Risk management frequently means insurance planning in the financial services industry; however, when we talk about risk management we mean - what areas present a considerable amount of risk in your life and how to we best offer advice to mitigate those risks. In other words, what can we help you plan for and what can we help you avoid.
Risk of a Financial Emergency
Emergencies happen in life - you get a flat tire, your refrigerator stops working, or you end up in the hospital. The list of possibilities is nearly endless. This is why we believe all clients have an emergency fund set aside from 3 months to 1 year of your base living expenses. By having this money liquid and readily available, you can make sure you are prepared for the ups and downs of daily living.
Risk of Death
Everyone has a risk of death so it makes sense to prepare for it. We believe in having a level term life insurance policy in place until your household has enough saved up to be okay financially if something were to happen. There are many ways to calculate how much insurance you will need to plan for; however, a reasonable rule of thumb is around 12 times your income. And no, if you have a spouse that doesn't get compensated for their work it doesn't mean they don't need coverage as well.
Risk of an Accident
There are many accidents that happen in life, but the worst accidents have long-term consequences. If you accidentally broke your hand, you might be okay if you couldn't use it as well in the future if you were an attorney or store manager. But if you were a surgeon, or a truck driver, that kind of an incidence might have major implications. Having long-term disability coverage is a common way that people reduce the impact of this risk.
Risk of a Recession
Just like the risk of death, if you are invested in the market there is a certainty that you will also be exposed to the reality of recessions. The markets go up and the markets go down, and there are ways that we help reduce the risk in portfolios by investment selection. We can use bonds and annuities in situations where people need a more stable or guaranteed income option in their lives, and we can be selective about which stocks and mutual funds make the most sense to be able to handle the ups and downs of the market effectively. Overall, the way we help reduce risk the most in client's portfolios is by having a financial plan and making sure that we know your goals and can plan a certain amount of cash flow from the accounts sustainably no matter what happens in the markets.
Risk of Divorce
Unfortunately, divorce is a more common occurrence than anyone would like, but it happens. There are some ways that we can plan with the concern of divorce in the case of business owners and partnership agreements. However, for the most part, we want clients to try to be as proactive as possible in preventing this from happening. Go on dates, plan for vacations, and make sure you really get to know each other after the kids leave the house. The quickest way for a financial plan to be changed dramatically is through a divorce, so we want to encourage you to always protect your marriage.