Managing risk: are you advising clients about risk management?

• Author: Freedman, Mitchell
• Position: Client guidance

CPA financial planners, wealth managers and investment advisers perform a wide and comprehensive array of services for their diems as they assist them in identifying personal and financed goals; preparing roadmaps for achieving the goals; and implementing, monitoring and adjusting the plans based upon life-changing circumstances. These services are generally noted its personal financial planning, undertaken by CPA PFP* and typically consist of planning for cash flow (budgeting), taxes, retirement, estates, investments, education funding and other similar or related services.

One of the services that CPA PFPS invariably say they provide is "risk management," While some might believe they' understand what this entails, the term is somewhat ambiguous.

Risk Management Defined

Is it reducing risk in art investment portfolio? Yes, but I'm not talking about that. Is it providing advice and possibly products for life, health, disability and long-term care insurance? Indeed, but I'm not referring to that cither. Is it giving advice to clients that they should seriously consider the purchase of an umbrella liability insurance policy? Of course it is, but that is merely scratching the surface of risk management,

I submit that--unless CPA PFPs are advising their clients on property and casualty (PC) insurance--they are providing inadequate service and exposing themselves to undue risk of professional liability.

CPA PFPs may reply with, "I'm not an insurance broker," or, "I give some loose advice, but I don't sell those products." They may also say they don't have the knowledge to advise clients in this unfamiliar arena.

While these and similar comments are understandable, it docs not alter the fact that if CPA PFPs claim to provide risk management services they must not skimp on advice and counsel in the 1*0 arena.

I'm a CPA PFP who provides comprehensive risk management advice to my clients. 1 believe that such advice is an essential dement of service to assist my clients toward financial independence, security and well-being.

I began developing the body of knowledge I need to competently advise my diems in this arena more titan 30 years ago, and I keep adding to it. Insurance products have become more complex over the years. Like other financial products that used to be fungible from one company to the next, today there are a wide array of decisions that must be made from company to company and within various product options within companies.

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