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360 Private Wealth Management's Natural Wealth Process: Person Risk Thumbnail

360 Private Wealth Management's Natural Wealth Process: Person Risk

RISK – Person Risk

Person Risk is anything that involves any risks an individual’s Capacity (health), Capability (knowledge and skills), and Connections (personal and business relationships).

Capacity (health) risks are risks to our physical and mental well-being. We’ve all heard the saying “Your health is your wealth!” There are a hundred more variations. Just Google “health quotes”! Health is a pretty important factor in living a full life. Most people are born without any significant health issues. Some people are born with a chronic illness or physical handicap but manage to live full lives in spite of their health situation. Of the healthy ones, some will suffer a serious illness or injury which impacts them temporarily or for the rest of their lives. In some cases, the illness or injury can be attributed to lifestyle choices. In some cases, they are disabled by something totally out of their control.

Throughout life, we are vulnerable to health-related financial risks. When we are young and just starting our working lives, we often have little in the way of investments or pension assets (Portfolio Assets) or, home equity (Possession Assets) which can be drawn on if we become disabled or die. As life goes on many of us take on more responsibilities with families counting on our ability to continue working and generating income. The ability to retire requires portfolio assets like investments and pensions. If we are unable to work, accumulating portfolio wealth is very difficult. And, when we retire, uninsured healthcare costs can be a drag on cash flow for many households.

There are Capacity risks that we can minimize and manage (lifestyle risks) and there are risks that are beyond our complete control (accidents and, some illnesses and diseases). A key to managing and minimizing Capacity risk is awareness and “controlling the controllable”.   Adopting a personal health plan around the tenets “Sleep Well, Think Well, Eat Well and Move Well” is a good start.

Some capacity-related risks are significant enough that they require insuring against. Death and disability can cause an individual or household severe financial hardship. We strongly urge people to understand what their financial risks are and insure themselves accordingly. About a third of working individuals will suffer a long-term disability over the course of their careers. The chances of dying prematurely have declined over time (we are living longer) but the catastrophic financial implications often resulting from death in a family make owning the right amount of life insurance a necessity for families.

Capability (knowledge and skills) risks are most significant in our working years when we are most vulnerable to job loss or a business failure. Getting a good education or skills training in our chosen field is a good start. Keeping current in our chosen field of expertise is equally important. We live in a rapidly changing world. It is becoming more and more important to stay abreast of changes and to have a commitment to continuing education. People can become as obsolete as equipment if they are not careful!

We are social beings. As such we are exposed to Connection (relationship) risk. Science suggests we need human interaction on a very base level. Many would agree that healthy relationships with family and friends are important ingredients of a well-lived life. At work and in business, relationships and networks are essential to success in all but the most unique situations. Connection risk involves all the issues that can contribute to problems and failures in relationships. Minimizing Connection risk is not as “easy” as it might be for Capacity (health) or Capability (knowledge and skills). There are no hard and fast rules to lower connection risk. 

No relationship is guaranteed to last forever. Indeed, relationships evolve and grow or fall by the wayside naturally over a lifetime. It’s just one of the facts of life.

It’s an established fact that one of the greatest threats to financial wellbeing is marital breakdown and divorce. The implications are often severe, especially when there are younger children involved and, in late-life separation and divorce situations. It is no secret that two people living together can often live “cheaper” than two people living separately and apart. Just try booking a cruise or an organized tour as a single person when people become comfortable traveling on cruise ships and pre-arranged tours again…

Connections are essential in work and business success too. A good connector and communicator can reap many financial rewards. This is why individuals and companies invest so much money in marketing, sales, and communication training.

As is the case with Capacity (health) risk and Capability (knowledge and skills) risk, minimizing Connection (relationship) risk is “controlling the controllables”. We cannot always control how relationships evolve. After all, there are at least two people in most relationships. Other people will have their own needs and desires in interactions. However, we can control how we think, act and communicate with others. In my humble experience, one of the biggest contributors to Connection risk is “taking relationships for granted”. Healthy relationships require commitment and an ongoing investment of time and effort to maintain. If we are in the right relationships, for all the right reasons, this is easier to do than if we are not… All lasting relationships, personal and business, are built on trust, honesty, and sincere care for the other party. We need to be honest with ourselves and others about our needs and intentions at all times. We need to communicate well, with kindness and consideration for how the other person might receive what we are saying wherever possible. Furthermore, when something goes wrong or we screw up, we need to own it and find a way to make amends as quickly as possible. In my mind, the investment of time and energy in building and cultivating quality relationships is the single greatest contributor to personal and professional well-being one can experience. The rewards of being a good Connector, someone focussed on building and maintaining solid personal and professional relationships, are indeed boundless. The risks of not can be boundless as well, in the other direction!

Person Risk (as we define it in the Natural Wealth™ Process) is a real factor in our financial and general well-being. Understanding the various risks, Capacity, Capability, and Connections and developing a philosophy and plan towards managing and minimizing Person Risk to the extent possible is a wise exercise, one with significant peace of mind payoffs for ourselves and our families.

If you have questions about Person Risk matters, call or email us. Regarding health-related risks, we are licensed health, disability, and life insurance brokers. We have tools to help you determine the risks and provide solutions to address the risks you and your family face.


David J. Luke, CFP, RFP, CLU, CH.F.C., CIM, RIAC | Financial Advisor

360 Private Wealth Management | Manulife Securities Incorporated 

Unit 1 – 25 Scurfield Boulevard, Winnipeg, MB R3Y 1G4 

Main Office 204.925.5868 | Direct 204.925.2073| Fax 204.925.2263 | Toll Free 844.688.3656