Subscriptions

New Financial Planner Starter Kit

Professional Investment Portfolio Building Kit

Financial Planning Software Support

Financial Planner Software Updates

Site Map

Site Information, Ordering Security, Privacy, FAQs

Questions about Personal Finance Software? Call (503) 309-1369 or Send E-mail to support@toolsformoney.com

Free Downloads and Money Tools
(are listed below)

Free How-to Money eBook for DIY Investors, Critical Reading for Financial Advisers, and for Exposing Financial Myths

Free Sample Comprehensive Financial Plans

Free Money Software Downloads, Tutorials, Primers, Freebies, Investing Tips, and Other Resources

List of Free Financial Planning Software Demos

Selected Links to Other Relevant Money Websites


Free Retirement Calculators

Free 401(k) Calculators

Free Financial Calculators

Free Family Money Calculators

Free Real Estate Calculators

Free Debt Calculators

Free Investment Calculators

Free Tax Calculators

Free College Saving Calculators

Free Insurance Calculators

Free Business Owner Calculators

If you've ever been curious about Alternative Litigation Funding, the too-good-to-be-true returns some have been getting on their non-recourse loans, and its potential as a new asset class for portfolio diversification; then this page is a great place to start learning.

In May 2014, we made a financial calculator that models ALF strategies for a sales guy with a law firm in the consumer ALF business.

The following is just about everything there is to know about ALF. His brain was picked clean with dumb questions until there wasn't much else left to write about. So if you still don't get it after reading this page, then you're "overthinking it," because this is all there is to it.

Alternative litigation funding goes by many different names, but it's all pretty much the same thing. Different law firms just mix the words up to try to be different.

Other names alternative litigation funding goes by are: ALF, alternative litigation capital funding, consumer ALF, consumer alternative litigation capital funding, consumer alternative litigation financing, consumer lawsuit financing, consumer lawsuit settlement funding, consumer legal financing, consumer litigation financing, consumer litigation funding, lawsuit financing, lawsuit funding, lawsuit settlement funding, legal financing, litigation financing, litigation funding, settlement financing, settlement funding, third party legal funding, and third-party litigation financing.

Wiki page that explains the basic concepts

The simplest explanation is that third party funding companies provide cash advance (in the form of non-recourse loans) to litigants in exchange for a percentage share of the judgment or settlement after the suit is resolved.

If you loan them (usually a third party funding company) money, then you're called, "a funder." So let's call this particular third party funding company, the TPF.

Here the plaintiffs get the funding, so it's the opposite of legal defense funds, which fund defendants.

All of this started in the late 90's. It's grown since then to be HUGE business.

Here's the deal with these business models in simple English:

You know those annoying TV ads that say, "If you've been hurt by a "bad" (usually medical device making) corporation, then call our lawyers NOW to see if you qualify for a huge payout!"

The TPF is one of the firms that pay the big-bucks for those ads (and is where some of the funders' money goes).

First, the gist of it is that you (an investor or an RIA investing for your clients) are lending money to the TPF company. This money is then used to pay for (fund) all of the following activities.

The big thing to remember is that these major (mostly medical product liability) lawsuits have already been won. The deal is done, the bad people / corporations have been convicted, there's no more appeals, and the court has ordered them to be punished - in the form of paying uber-money into a court-administered escrow account.

So the defendant(s) have already lost and paid their money in damages to the injured parties. This huge pot of money is now sitting in escrow waiting to be distributed to people that have been harmed. So the vast majority of the hard work has already been done.

The heavy lifting was getting the legal system to convict these corporations of wrong-doing, and to make a settlement to punish them so they won't do it again, to deter the another corporation from going down the same road, then to put the money in escrow so they can't control it anymore. So that's all a very done deal, nothing more needs to be done.

The injured parties just need to become aware that they may be entitled to their money. Then they have to do the work needed to file a claim.

Then their claim has to go before a judge to ensure it's valid, and they qualify as someone that's been harmed (AKA fitting pre-determined insurance underwriting guidelines).

When that's done and won, their part of the money that's waiting for them in escrow is paid to the attorneys. Then they pay everyone in the process. The funders get paid first, before anyone else does.

So the first step is to do things like run those annoying ads on TV to get the information out. This is also where some of the funders' money goes.

Then people that think they qualify see the ads, and call into to their call centers (which are also funded by funders).

Then a groups of screeners do their things (including paying for medical exams) to see if the potential plaintiff actually qualifies to collect some of these funds. This is expensive, so most of the funders' money goes to pay for these folks (very little goes to the partnering law firms).

They the TPF packages qualified plaintiffs / cases, and sends them to one of the nine partner law firms to litigate in court.

Center TPF law firms also pay the partner law firms an expense for each case. This is where the partners pay off the funders at the end of the process. So there's little-to-no gambling with funders' money.

Then over 90% of all cases "fund." This means everything went as planned, the plaintiff got their money from escrow, and everyone was paid.

Plaintiffs that don't qualify are screened out, and those that do qualify have individual suits filed against the escrow account. This is also where some of the funders' money goes. This is also why each case is handled as a $10,000 non-recourse loan.

When funders fund, it's in $10,000 chunks. So each chuck goes to fund an individual case (suit). So if you loan them $100,000, then you're funding ten cases.

Then if and when an individual case wins, everyone is handsomely rewarded (because the bottom-line payout to the plaintiff from escrow is usually plenty to pay everyone in the process back). This is where the funder gets their non-recourse loan paid back.

That's about it in a nutshell. There's not much more to it than that.

If you loan the TPFs money, then you're a funder. Your funds fund lawyers (that pretty much do nothing but this) to bring individual cases to court. Since the vast majority of the heavy lifting has already been done, and people have already been screened, it's basically just pushing paper through the court system (if the plaintiff qualifies, they pass medical exams, and is not screened out along the way, or they don't want to endure the process, etc.).

The screeners ensure the plaintiff qualifies before the medical exams to prove it are funded. After that, then it's sort of a well-refined paper-pushing factory that spits out money, and pays everyone off, at the end of the process.

Then the people that fronted the money (you, the funder) needed to pay the factory to push the paper, are well rewarded for taking these risks.

That's the deal in a nutshell.

So far, there's no mutual fund or ETF that one can "invest in" to have all of your loan be a part of this action. There are a few mutual funds that invest a small portion of their assets into this business (e.g., Alliance Bernstein). So if you invested in those, then less than 10% of your money would get a piece of this action. We'll post this About which exact Mutual funds, with tickers, do this here as it comes in.

So being a direct funder is the only way to put all of your money to work to get a pure piece of this action.

This is, should be, and is growing up to be, a sub-asset class all in itself; as there's nothing else like it.

Here's an analogy compared to traditional funding vehicles: Other than not being FDIC insured - it's similar to a medium-risk two- to three-year CD, usually with no early surrender charges if you chicken out and want your money back before 24 months; that pays between 125% to 150% at maturity.

The risks are higher than a CD, even with the Contractual Replacement Guarantee. There's hundreds of cases in the pipeline at any point in time, so if it looks like a case isn't going well (especially in the first 45 days), then it's replaced for free. In other words, if your $10,000 chunk looks like it's going to fail, then they'll replace it for free with a fresh one.

As you may know, there hasn't been a new asset class to use to diversify an investment portfolio come along, for what, over fifteen years now? The last one was Internet in 1996, unless you think water is a sub-asset class, then 2012.

That's reason enough why this page is here - because it could prove useful by every investor with more than $250,000 invested that wants portfolio risk reduction.

A potential win is if there's a huge catastrophe (e.g., limited nuclear war), then most all of the world's stock markets will lose more than half of their value on day one. Then they may stay down for decades. What's going to happen to your money in ALF, assuming the lawyers doing this work, the plaintiffs, and the physical courthouse in that jurisdiction are not incinerated? A whole lot of nothing.

There's not much that can stop this money-making factory from turning the crank and making money pop out at the end. There's not much anyone can do to stop lawyers from suing people and bringing cases to court. Lawyers and the legal / court systems have been out doing their things before there was electricity, so even if the world ends and there's no more electricity, this whole deal will still be turning their cranks.

So this is one of the last things that would become worthless if "the world ends." This is one of the whole points of diversifying your investments as much as you can.

In the U.S., there are a few mutual funds that invest a small part in these deals. However, there are pure funds that do nothing but this in the UK, and they've had very good results.

The bucks are much bigger on the commercial side by orders of magnitude. So commercial funders need to pony up a minimum of usually $1M to loan, whereas funders on the consumer side only have to come up with $10,000. So the difference is two orders of magnitude (X100) on average.

Big players lend much bigger dollars. The firm I worked with is for much smaller cases.

They’re not securitizing it – they're just loans – so you’re not an equity partner, you’d be a primary creditor.

Other firms (mutual funds) fractionalize the settlements. This new way of doing it cuts out the middle man (e.g., mutual fund). Cutting out all of the middlemen means much more money flows back to everyone, especially the funder (because there's nobody else needing to be paid, other than the funder, plaintiff, the sales force, and the paper-pushing factory itself).

Actually, both of these business models are considered to be "Commercial." The technical difference is that true Commercial is corporation suing corporation, whereas "Consumer" is consumer suing corporation. So the deal I learned about can be considered to be both Commercial and Consumer.

In other words, this deal is just about the only way for "small" investors to get a pure part of this action. It's also one of first to bring it directly to private investors (which is why it’s also called "alternative private capital funding").

Once securitization happens, then this will be a whole new viable asset class for everyone to invest in. It's not correlated to any other asset class, and is more of a loan than an investment - so it would fit best into the fixed income allocation of an aggressive portfolio.

So if you know how portfolio optimizers work, then you should be excited about the potential of this from both a risk-reducing diversifier, and being very viable from a total return point of view.

So at the moment, the big-time lawyers say it's not a security - it's a non-recourse loan. So if you "invested," then you'd be loaning your money to the law firm, and taking your chances that it will be a success. If not, then you could lose ALL of your money.

To minimize that, if a particular case fails, they'll replace it for free. It's also possible to get a 100% return of principle up until actual funding (prior to funding) - which is 24 months (longer if funding doesn’t happen after 24 months).

The maximum is 36 months. If so, then there are no surrender charges, document fees, or penalties. So funders usually get all of their money back if they chicken out before funding (funding means an individual plaintiff's case is actually brought to trial to claim their money waiting for them in escrow).

This is because the case the funder funded can usually be easily re-sold to another funder. All of this educes the risks, so that's another reason why this new business model is worthy of further study and attention as a distinct asset class.

Then they'll even let you roll it over and over again, so you can let your money ride. Yes, you can even use tax-qualified IRA money to fund.

All of this has only been going on for a decade or so (~1997). Ten years from now, your local financial adviser will probably be recommending you buy a regular old boring mutual fund or ETF that does nothing but fund these cases.

Then you'd be able to invest in this asset class for as little as $1,000, and get pure exposure.

When this happens, it will be an asset class used in the odd-fixed-income allocation in most all of our investor models.

Financial Planning Software Modules For Sale
(are listed below)

Financial Planning Software that's Fully-Integrated
(the IFP is the NaviPlan alternative for 1/6th the price)

Goals-Only "Financial Planning Software"
(the MoneyGuidePro alternative for 1% of their price)

Retirement Planning Software Menu: Something for Everyone
(the RWRs, RP, and SRP)

Comprehensive Asset Allocation Software

Model Portfolio Allocations with Historical Returns

Monthly-updated ETF and Mutual Fund Picks

DIY Investment Portfolio Benchmarking Program

Financial Planning Fact Finders for Financial Planners Gathering Data from Clients

Investment Policy Statement Software (IPS)

Life Insurance Calculator (AKA Capital Needs Analysis Software)

Bond Calculators for Duration, Convexity, YTM, Accretion, and Amortization

Investment Software for Comparing the 27 Most Popular Methods of Investing

Rental Real Estate Investing Software

Net Worth Calculator (Balance Sheet Maker) and 75-year Net Worth Projector

College Savings Calculator

Financial Seminar Covering Retirement Planning and Investment Management

Sales Tools for Financial Adviser Marketing

Personal Budget Software and 75-year Cash Flow Projector

TVM Financial Tools and Financial Calculators

Our Unique Financial Services
(are listed below)

We're Fee-only Money Managers: So you can hire us to manage your money, and/or financial advisers can hire us to manage client money, using our Model Portfolios and/or Asset Allocation Systems

Mr. Market Timer's Unique Market-neutral Stock Market Timing Services
(the hedge fund alternative)

Consulting Services: Hire Us to Make Your Financial Plan, Retirement Plan, Benchmarking Report, Whatever

Buy or Sell a Financial Planning Practice

Miscellaneous Pages of Interest
(are listed below)

Primer Tutorial to Learn the Basics of Financial Planning Software

About the Department of Labor's New Fiduciary Rules

Using Asset Allocation to Manage Money

Download Brokerage Data into Spreadsheets

How to Integrate Financial Planning Software Modules to Share Data

CRM and Portfolio Management Software

About Monte Carlo Simulators

About Efficient Frontier Portfolio Optimizers

Calculating Your Investment Risk Tolerance

About Discount Brokers for DIY Money Management

About 401(k) Plan Management

Disclaimer: This financial plan software is designed to allow financial planners, investment managers, other financial services professionals, and investors, to demonstrate and evaluate various financial strategies in order to help achieve their clients', or their own financial goals. Investment strategies, results and any other information presented on the website are for education and research purpose only. There are no guarantees that any of the software will perform this function. The investment choices and services on this site are provided as general information only, and are not intended to provide investment, tax, legal, financial planning, or other advice. This site is for information purposes only and does not constitute an offer to sell or a solicitation of an offer to buy any security, which may be referred herein. Mutual fund recommendations made are suggestions only, and customers should evaluate the suitability of each fund for their own holdings on their own or seek professional advice. They are generic in nature and do not take into account your detailed and complete personal financial facts and needs. You alone are responsible for evaluating the information provided and to decide which securities and strategies are suitable for your own financial risk profile and expectations. Consult with your financial, legal, or tax advisor with regard to your individual situation. Toolsformoney.com is not engaged in rendering legal, accounting, tax, or other professional advice. In no event shall Toolsformoney.com be liable to customers for any damages whatsoever, including lost profits or savings, missed gains, or other incidental or consequential damages arising out of the use, or inability to use, any of the software or information obtained from this website. Financial estimates are generated by using many assumptions made by the program, clients, advisors, and the user. No person or software program can predict the future with any degree of certainty. No warranty as to correctness is given and no liability is accepted for any error, or omission, or any loss which may arise from relying upon data generated from reports produced by these programs. Toolsformoney.com makes no warranty of any kind regarding our site and/or any contents, strategies, portfolios, materials, information, products and services provided on our site, all of which are provided on an ‘as is’ basis. We disclaim any representation and warranty that our site and its contents, strategies, portfolios, materials, information, products and services are error-free, secure or uninterrupted. We further disclaim any warranty to the accuracy, completeness and timeliness of any content, information and services provided by our site. In no event shall Toolsformoney.com be liable to you or any other party, for any special, consequential or incidental damages suffered by you or such other party as a result of any problems that may arise because of the installation or improper use of this software or presentation of reports produced by this software. All reports generated by this financial planning software are only rough estimates of many possible future scenarios (none of which will occur in the Real World). Furthermore, in no event shall Toolsformoney.com be liable for any damages or injury caused by any failure of performance, error, omission, interruption, deletion, defect, delay in operation or transmission, computer virus, communication line failure, theft or destruction or unauthorized access to, alteration of, or use of record, whether for breach of contract, tortuous behavior, negligence, or under any other cause of action. Before investing in an ETF or mutual fund, carefully consider the investing objectives, risks, charges and expenses. For a prospectus containing this and other important information, contact the mutual fund / ETF and read the prospectus carefully before investing. The website is not operated by a broker, a dealer, a Broker Dealer. Information provided by the website could be time-sensitive and out of date. There is no guarantee for accuracy and completeness for the contents on the website. Contents are subject to change without notice. There is no guarantee for future results in your investment and any other actions based on the information provided on the website including but not limited strategies, portfolios, articles, performance data and results of any tools.

© Copyright 1997 - 2017 Tools For Money, All Rights Reserved