Fishing Can Kill You: Comprehensive Risk Management for Clients

It’s true but probably not a risk for you or your wealthy clients since you aren’t working as commercial fishermen. According to the Bureau of Labor Statistics of the US Department of Labor, in 2017 commercial fishing was the second most dangerous occupation in America. [1]

Most of these workers need life insurance since they often have dependents.  But if your clients are wealthy and don’t do anything more dangerous than play lawn darts, why would you even bring up the subject of life insurance? Many reasons.

Let’s take a look at the clients in your wealth management practice and decide who might need life insurance because of a few scenarios I am going to describe. Before doing this, I would ask you to temporarily suspend your preconceptions about life insurance because this product can do far more than just insure a life. But you must think of it as a tool which is simply part of an overall risk management plan.

If you are taking a comprehensive wealth management approach to clients, then life insurance is a product which needs to be discussed within the ongoing conversations you have with your clients about their overall risk management plan. Too often, we, in the wealth management industry, keep life insurance outside of the risk management conversation as if it were an unwanted relative one had to invite to a family wedding.

Please consider inviting life insurance into the same place with your other risk management tools because that’s where it belongs. Broaden your perspective and understand that life insurance isn’t a product that stands alone because it doesn’t. Once again, when having conversations with your HNW/UHNW clients about risk management, you need to realize that life insurance is simply one part of that conversation. No one likes to hear a client say “no” which is often the response if you bring up life insurance all by itself.

Here is a classic way to position life insurance with business owners. Ask about their most valuable employees. What do they do and what value do they add to the business? Then ask what would happen to the business if something happened to one of those key employees. No business owner wants to admit that there are “key people” in his business other than himself. Suggest the following definition in the form of a question to your client since it goes to the heart of the issue. “Let me phrase this differently. Is there a person or persons whose absence would seriously affect the financial health of your business? Or, to put it bluntly, how much money would you lose if one of your most valuable employees is bitten by a werewolf and dies?”

What if their top salesperson, with contacts throughout the industry, who has been with them for a long period of time and accounted for a substantial percentage of sales, is in a major car accident? How much would that impact the business? All of our systems of storing information rarely include the full knowledge and nuances of a client relationship. In this case, that was stored in the brain of the top salesperson and is now either temporarily or permanently gone.

As this conversation continues, you can explore how the owner can protect himself from that risk. Mention “key person” insurance. Many business owners haven’t thought of this because they have more immediate business issues on their minds. Don’t assume that because someone who owns a successful business person has thought about “key person” insurance or even knows much about it. Uncovering this need, then presenting the solution is your responsibility as a wealth partner.

I’ll close by quoting a phrase you never, ever want to hear from your clients: “if only I had known.”

Resource(s):

[1] https://www.bls.gov/news.release/pdf/cfoi.pdf

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Contributing Writer: Subject Matter Expert Charles McCain