Planners fail implementation test
Financial planners are very good at advising their clients on risk strategies, but when to comes to looking at their own situation, the implementation is not so good.
"Planners should check market risk and income risk so that they have protection when an inevitable risk like death comes along," warns Michael Harrison of 21st Century Business Strategies.
"Also, adviser risk includes reputation. If that goes wrong it often leads to prosecution."
Harrison says there are seven questions every planner must ask themselves when it comes to risk.
What arrangement has the planner made to provide for an ongoing illness? This should include cover for not being able to work due to an accident or illness, or if the planner suffers from a major trauma such as a stroke or develops a disabling condition such as multiple sclerosis.
If the planner has been married before, are there any children that will need to be looked after financially?
Has the planner signed any personal guarantees and are there any conditions on those loans regarding death or disability?
Are there people who are critical to the success of the planner's business?
Are there assets that the planner wishes to leave to specific people and could this result in inequality among family members?
Are there family members the planner wants to exclude from their estate and, if so, who are they and why is this important?
A planner should imagine they are an executor of an estate and think about what the questions the dependents will ask, says Harrison. The planner should be able to provide the answers, which means they need to think about their own estate and be able to provide all the answers instantly, he says.
Harrison says good file notes are essential to avoid prosecution, and being sued.
"The planner should make regular reviews of their clients and combined with good file notes, that should reduce the risk of being sued," he says.
A planner should have knowledge of these types of risk in order to be able to run a good business, Harrison says.
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