Changes in the Insurance Industry : Our Responsibilities and Your Responsibilities

In this newsletter we want to update you, our clients, of the implications of Financial Markets Authority’s new regime for Financial Advice Providers. In particular,  we want our clients to fully understand what our responsibilities are to you as your insurance adviser,  and how you can more effectively take responsibility for managing your own risks. The new regime places greater emphasis on creating risk management solutions over a client’s lifetime, rather than a series of disconnected policies that lack the flexibility to adapt as circumstance change. 
Being responsible is an enormous privilege…. It’s what marks anyone as a fully grown human”Barack Obama
Responsible Risk Management   
Financial risk is with us for all our lives. Being able to manage it in a timely and responsible manner is the key to being able to mitigate the effect of risk.
The sources of financial risk most commonly experienced by individuals and families are:

– Loss of income through health, accident or redundancy
– Incapacity through illness or accident
– Death
– Medical care costs
– Not adequately providing for retirement

Our role to ensuring that we help our clients develop and maintain an overarching risk management programme that is sufficiently adaptable to suit their evolving life cycle stages and any changes in the risk environment.
Attitudes to Financial Risk
We find that each of our clients have differing perspectives relating to their:

willingness to accept risk,
capacity to bear risk. 

We find that many clients have a willingness to accept risk, however they do not have the financial resources to accept that risk. 

Ideally, we suggest that our clients should have access to a survival fund or facility equivalent to 3 months income that they can draw on in times of adversity.
But three months is not enough for when facing the consequences due to health and accidents incapacity and death. In most cases our clients need a structured insurance programme to enable them to meet their responsibilities as a partner and/or a parent.
“The first step in the risk management process is to acknowledge the reality of risk.
Denial is a common tactic that substitutes deliberate ignorance for thoughtful planning.”Charles Tremper
Annual Reviews – The Adaptation Process 
How we Help
Our responsibility is to advise our clients about the appropriateness of their individual risk management programme.  All clients experience changes in risks faced and an insurance-based risk management programme that was appropriate at one point of time can gradually be less relevant and becomes a financial burden.
Up to Date Information
 One of our major responsibilities is to undertake systematic reviews of our individual clients.  The reviews need to be comprehensive, as does the analysis and the response. We recognise that our clients risk environment is continually changing, as are their perceptions to risk. 
Our commitment to you is that our advice is contemporary and relevant; and reflects you and your family’s unique circumstances.
The Annual Review Assessment.
Our review process begins with making sure we have all current and relevant information about your financial risks and what strategies you have to manage these. Knowing about your income, assets and liabilities position is fundamental to the review, as is information about your responsibilities to your dependents.  We must then gain an understanding of your particular objectives in the medium and longer term.
Finally, we need to assess your attitude to risk.
Based on the above, we prepare an assessment of the sources and levels of risk that you and your family face,  and then review the mitigating strategies you have in place. For example, you may have passive income sources or uncommitted investments that can be utilised in times of distress. Where these are not adequate or absent, we will make recommendations for how insurance products can be effectively used to manage the residual risk.
Those who cannot change their minds,
 cannot change anything.” George Bernard Shaw
Managing Your Ongoing Insurance Program
In the medium term (ie 1-3 years) many of the insurance components of our clients’ risk management program do not need major revision and we can agree on minor adjustments via telephone and/or e mail.
In situations with the arrival of new dependents, new assets being purchased, business ventures emerging, and/or new debt obligations being created, the situation become more complex. In these situations we would prefer to meet with you in person so we can explore options that can be considered.
In the reverse situation, the same applies. As risk diminishes the opportunity to modify your insurance component within your risk management program needs consideration. We often find that as clients accumulate higher levels of savings and investments they are in the position to self-insure some of the risks that they may face and reductions or removal of covers may be required.
We want to stress; it is not about insurance…. it is about risk management.
 Risk Management Tools
Over the coming months our newsletters will provide detailed information about the various risk management tools that are available to you. Our objective is to create awareness of risk situations and what tools you can use to manage them in a manner that is consistent with your individual capacity to accept and bear risk.
“We don’t sell insurance; we sell what insurance can do for you.”Ben Feldman
Special Request – Compliance Requirement
All clients are required to sign our new disclosure document on how we work, how we are paid, our privacy policy and general information. We would be pleased if you would sign and return our Initial Disclosure document. 

If you have questions, or your circumstances are changing, please contact us.