What Every Financial Advisor Should Know

What Every Financial Advisor Should Know
Ron Cohen, RHU, RR

Yes, a financial advisor’s job is to protect one’s accumulated assets, but how many prepare their clients for the uncertainties of life? In other words, protecting one’s greatest asset, “the ability to earn an income” might just take precedence in proper financial planning.

As 70% of the wealth in the United States is controlled by people over age 50, the word insurance has taken a backseat to the term “financial”. Many insurance companies have incorporated the word into their names and thus, disability insurance has become a topic left in limbo. Terms like Asset Protection and Wealth Accumulation have moved to the forefront in the last 10 years, naturally, retirement has become an issue of concern for most Americans. Well, here it is short and sweet, reality!

Being disabled is an eraser. All those numbers financial planners forecasted must now be changed. Yes, perhaps your kid’s college education, as well as your mortgage payments, pension plan contributions (they stop!) and you might even have to start selling off assets that you have accumulated just to survive. I’ve seen it happen all too many times and I am certain, I will see it happen again. Why?

People are trying to protect their futures, yes, but they are going about it in the wrong way. When you build a home, what’s the first thing you do? Lay the foundation and that is exactly what disability insurance does. It should become the bedrock of any individual’s financial plan. Yet, as you can well imagine, many financial planners find the topic confusing and do not wish to sacrifice ongoing income for the relatively small dollars involved in disability insurance sales. Yes, they would have to become licensed and continuing education courses prove to be too time consuming to justify the end result. The mindset is simple in most cases. If one receives a percentage of the assets accumulating in your portfolio each year, why bother with a few hundred dollars and risk losing the client. In other words, it’s an area few financial advisors see worth pursuing.

Years ago, I had a phone call from a financial advisor. Someone gave him my name and as I was a third party in this particular case, he felt I would give an honest opinion. He was reviewing three proposals a client had given him to review. All and all, three different companies, three different agents and he had no clue what he was looking for. The only thing he said was, “This seems very expensive!” (Note as well, this advisor was also a CPA.)

My reply, “Not really and I will show you why.” What I then told him, is actually what I have been telling individuals for 40 years. “John, let’s remove the issue of becoming disabled permanently, as most individuals just cannot see that happening to them.” I continued; “Can you see the possibility of a sickness or accident resulting in a loss of income for one year?” “Certainly”, he said. I continued; “If you look at the total premiums your client will pay all the way to age 65, you will notice something very unique, as the total will be less than the your client would receive in benefits for a 1 year claim!” “If by chance, your client is disabled permanently, well, you see the value of benefits paid could amount to 3 million dollars….” He stopped me there. “I understand”, he said. How much money did he make from that conversation? Nothing, yet how much did he learn about the value and reality of disability insurance? Enough to become a client, after suggesting his client contact me directly.

Granted, financial advisors have a key role in protecting one’s assets and I suppose Wealth Preservation and Asset Protection will continue to take precedence in our Society and yet, what are you thinking about now? Protecting your family and your greatest asset, “your ability to earn and income”, in the event of a disability caused by a sickness or accident. Yes, there is urgency here and preparing for the future does result in peace of mind. I suggest you build your house accordingly and your Financial Planner use the proper blue print during construction.
“One thing is certain….change. It is the preparation that makes all the difference.” Ron Cohen, RHu

The Essence of Disability Insurance
Ron Cohen, RHU

The holiday season can be quite chaotic for many. The traveling alone, well, you get the picture. If you are one of those who wandered through the airports checking flight schedules and baggage, the word anxiety comes to mind. All and all, still a great time of the year!
I noticed something very interesting during my run through the crowds, standing in lines, sitting and waiting for the plane to board and then again, during the flight. We have become a Society dependent upon electronics. Cell phones, PDA’s and computers were everywhere! The minute the stewardess requested the passengers turn off their electronic companions, I am certain, many felt helpless and out of touch with the world!
At this point, many purchased the movie, read, or just went to sleep. In other words, few began communicating with one another. That’s the point here. Interaction, where have you gone?
During the last hurricane (Ike), many of us lost power and were forced to shut down our businesses for weeks. Some lost their businesses entirely, as well as their homes and some, even lost their lives. Nature and life are indeed unpredictable.
Information has become a chosen commodity. In other words, the TV station you watch, the radio stations you listen to, the movies you view, the books you read, the websites you visit, all are by choice. Now, turn off the power and your access to information is lost and you remain in the dark….for how long? Until somebody comes and fixes your power lines, you will be helpless. Again, the word anxiety comes to mind.
Preparing for a hurricane might help, having a generator, water, propane tanks and so on, could be beneficial….but many here in Texas realized that after the fact. At a local Loews store, I asked one of the workers how many generators they sold after the hurricane. “At least 1000”, he said. “People want to prepare for the next power outage”, he said. I’m sure that’s right. For those that lost their homes and businesses, not much can be done now.
As many of you might know, my house was hit by a tornado during Ike and helpless is a word that just doesn’t quite express the emotional roller coaster my wife and I experienced. As my wife was also disabled during the storm, it was quite traumatic to say the least.
An unforeseen disability due to a “sickness or accident” is unpredictable, yet the odds are much greater than being victimized by a hurricane. One can prepare for a disability and protect their families from the loss of income that will result. “Protecting one’s greatest asset, their ability to earn an income”, is the essence of disability insurance. Receiving the proper information and purchasing coverage prior to a disability is the preparation one must take before the storm. I wonder how many of those 1000 people who purchased generators from Loews, wished they had purchased them a day earlier. Once the lights go out, all information and communication is lost. Perhaps it’s time to interact with each other again and communicate. You might just find that a one on one conversation is the generator you need now.