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At the end of your financial planning process, you’ll probably discuss with your wealth advisor the threats to accomplishing what you’re planning for.  This is usually where you talk to an insurance agent and they sell you an insurance portfolio, after which you might never re-address your insurance again for a long time.

To help with the likelihood that your “one chance” to get your insurance done right is actually done right, I’ll offer you this template of a process for introducing your needs to an insurance agent, and then using it to audit what they’ve done to see if it fits what you need.

Step 1: Realize that insurance is just a financing tool.  It does not reduce risk, nor does it transfer risk.  It just pays for losses in ways and in amounts governed by the insurance contract negotiated between you and the insurance company.  You’re buying an agreement, not a panacea. Understanding this will help you with your decisions and expectations.

Step 2: Address who needs their risks financed. Obviously, you do.  But also be sure that a marital community, or domestic partnership gets their fair share of the rights.  We’ve seen 1/2 of a relationship quite surprised by the realization that they don’t actually have the same rights under the policy because the agent did it wrong.  Also, if there are any stand-in entities like Trusts, LLCs, Family Partnerships, be very clear about whether they have rights under the insurance – nothing is worse than moving assets into a Trust for protection, only to find out later that doing so left the Trust totally without the same insurance you had.  Be sure to include consideration for minor children, children not-yet independent but are close to being so, ageing parents for whom you may provide care or support.

Step 3:  Inventory the assets and financial horsepower that your financial plan is depending on.  Real estate, tangible assets, valuable collections, personal property, vacation and rental homes, vacant land, time shares, home-based businesses, ability to earn an income in a particular profession, health and well-being, cash/investments, business income and equity value, business perpetuation, key-employees or partners, access to borrowed funds, social goodwill (especially for professional services), identity/personal security.

4. Assess, even briefly, your perceived exposure to different risks.  You and I may not share exposure to the same types of losses, so for a starter-list of risks, check out an earlier blog post here.

5. Assess, even briefly, a range of financial consequences you might face if you did suffer a loss.  It doesn’t have to be exact, but if you had to rebuild your home, for example, could you do it for the amount you currently have it insured for?  No one can predict a serious accident, and no one can predict how much a jury could decide in favor of a plaintiff, but I think it’s smart to have an idea in your head about what you feel is a reasonable amount of net worth protection to have against liability.  If you’ve worked hard to have a net worth of X, how much of that do you want insured against insurable allegations of liability?  That’s a personal decision and having some idea will put you in the driver’s seat of deciding on liability limits instead of asking an insurance agent what they think – you know you better than they know you.

We don’t believe that consumers need to know how to design and execute their insurance portfolio, but they should know the standards and boundaries of what a good insurance plan should do for them.  Bringing your own intelligence to the five points above will help interview, hire, and audit whomever you choose to handle the insurance that is meant to help protect the capital you expect will perform for your financial plan.

Photo: Rachael McGraw – Manhattan Beach, CA

We have this saying inside our office: we exist for the privilege of stewardship. In the responsibilities to our business and in the lives of our clients, we can think of no better motivator than to acknowledge that we’re stewards of what other people care so deeply for.  And while stewardship is a responsibility, we have a passion for it, so it’s also a privilege to be provided with so many opportunities to serve.  We are truly grateful for all of them.

To us, a good steward does three things well:

1. They shepherd against the wolves.  Whether those wolves are the unfortunate events that threaten the stability of wealth and financial capacity, or the false experts who’d otherwise try to sell something that benefits themselves over the client, a steward’s first job is as lookout.  And being good as a lookout means constantly learning so we’re able to spot trouble before it comes too close.
2. They unburden the hassle.  Complexity, ambiguity, and inconvenience are roadblocks to getting the right things done, and insurance is full of all three of those characteristics.  So if we unburden the hassle of knowing the right answers, of clarifying the choices, and of handling the soul-sucking experience of working with insurance companies, we feel that clients are more likely to have the right plan and experience in place.
3. They fight until it’s right.  The opposite of this is laziness, and we see plenty of it in our industry.  There’s usually a right answer for every question related to protecting wealth and we’re astounded by how many wrong answers exist in the insurance portfolios and the experiences of consumers.  That’s just not acceptable.

We believe in the privilege of stewardship and we practice and hone our daily habits to prove that there’s value in working with a committed steward.

Photo: Rachael McGraw, Flathead Lake, MT

Integrity, like honesty, is made up in a chain of linked behaviors.  If you tell the truth sometimes, but not at other times, then it’s hard to claim you’re an honest person.  There can’t be a jury that decides to like some parts of your testimony, but not others – the entirety of your testimony is either all reliable, or none of it is.

The same is true about the larger concept of integrity, which is an adherence to principled quality, unity, soundness, and wholeness.  You either exhibit it consistently and reliably, or you don’t.

And it’s been my experience that the people I find most consistent in their principled quality are those that have a process for making it happen.  The people I admire the most for their commitment to the mastery of their craft  are not accidentally good.  They are purposefully good, and they design repeatable patterns and standards of behavior that result in strong moral character and high performance.

I believe that the people you choose to listen to for advice should have a definable and demonstrated process for netting the high performance you obviously expect.  And the process I’m talking about isn’t one of how work is moved from “prospect-to-client”, or anything sales-y or administrative.  Instead, it’s an accounting for how the right needs are going to be identified, the right answers determined, and then the right burdens lifted. And this demonstrated process is critical because the chance of you getting what’s right for you starts with a track record of how your advisor consistently gets it right for everyone else.

Photo: Vik, Iceland

I was at an industry conference last week and sat near two gentlemen who owned firms that were similar enough to mine that most consumers would think of us as competitors.  These two men were obviously intelligent and experienced, and they both seemed like genuinely nice and caring guys.

The subject of their conversation was how one of the men built an extremely successful business on the defined strategy of keeping expenses as low as possible by negotiating access to a bank’s list of customers and then selling and delivering insurance to those customers without ever having to give advice or help them in the process.  As this man put it, “When someone takes out a loan, all they want is for the insurance problem to evaporate so they can close on the deal.”

So there you go.  My own industry is the #1 contributor to the dumbing-down of the value and expectations placed on insurance by consumers.  It’s why some insurance companies advertise using cartoons and not a single comment about whether their product is any good.  It’s why consumers ask for discounts and not about whether they’ll actually have enough coverage to rebuild their home.  It’s why insurance companies can get away with poorer and poorer claim service because you know in advance it’s going to suck, so why try?

I don’t begrudge someone’s prerogative of choosing how to run their business, but I don’t believe it’s matched with enough education to the consumer so that they know what they’re getting into.  Insurance is complicated (have you ever actually read a policy?) and the consequences of believing you’ve done it right when you really haven’t can be severe.  That’s why we believe in teaching and evangelizing, in investing in our own expertise, and in actually being present & side-by-side with our clients.  We think it’s better for most families and we’ll continue to commit to that way of doing things.

Photo: Palm Beach, FL

Whether reviewing or designing a plan to protect wealth, we judge its accuracy across four degrees, or directions.  If you picture a defense plan as a wall between the risks to a financial position (see here for earlier post) and the prosperity being pursued, how tall and how wide that wall is the visual reference for our judgments.

How high the wall goes is the extent to which the plan will protect against really bad consequences.  It’s what we judge to be the degree of inclusiveness, and common questions are, “what if the entire house burns down?”, or “what if you hit the bus full of lawyers?”.

How low the wall goes is the extent to which the plan maximizes the most cost-effective approach.  It’s what we judge to be the degree of efficiency, and common questions are, “are those deductibles high enough?”, or “can we drop the home warranty coverage if we have other mechanical breakdown options?”.

How far the wall stretches is the extent to which the plan captures and traps the risks we should worry about.  It’s what we judge to be the degree of thoroughness, and common questions are, “have we considered a reputational hit on the business after a public embarrassment?”, or “have we considered the cost to bring this old home up to current building codes?”.

How deep the wall goes is the extent to which the plan can withstand a loss.  It’s what we judge to be the degree of robustness, and common questions are, “will I be forced to rebuild my home, or will I have a cash settlement option?”, or “will I have my own attorney represent me, or will it be someone who doesn’t know me?”.

We believe the right answer is always a customized one that addresses the unique needs of the family, but these four ingredients are always present.  For a plan to be of good quality, it needs to be built intentionally and we feel consumers should know where their plan stands in all four of these measurements.

 

I was challenged by someone wondering why I focus my practice on helping families of high net worth, as if it was less noble in some way than helping “normal” families.  The implication was that families of wealth either don’t need, or don’t deserve help with the things I worry about on their behalf.

My first inclination was to say to this person that if you’re lucky enough to live in a place where you can ask me that, or read this blog, or even compare yourself to “high net worth” families, then you’re automatically the wealthiest among billions of other people on this planet, so be careful when you’re being judgmental.

And as I’ve said before, the quality of how you use whatever wealth you have is a better indicator of my interest in helping you than of any given level of wealth.  Based on that standard, I know wealthy families with $300,000 and unwealthy families with $30M, so I’m always careful about labeling people based solely on a dollar figure.

And finally, if you feel there are injustices, inequalities, calls to action, or social responsibilities that deserve our collective attention, where do you expect to find the greatest horsepower for fixing those things?  In my work with families of significant wealth, I’ve seen some amazing things happen because of their passion and their generosity.  This is why we believe:

Financial firewalls → Freedom of capital → Prosperity → Purpose → Passion → Action

Wisdom: the power to discern what is true and right by employing learned knowledge

There are times when there’s an obviously clear line between the right answer and the wrong answer.  And other times there’s a continuum of space between a right answer and a more-right answer.  The benefit of having accumulated knowledge and direct experience is knowing the difference between what’s right and what’s more right.

You could have a home insurance policy with just the right amount of coverage to rebuild your house, but maybe instead you could have one with an unlimited amount of coverage and never bear the risk that inflation outpaces your policy’s ability to keep up.  Or, you could have a home insurance policy that will rebuild your home, but maybe instead you could have one that would give you the option to take the equivalent in cash so you could sell the lot and move elsewhere.  Or, you can have a policy that will replace your car, but maybe instead you could have one with an agreed value so there’s no argument about how much it was worth.

Creating the most-right recommendation for families is why we care about the intimacy of our process.  It’s how we highlight the difference between customized and off-the-shelf.

Photo: Rachael McGraw, Gullfoss, Iceland

Precision: exercised with definitive statement, exact in position, and exact in measure.

It’s hard to think of an example where “pretty close” works out okay for families when it comes to their insurance.  Insurance contracts are complex financial agreements and there are very real limits, exclusions, and conditions to those agreements.  And there’s usually no flexibility and no budging to try and get more once the loss has occurred, so you’d better be correct from the very beginning.

When we engage with a client we attack the precision of their insurance portfolio first.  Are the limits of coverage sufficient in light of expected losses?  Are all interested parties to the contract named correctly so as to protect their rights and positions?  Is the entire inventory of what needs coverage accounted for and documented correctly – sometimes across multiple policy contracts?  Is the full scope of expected coverages captured in the portfolio, or are there gaps because of a lack of thoroughness when it was constructed?

We believe being precise begins with having a passion for learning what the right answer is, then having the discipline of process to do it, check it, then check it again.  And it’s our tight control over that discipline that winds up mattering the most to our clients when they eventually have a claim.

Photo: Rachael McGraw, Florence

An expert is an atypically reliable source of technique and skill who delivers their art with precision, justice, and wisdom.

Precision: exercised with definitive statement, exact in position, and exact in measure

Justice: guided by truth, reason, and fairness and made according to principles and equity

Wisdom: the power to discern what is true and right by employing learned knowledge

Validating real expertise from potential expertise requires a test of the behaviors, actions, and delivery of someone’s purported skill.  Education and years of experience are foundational but not definitive, as we all know well-educated professionals who don’t act in the best interests of other people.

Real experts speak plainly about complex subjects, take a stand behind their positions, are indomitable against proprietary interests, serve as stewards of those who rely on them, defend the ignorant against manipulation, and relate stories of experience to what matters to you.

We believe that being precise, just, and wise is the best way to show how much we care, and we’d like the opportunity to share that with you.

Photo: Rachael McGraw, Santa Monica, CA