The Natural Wealth® Process divides the financial life planning process into five distinct elements; Vision, Wealth, Tax and Estate, Cash (Flow), and Risk. The Natural Wealth® Process addresses each of these elements through the calendar year. Over the last quarter of the year we will emphasize the Risk element of the planning process; how individuals and families can minimize risk where possible, manage risk where necessary, and insure against risks where appropriate.
In order to discuss risk and how it impacts a financial life plan we need to begin by defining risk. The Merriam Webster Dictionary defines “risk” as:
- possibility of loss or injury: Peril
- someone or something that creates risk
- chance of loss or perils to the subject matter of an insurance contract
- the degree of probability of such a loss
- a person or thing that is a specified hazard to an insurer
- an insurance hazard from a specified source
- the chance that an investment (such as a stock or commodity) will lose value
Now that we have a definition it is easy to see that we must deal risk every day as we go about living our lives. From the time we get up in the morning until we go to sleep at night, we face many types of risk whether it is to our person, to those closest to us whom we are responsible for, to our financial assets or to our property.
We make decisions every day that can increase or decrease our risk in any given situation. Some situations offer a risk-reward trade off. More risk can offer the potential for a greater reward, personal and financial. Less risk comes with a likelihood of less reward (not always but often this is the case). Safety often has a price. Other situations are a pure risk situation with little or no upside that must be addressed or insured against. In virtually all situations we deal with on a daily basis, risk is a factor in the decision-making process. One must consider risk minimization or, if that is not feasible, risk management and where sensible, insurance strategies.
Much of what we do as financial advisors is helping clients uncover risks an develop strategies to help them address risks in their financial life plan. Risk management comes in many forms including having proper legal agreements and estate planning documents in order. It involves having the right kind of personal and property insurances in place to cover the most significant financial losses that might occur if one gets sick or hurt or dies or if our personal property is damaged or destroyed or, if something we do or own exposes us to third party financial liability. Risk capacity, financial and emotional, is a core element in the investment management process. Investment portfolios need to reflect the underlying ability of the investor to withstand market volatility or asset risk.
We will be placing special emphasis on the element of risk here at 360 Private Wealth over the next three months. We will provide you with some thoughts to consider and some actionable advice as in the area of risk and its impact on your household’s “Person, Portfolio and Property” wealth.
If you would like a dedicated personal household financial risk assessment feel free to call or email us to arrange a time to meet.
In the meantime we hope you will find our blogs and the tools we will provide in coming weeks useful in helping you understand your own household financial risk exposure and the possible solutions available to address the financial risks you and your family face.
David J. Luke, CFP, RFP, CLU, CH.F.C., CIM | 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