Preserving the value of accumulated wealth is obviously a prime concern for high-net-worth individuals. Typically, this responsibility is outsourced to a wealth management firm that includes advisors making sophisticated recommendations on asset diversification, estate planning and taxes.
As part of their services, a growing number of wealth advisory firms also offer personal and asset risk management and insurance consultations by partnering with an independent insurance agent.
The goal of the partnership is to create a holistic risk management program that identifies known and unknown threats to the client’s accumulated wealth. By developing a client risk profile, the agent can recommend how to mitigate and transfer the related financial exposures.
Both the wealth advisor and the insurance agent benefit from this alignment — the agent augmenting his or her book of business with an important new client, and the advisor providing a much richer set of services to the firm’s clientele.
I reached out to two experts to discuss their approach to creating a holistic risk management program for their high-net-worth clients.
Maryann Zaleski is an advisor to some of the wealthiest individuals in the world as an executive director at J.P. Morgan Private Bank in Morristown, New Jersey. A veteran wealth manager, Zaleski has long favored partnerships with an insurance agent to handle her clients’ risk management and insurance needs. Gil Lai is a former insurance underwriter who now serves the risk management and insurance needs of HNW clients as an agent with NFP Private Client Group, where he is a managing director.
Zaleski and Lai, who know each other professionally, exemplify the informal partnership trend between wealth advisory firms and specialist insurance agencies, each serving affluent families. The firms retain their operating independence but are joined at the hip when assessing client risk and insurance needs.
As Lai put it, “We’re in a position to add value to an advisor’s repertoire of advice. It’s a two-way street.”
Zaleski concurs: “Insurance is crucial to our clients’ asset protection. It’s important to us to have this partnership with an agent in place.”
It was common in the past for wealth advisory firms serving high-net-worth families and individuals to leave the risk assessment and acquisition of insurance policies up to the client, who separately discussed these matters with the family’s insurance agent. While there is nothing wrong with this scenario, much more can be gained for the client by aligning forces — wealth management and risk management.
Each party often is privy to the changing details in a client’s life and work that will be of importance to the other party. For example, if the wealth advisor learns that a teenaged daughter will be traveling with fellow students to Paris for a short-term study project, this information is valuable to the insurance agent, who can identify and address a wide range of travel-related risks, such as potential political instability, civil strife and health crises.
The agent also can offer assistance with pre-trip physician referrals and medical evacuation coverage, and provide timely advisories on transportation hazards. Many agents have relationships with third-party organizations that offer lost document assistance and emergency translation and transaction services. They also can determine if additional insurance coverage and higher limits of financial protection are required.
Insurance agents not only spot risks, they resolve them.
Zaleski shares this opinion: “The value of having an insurance agent work on our team is proactive and reactive,” she told me. “I am constantly looking for opportunities to better serve my clients, and it is important to evaluate their coverage and financial protection as their lives change.”
She recalled a situation where she was helping a client purchase a beach house and determined that the client needed additional coverage. “Because we had a relationship with a skilled insurance professional, we were able to bring our partner in to satisfy the need in a timely matter,” she said. “When people work in siloes, oversights are more likely, but when we work as a team, our clients always benefit.”
Lai said his previous career as an underwriter, designing comprehensive insurance programs for high-net-worth families and individuals, prepared him to evaluate their changing landscape of risks. “I’ve been fortunate that the advisors I first worked with viewed me as an important part of their team,” he said. “Many were concerned their clients’ deep pockets were a magnet for litigation. They wanted to be sure all the T’s were crossed and all the I’s were dotted. Well, that’s what I do.”
Planning for the Worst
Both Zaleski and Lai espouse the development of a holistic risk management program outlining the evolving risks confronting clients. This work typically falls on the shoulders of the insurance specialist.
Lai, for instance, starts with gathering as much information as possible about the client’s demographics, career, lifestyle, financial holdings, family members, homes and their location, memberships on for-profit and not-for-profit boards of directors, and passionate hobbies like sailing, art and vintage car collections. “I try not to leave a single stone unturned,” he said.
Following extensive due diligence into the risks that the client may confront, Lai examines the person’s current insurance policies. “From a high-level overview, the red flags become immediately apparent,” he said. “As I dig further into the vulnerabilities, I often find a host of problems — substandard insurance policies, gaps in insurance protection, inferior limits of financial protection, and duplicative insurance coverages that merely add to the overall cost.”
Once he has assembled the risk profile and recommendations, Lai likes to sit down with the wealth advisor and the client together. Since the client is already insured, his conclusions can be disconcerting, alerting the person to a serious problem. “I point out the deficiencies in their current program and illuminate the upsides as well,” he said. “I then provide my design for where I think they should be. It’s all very advice driven.”
He added, “This is all about establishing a relationship based on competency.”
This highly consultative approach is just the kind that Zaleski seeks in her partnerships with insurance agents. “As a wealth manager, I bring the best resources, thinking and ideas to my clients for everything from investments to trust and estate planning. However, a key part of our team is the insurance specialist, too. That’s what our clients prefer — a multidisciplinary approach to their wealth accumulation and preservation objectives.”
Similar advisor-agent partnerships are mushrooming across the country. The issue of geographic proximity that once stood in the way of such alignments is no longer an obstacle thanks to the proliferation of mobile, digital and video technology tools. Today, conferences can be arranged on the fly — the client in one place, the wealth advisor in another, and the specialized insurance agent in between.
— Read “Wealthy Families Actually Won’t Kill Each Other Over Money, Survey Finds” on ThinkAdvisor.