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