Fiduciary Risk Management
At Pointer Creek Wealth Management®, we do not begin a risk-management conversation by asking, “What insurance should you buy?” We begin by asking what could prevent the client, family, business, trust, or other entity from accomplishing its objectives—and what is the most appropriate way to address that risk.
Sometimes the answer is insurance. Sometimes it isn’t. A thoughtful process evaluates whether a risk should be retained, reduced, transferred, or addressed through some combination of those approaches. Only after understanding the risk and its consequences should the conversation turn to whether an insurance contract—or any other solution—is appropriate.
Retain It. Reduce It. Transfer It.
Sometimes the most appropriate decision is to buy no insurance at all. A family or entity may have sufficient financial capacity to absorb a particular loss without jeopardizing the larger plan. In those circumstances, paying an insurance company to assume the risk may not be necessary or efficient.
Not every risk has to be accepted exactly as it exists. Changes in ownership, liquidity, reserves, diversification, contractual arrangements, estate structure, business planning, or other decisions can reduce either the probability of a problem or the financial consequences if it occurs.
Sometimes retaining a risk simply doesn’t make financial sense. Insurance is fundamentally a contract that transfers specified financial risks to another party. When that transfer provides an efficient way to protect a family, business, estate, or financial plan, an insurance contract may be entirely appropriate.
The fiduciary question isn’t whether insurance is “good” or “bad.” The question is whether transferring that particular risk serves the client’s plan better than retaining it.
We occasionally meet people who tell us, “I don’t believe in insurance.” Insurance isn’t really something you have to believe in. It is a financial tool—and like any financial tool, it can be used appropriately, unnecessarily, efficiently, inefficiently, or sometimes very poorly.
We are equally skeptical of blanket statements such as “everyone needs this insurance” and “all annuities are bad.” Neither substitutes for planning. A particular contract may be inappropriate for one client and mathematically useful for another—depending on what problem is being solved, what alternatives exist, what it costs, how it is structured, how it is taxed, and how it interacts with the rest of the plan.
Planning should determine whether the tool belongs in the toolbox—not the other way around.
A business owner with a large loan
Suppose a young entrepreneur borrows several million dollars to acquire or expand a business, and the lender requires the debt to be protected if the owner dies before it is repaid. That doesn’t automatically mean the owner needs an elaborate permanent insurance strategy. The planning question begins with the obligation itself—its duration, the owner’s existing resources, and the consequences of death.
In the right circumstances, an appropriately structured term insurance contract covering the relevant period may transfer a potentially catastrophic risk for a comparatively modest cost.
That’s risk management. It began with the liability—not with an insurance product.
Further case studies—surviving spouse & income, estate liquidity & trusts, and others—are in development.
Having substantial assets doesn’t eliminate risk. In fact, greater wealth can introduce additional exposures involving:
Large organizations routinely identify risks, decide which ones they can afford to retain, reduce exposures where practical, and transfer risks that could materially impair their objectives. We bring that same planning discipline to individuals, successful families, business owners, trusts, and other entities.
With no allegiance to selling insurance, our planning models evaluate both risk retention (no insurance contracts) and risk transfer (including estate- or trust-owned insurance where appropriate), using multiple carriers, structures, and scenarios—comparisons that could “wrap around the conference room.” Our loyalty is to the client outcome, not to any company or policy-production target.
The questions we work through
Pointer Creek’s fiduciary planning process is designed to evaluate whether a risk should be retained, reduced, or transferred and to compare reasonable alternatives. A recommendation to investigate transferring a risk does not automatically mean Pointer Creek must be the firm implementing it.
Depending upon the solution, implementation may occur through Pointer Creek’s fiduciary wealth-management platform where appropriate, or through an appropriately licensed outside or affiliated provider.
The planning question comes first. The implementation channel comes second.
Content pending compliance review. When appropriate, this section will discuss how advisory-based solutions may fit within a fiduciary plan. Crucially, Pointer Creek remains agnostic about the wrapper—the planning determines what characteristics are needed; we don’t start with “we sell annuities.”
Questions This Page Will Answer
Detailed answers are in development.
Fixed insurance services offered through B Renner LLC, an unaffiliated Ohio insurance agency.