The Natural Wealth® Process divides Risk into three different types: Person Risk, Portfolio Risk and Possession Risk.
Person Risk includes the risks associated with our Capacity (physical and mental health), Connections (our personal and professional network; family, friends, work cohort and customers) and our Capabilities (knowledge and skills). Person Risk is made up of threats to our physical, emotional, relational and, where applicable, work well-being. Examples of real-life Person Risk include illness, accidents, breakdowns in social networks and, while working, sudden and longer-term changes in employment situations.
The 2020 COVID-19 pandemic has highlighted all of the facets of Person Risk. In fact, the situation we are collectively experiencing has been as close to a Person Risk “perfect storm” as I am likely to see in my lifetime. People are getting sick and dying from the disease. Many who have survived have lingering health challenges. Quarantining has impacted people’s mental health. Health care workers are facing extreme levels of stress. Mandated business closures and restrictions have impacted employment for a large swath of our working population. The good news this past couple weeks is it appears effective vaccine candidates are on the way. In the meantime, the medical profession is asking everyone to play their part to help keep the pandemic from overrunning us until the vaccines arrive.
In terms of Person Risk, Capacity (physical and mental health) should be a primary focus for us all. As the American philosopher Ralph Waldo Emerson once said, “The first wealth is health.” Health IS wealth. With it the possibilities are many. Without it… Our options can be limited. Good health, for those blessed with it, can be easy to take for granted. One would be very, very wise not to. Good health can be fleeting and can be taken away from us, quite literally, in a heartbeat. Medical science is amazing to be sure. It has developed treatments, medicines and even some replacement parts, to help us sustain our mental and physical Capacity. While medical science is great, a personal Capacity maintenance strategy can provide the best opportunity to stay well and minimize controllable Person Risk for as long as our genes will allow.
When it comes to Capacity many wise people incorporate some sort of “Live Well” mental and physical wellness maintenance strategy into their daily lives. A solid Live Well strategy often includes thinking well, eating well, moving well and sleeping well. The COVID pandemic is presenting a challenge to people trying to adhere to this mantra right now. For example, gyms are closed under the latest health directives in place, at the moment, where I live. That said, the most dedicated Live Well adherents are finding work arounds including building home exercise strategies including accessing streaming exercise routines until they can get back to the gym.
Wise people also understand the power of Connections. Our personal and professional networks are as important as a personal and mental health strategy, in minimizing Person Risk. In-person, face-to-face interactions are an integral part of being human. Many would agree that staying connected to those we love and appreciate is a core mental health maintenance strategy (and an important part of personal Capacity). In fact, one of the biggest risks COVID is presenting is to our mental health from the isolation many are experiencing from various public health directives. Much is being written about the mental health impacts of the isolation being experienced by single person households, the stresses being experienced by couples and families living in isolation and the societal and work pressures being felt by the many people working from home. On the latter, many employees at first celebrated all the benefits of the work-from-home opportunity created by the COVID pandemic. Now, nine months into the grand experiment, the bloom is coming off the rose for an ever-increasing number of people working from home. Many people are hard-wired with a need to be with other people.
It is more important than ever right now to stay connected with the most important people in our lives, both personally and professionally. Relationships need to be nurtured or, like most other things in life, they get sick and die. We need to consider the relationships we value most and reach out. I might humbly suggest we make a list of people we want to stay connected with and make a point of reaching out every week or every few weeks or monthly, depending on the relationship. There are multiple tools available to connect including phones, online video calling and meeting venues, texts (when calling is not an option), emails and sometimes even old-fashioned mailed greeting cards. There’s no lack of opportunity where there is a will to stay connected.
Wise people, who depend on work to generate cashflow for themselves and their families, appreciate the importance of continuous Capability (knowledge and skills) improvement. People enjoying life post-work understand the power of curiosity and an engaged mind in maintaining mental health and quality of life. Someone who is good at cutting down trees spends a lot of time sharpening their saw, keeping their work tools at their very best. Adopt a similar mindset. In the ever-expanding service economy, our tools are our knowledge and skills. Never let them dull. Keep sharpening your knowledge and skills through courses and reading. Become a student of your chosen career or profession.
These are challenging times. Companies are adjusting their workforces to survive the challenges of the COVID economy. Companies are more likely, all else being equal, to retain employees with a history of taking courses to improve their work knowledge and skills. Employers you want to work for pay attention to these things. If the company you work for does not, others will. Use your LinkedIn profile to publicize course and program completions. While there is no iron-clad guarantee that continuous knowledge and skill improvement will save you from the risk being laid off in a downsizing, it can make the difference in how long you are out of work. A resume with a list of program and course completions gets noticed.
Capacity (health) Risk, Connections (network) Risk and Capabilities (dated skills and knowledge) Risk…There are things you can do to minimize each of these Person Risks. However, there are situations where awareness and risk management are not enough. If we count on our ability to work and generate income as essential to our personal and our families’ financial well being, then we must understand there are risks that are too big to ignore. Loss of health through illness or injury or loss of work can be financially devastating. If you die, get sick or hurt, to the point you can’t work and you don’t have the investments to generate income in your absence or a business that can function without you, you need insurance to cover you and your family. If you die or are disabled, what resources exist to replace your work earnings? If you are laid off or your business fails, what financial resources do you have to bridge you to your next opportunity? Not everyone is covered by social safety nets. We need to know what the consequences of certain outcomes will be and what we can do now to mitigate the worst of them. Take time to consider the most significant financial risks you face and develop a plan for dealing with them now, while you are in a position to do something about them.
A word for snowbirds and other travelers. I know many people are choosing not to travel this winter. If you are travelling, emergency travel medical insurance is essential. Understand the coverages provided and the exclusions in your plan, BEFORE you leave. Horror stories about emergency travel medical situations and travel insurance claims are common. In many situations, claimants did not understand the terms of their policy, or most importantly pre-existing condition clauses and exclusions. If travelling this year, are you covered for COVID-19 related treatments and hospitalization? Not all plans cover this important risk. If you don’t know or are unsure of any provisions in your policy, ask. A single medical event in a foreign country can easily end up costing hundreds of thousands of dollars in the worst-case scenario. Worse still, when time is of the essence in treatments, are the delays in treatment that can occur while the hospital confirms your ability to pay for treatments or surgery. Be informed. Be clear as to what you are and are not covered for and what the protocols are with your insurance company if you need to make a claim.
We work with client households to determine the Person Risks they are most exposed to and then develop plans for minimizing, managing and, where sensible, insuring risks that are the most financially devastating. We provide a complete range of individual life, disability, and health insurance plans from a wide range of suppliers. If you need help in assessing your Person Risk, call or email us and we will arrange a meeting to review your situation and provide solutions to make sure you can live life confident in the knowledge that if the worst ever happened, you and your family would be financially OK.
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