Tuesday, October 10, 2000 Section: Business Edition: Final Page: C1 SETTLEMENT SETUPS ONE COMPANY'S STORY DON MCNAY HELPS BIG-MONEY WINNERS MAKE FINANCIAL PLANS By Jamie Butters, Herald-Leader Business Writer RICHMOND -- Don McNay holds up two items: a Coke can and a techno-thingy called a pocket mailer. Selling Coca-Cola is pretty easy, he said, because everyone is familiar with the product, the brand and its rivals. But before you can sell a pocket mailer, you have to take some time to explain what it is: a tiny computer that sends and receives e-mail over phone lines when placed next to a telephone handset. McNay's business -- structured settlements -- is a pocket-mailer type of business, he said. It takes a little explaining. Studies of lottery winners in the late '70s showed that 90 percent blew all their money within five years, then struggled to resume a normal life. Many even ended on welfare. But most people who receive a lifetime of money at once are not lottery winners. They are victims of workplace harassment or crippling accidents -- the stress of which can lead to bad financial decisions. So Congress created tax breaks for individuals who structure their settlements to pay out over a period of time. In most cases, all of the interest earned -- often tens of thousands of dollars -- is tax-exempt. McNay, president and owner of McNay Settlement Group, advises attorneys, insurance companies and others on ways to set up such large disbursals. Then the company helps individuals navigate the tax system and financially prepare for the rest of their lives. McNay got into the business in a roundabout way. He quit graduate school to work on a political campaign, but the candidate lost the primary. He took a job at the Kentucky Horse Park cleaning bathrooms and picking up garbage. Soon Bob Babbage, who taught McNay at Eastern Kentucky University and later became Kentucky secretary of state, persuaded him to try the insurance business. McNay was rejected by a few firms because his tendency to be introverted was a bad fit for the aggressive sales business. But once he got started, he was one of Mutual of New York's most successful mutual fund salesmen. When structured settlements became law in the early '80s, he studied them and consulted for lawyer Peter Perlman on one of the state's biggest medical malpractice cases ever. That quickly defined him as Kentucky's resident expert on structured settlements. Throughout the decade, he thought he was spreading himself too thin, "trying to be all (financial) things to all people." At least 200 people within 2 miles of his office were selling mutual funds. Within 100 miles, it was more like 2,000. He shook his head and said to himself: "I know I'm the best structured-settlement person -- the only one -- in that area." Over the next five years, he steered about 800 clients to other mutual fund companies. Turning away that much business cut his income temporarily, but now it is bigger than ever, with revenues topping $1 million. It was a somewhat painful adjustment, he said, but "it's worked out in the long run." The company does not seek business from personal-injury or workplace-harassment victims. In fact, all McNay employees sign an ethics statement that prohibits soliciting victims. "We do not look in the newspaper and see 'Gee, someone won $3 million.'" This means he has to sit by the phone waiting for business. But he doesn't have to wait long. His business comes almost exclusively from trial lawyers who refer clients to him. A recent survey of Kentucky trial lawyers showed that 93.3 percent knew McNay's company by name, he said. The second best-known brand was recognized by 42 percent. To generate business, McNay writes for journals and gives many speeches to law, insurance and investment groups. Aside from lawsuit cases, he has handled matters for one professional athlete and a couple of Powerball winners, he said, "But that's not a normal business for us."

Don McNay usually helps people who have won a large sum of money for either a crippling injury or perhaps from a lawsuit. Under its ethics policy, his company cannot solicit business, but clients keep coming. DAVID STEPHENSON/STAFF Reach Jamie Butters at (859) 231-3201 or jbutters@herald-leader.com Services: Structured settlements and settlement techniques. Owner: Don McNay, president, 41. Year business started: 1983 Source of capital for start-up: A $3,000 line of credit at the old First Security Bank and a Union 76 gasoline credit card. Number of customers: More than 800 attorneys, 200 claims adjusters, 50 self-insured companies and 20 insurance carriers. Well-known or famous customers: The late Frank Haddad Jr., a prominent Louisville attorney. Other clients include more than 50 trial attorneys listed in the 1999-2000 edition of Best Lawyers in America. System for networking: "Our primary source of clients is repeat business and referrals from existing clients. We also give lectures at bar association and trial lawyer conventions and author articles in legal and financial publications." Mentor who helped start the business: Former college instructor Bob Babbage, who persuaded Dennis Pike, manager at MONY, to bring McNay into the financial-planning business and persuaded then-ATLA President Peter Perlman to be his first structured-settlement client. Currently reading: "A Piece of the Action by Joseph Nocera (for the 30th time). It is the best book ever written on the history of the financial services industry." Biggest business mistake: "Trying to be all things to all people. ... I have to be the only Chartered Life Underwriter in the world who buys his life insurance from another agent." Biggest business success: "Since 90 percent of all businesses fail in the first five years and another 90 percent in the next five, every day we open for business is a success."

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