Sittin' in: property/casualty agents and brokers can--and should--align themselves with planners at the wealth-management table.
In many cases, the answer is "no." Few agents and brokers actually have gotten to sit next to the financial planners, lawyers, accountants and other advisers. Increasingly, these advisers are assessing risks to their clients' assets, although without the same level of scrutiny and expertise an agent or broker can provide. This presents an opportunity for the independent agent or broker to demonstrate that he or she can bring a holistic risk management approach to the table to preserve wealth.
A survey conducted by the Chubb Group of Insurance Cos. found that more financial planners now assess clients' asset protection through property and casualty insurance. Yet many planners have a narrow perspective on the topic. They often limit their asset protection consultations to traditional liability risks emanating from home and automobile ownership and insurance coverage amounts. Few planners have the risk-management skills necessary to identify, assess, mitigate and finance the growing range of complex property and casualty exposures their clients face today. Most planners also are not expert at delving into the details of insurance contracts.
During a recent continuing education course for financial planners, many registrants said they were unaware of the insurance issues associated with the creation of a trust or limited liability company for a client. Yet the establishment of these--meant to preserve wealth for future generations and limit exposure to financial loss--introduces other risks. Since assets in a trust or LLC are technically no longer owned by the individual, they are not covered under existing personal insurance policies and must be insured separately.
The agent or broker who is able to consult on trust or LLC issues as well as a long list of others, including emerging personal Internet, travel, family security and liability exposures, can be invited to the table. One way an agent can secure that invitation is to ask high-end customers to hold a joint meeting with their financial advisers to discover exposures the agent or planner may be unable to uncover alone. Agents also can develop valuable contacts by networking and speaking on risk management topics at meetings of financial planners.
Once agents have identified opportunities to seek out relationships with financial planners, they need to be prepared to counter preconceived notions some planners have about independent agents. In recent focus groups conducted by Chubb, financial planners said they were reluctant to trust insurance agents and brokers as a result of the publicity regarding bid rigging and contingent commissions. Agents can overcome this obstacle by educating wealth managers about how they conduct business. Agents who disclose contingent commissions can demonstrate how they make the insurance transaction as transparent as possible.
Independent agents also can illustrate the value they can bring to the planners' client relationships. They can avoid appearing as salespeople by explaining their methodologies to uncover and assess risks during an annual insurance review, and by providing examples of specialized risk mitigation and finance strategies they have crafted for high-net-worth individuals. It is also a good idea for agents to explain how clients can secure high-quality coverage, yet save money, by understanding their ability to absorb risk through higher deductibles and self insurance.
Another effective strategy is to think like planners, who create plans based on clients' financial goals at various life stages. At each stage, different exposures become more or less acute. It also may pay to invest in subscriptions to financial planning publications to understand what topics are currently on the minds of planners.
Finally, many financial planners may not understand the difference between independent and captive agents. Independent agents can help to educate them about their unique ability to secure a variety of coverages from a number of insurers, while many captive agents typically sell only one company's products, which often are not in line with the needs of affluent clients. Furthermore, independent agents often provide a variety of risk management and claims services not available through captive agents.
By showcasing their knowledge, methodologies and versatility, independent agents and brokers can distinguish themselves--and help ensure that planners will save them a seat at the wealth-management table.
Andrew McElwee, a Best's Review columnist, is executive vice president of Chubb & Son and chief operating officer of Chubb Personal Insurance, Whitehouse Station, N.J. He can be reached at email@example.com.
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|Date:||Nov 1, 2006|
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