Volatility in the stock market is a reminder that thoughtful advi- sors can help their clients by
preparing them for the possibility of a
correction. Identifying and discussing
risks that could affect a client’s hard-earned nest egg may not be the fun part
of an advisor’s job, but it’s important and
One such risk — and one that is often
overlooked by clients and advisors — is the
risk stemming from accidents and losses
involving property. In this area, research
conducted by the consulting firm Oliver
Wyman finds that advisory firm clients
want and expect their advisor’s help in
identifying risks and taking steps to help
protect them from those risks.
Protection, of course, often involves
insurance. Most financial advisors
don’t profess to be property and casualty (P&C) insurance experts and quite
understandably do not provide advice in
this area. They don’t have to.
Advisors can help their clients and
at the same time protect assets under
management by developing a strong
relationship with a trusted independent
agent who can be part of yearly asset
protection reviews with clients.
Such reviews are crucial, because while
most homeowners have P&C insurance
coverage, for many affluent clients such
coverage often is inadequate or absent
entirely. This means that if a client experiences an incident where the costs to repair
the damage or replace the loss exceed policy limits, the money beyond what insurance coverage provides typically must
come from the client’s own pocket.
Consider a family with a homeowners’
policy that was purchased several years
ago and which never has been updated.
Many such families, and probably many
of your clients, have made extensive and
expensive improvements to their home
over the years.
If a catastrophic event were to occur
involving their home — say, a pipe bursts
and water destroys an expensively renovated kitchen or ruins the home’s new,
energy-efficient heating and ventilation
system — they may discover an enormous
gap between the reimbursement they
receive from their insurance policy and
the total expense of repairing the damage.
If your clients find themselves in a
similar situation, they may have to dig
into their investment accounts to bridge
the coverage/expense gap. That could
mean not only unexpected disruption
of your carefully drawn financial and
investment plans, but also big changes in
your clients’ lives as they face working
longer to rebuild their retirement nest
egg, for example, or having to change
their estate or philanthropic plans.
All these potential negative outcomes
could be easily avoided if your clients peri-
odically update their P&C coverage. By
introducing your clients to a trusted insur-
ance expert who can help them select a
more comprehensive policy, you are point-
ing them in the right direction to help
manage their P&C risks. And your clients
want you to be involved in this process.
In the Oliver Wyman study, 77% of
those surveyed — all affluent clients of
financial advisors — said they would
appreciate their advisor providing
access to P&C guidance and counsel.
More than a third (37%) said they even
would be willing to switch to an advisor
who made such advice available.
In addition, if P&C advice were part
of the mix a financial advisor provided, almost half those clients surveyed
said they would be more satisfied. In
addition, more than a quarter said they
would increase the amount of money
they invest with their advisor, 41%
would stay with the advisor longer and
half said they would be more likely to
recommend their advisor.
In short, including P&C insurance
counseling through a qualified insurance expert could be a profitable and
very much appreciated service addition
to your business.
If you have any questions about this
topic, please email me at AskFran@
Fran O’Brien is Division President, North
America Personal Risk Services, Chubb.
WEALTH & RISK
By Fran O’Brien
A Hidden Risk That Could Sink a Portfolio
Advisors can help clients and protect assets by developing a strong relationship
with a trusted independent agent who can review their P&C coverage