Wealth Exposed E-Book

Brian G. Flood

• Herausgeber: John Wiley & Sons
• Kategorie: Fachliteratur
• Serie: Wiley Finance Editions
• Sprache: Englisch

Seitenzahl: 313

Veröffentlichungsjahr: 2013

Beschreibung

An indispensable survival guide for high-net-worth individuals and their advisors If you're like most high-net-worth individuals nowadays, you are underinsured, over-targeted in litigation, and dangerously exposed to risks that can profoundly jeopardize your lifestyle and rob you and your family of what they've worked so hard to achieve. Don't risk it all for lack of basic knowledge. Read Wealth Exposed and get the practical guidance and real-world solutions you need to protect your hard-earned assets. Written by a leading national risk management expert with extensive experience advising high-net-worth individuals, Wealth Exposed alerts you to the full range of risks to which high-net-worth individuals are exposed, while schooling you in your risk management ABCs. Designed for high-net-worth individuals, their CPAs, attorneys, family office managers, and others, Wealth Exposed arms you with the knowledge and tools you need to protect yourself, or your clients, from mayhem. * Provides a framework for creating a comprehensive personal risk management strategy * Contains numerous real-life anecdotes and case studies drawn from the author's case files * Discusses insurance solutions for property, cars, jewelry, aircraft, watercraft, wine, cars, and more Read Wealth Exposed and find out what you need to know to protect your assets from risk and secure your peace of mind.

Leseprobe

Contents

Cover Page

Series Page

Title Page

Copyright

Dedication

Contents

Introduction

THE CHALLENGES OF WEALTH AND THE NEXT LEVEL

WHY WEALTH EXPOSED NEEDED TO BE WRITTEN

HOW TO USE THIS BOOK

Chapter 1: Welcome! You Are at the Next Level

A REAL-WORLD SUCCESS STORY

WHAT RISKS ARE YOU FACING?

Chapter 2: My-Oh-My, How Far You Have Come!

REMEMBER YOUR FIRST APARTMENT?

Chapter 3: Life Is Too Short to Drink Cheap Wine

A LOOK AT MANAGING VALUABLES AND COLLECTIBLES SCHEDULES

NOW TO THE WINE CELLAR FOR A VERTICAL TASTING OF LAFITE

THEN THERE’S THE ANTIQUES, RUGS, CHINA, AND OTHER TREASURES

Chapter 4: The Hired Help—Who’s Watching Whom?

THE REAL RISK OF “NANNY REVENGE”

WHAT CAN GO WRONG? EVERYTHING

MANAGING THE RISKS OF HOUSEHOLD STAFF

FOUR THINGS ALL DOMESTIC EMPLOYERS NEED TO KNOW ABOUT EMPLOYEE LAW

WORKERS COMPENSATION, EMPLOYEE BENEFITS, AND THE EMPLOYMENT PRACTICES ISSUES DOMESTIC STAFF PRESENT

Chapter 5: Which Car Will I Drive Today, the Ferrari or the Bentley?

IT’S NOT YOUR OLDSMOBILE’S INSURANCE COVERAGE

INSURING FOR THE UNDERINSURED AND UNINSURED

HIGH-END CARS NEED HIGH-END INSURANCE COVERAGE

Chapter 6: How Big Is Your Umbrella?

STANDARD UMBRELLA POLICIES VERSUS SPECIALIZED UMBRELLA POLICIES

HOW MUCH IS ENOUGH?

FILLING THE GAPS

NOT-FOR-PROFIT BOARD MEMBERS—ARE YOU AT RISK?

SUMMARY

Chapter 7: Toys, Toys, and More Toys

CASE-IN-POINT

MANAGING YOUR RISKS AT SEA...

...AND IN THE AIR

YOU’D BETTER SWEAT THE SMALL STUFF

Chapter 8: Personal and Family Security Risks

WHOM ARE WE REALLY DEALING WITH HERE?

WE’RE ALL AN OPEN BOOK

UNDERSTANDING THE THREATS

THE WORLD IS YOUR LIABILITY

Preemptive Security Planning

Chapter 9: The Dangers of Wealth

HIGH PROFILE EQUALS HIGH RISK

WHAT EXACTLY IS DEFAMATION?

PROFESSIONAL LIABILITY

THE HIGHER THE PROFILE, THE BIGGER THE LAWSUITS

THE WEALTHY NEED TO PREPARE FOR THE WORST

YOU ARE YOUR BRAND, SO YOU’D BETTER PROTECT IT

PROTECTING YOUR INTELLECTUAL CAPITAL

Chapter 10: Personal Risk Management Planning at the Next Level

IT’S ALL DOWNHILL FROM HERE

THE PERSONAL RISK MANAGEMENT PROCESS

GENERIC SOLUTIONS JUST DON’T CUT IT AT THE NEXT LEVEL

Chapter 11: Would You See an MD Generalist for a Heart Transplant?

IT TAKES THREE TO TANGO

WHAT YOUR PROPERTY-CASUALTY AGENT DOESN’T KNOW CAN HURT YOU

IT’S NOT JUST ABOUT INSURANCE

ADVANTAGES OF CONSOLIDATING YOUR PERSONAL RISK PROGRAM

SERVICE FIT FOR KINGS AND QUEENS

IT TAKES A VILLAGE

Chapter 12: Getting Started with Next-Level Planning

IT’S NOT GOING TO GET ANY EASIER

HOW DO YOU EAT AN ELEPHANT?

GO AHEAD AND RIP OFF THAT BAND-AID!

Chapter 13: Making the Move Abroad

IT’S ALL IN THE PLANNING

WHAT EVERY EXPATRIATE SHOULD KNOW ABOUT INTERNATIONAL INSURANCE COVERAGE

INTERNATIONAL PROPERTY COVERAGE

VALUABLE ARTICLES VERSUS REGULAR PROPERTY

SCHEDULING YOUR VALUABLES

STORING YOUR PROPERTY

TRANSIT INSURANCE

INTERNATIONAL PERSONAL UMBRELLA LIABILITY COVERAGE

KEY TAKEAWAY—DON’T LEAVE HOME WITHOUT IT

Chapter 14: Weaving It all Together

FRANCESCA’S FABULOUS LIFE—A CASE STUDY

FRANCESCA’S DIRECTORSHIP

FINAL STRATEGIES FOR FRANCESCA AND JOHN

SUMMARY

Conclusion

IT’S EASIER THAN YOU THINK

Appendix A: Sample Personal Lines Checklist

Appendix B: Coverage and Service Comparison

Appendix C: Specialized Flood Insurance versus Standard Flood Insurance

Appendix D: Ten Items to Include in Family Disaster Plan

Appendix E: Breakdown of Audio and Video Recording Laws

VIDEO RECORDING

AUDIO RECORDING

Insurance Glossary

Useful Websites for Personal Risk Management and Insurance Information

About the Author

Index

Founded in 1807, John Wiley & Sons is the oldest independent publishing company in the United States. With offices in North America, Europe, Australia and Asia, Wiley is globally committed to developing and marketing print and electronic products and services for our customers' professional and personal knowledge and understanding.

The Wiley Finance series contains books written specifically for finance and investment professionals as well as sophisticated individual investors and their financial advisors. Book topics range from portfolio management to e-commerce, risk management, financial engineering, valuation and financial instrument analysis, as well as much more.

For a list of available titles, visit our Web site at www.WileyFinance.com.

Cover design: Wiley

Cover image: top and bottom © iStockphoto.com/pictograph; red leather © iStockphoto.com/claylib

Copyright © 2014 by Brian G. Flood. All rights reserved.

Published by John Wiley & Sons, Inc., Hoboken, New Jersey.

Published simultaneously in Canada.

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ISBN 978-1-118-81069-9 (Hardcover); ISBN 978-1-118-81080-4 (ebk);ISBN 978-1-118-81070-5 (ebk)

For my wife, Regina, whose love and support provides the foundation as our dreams are pursued.

My children, Francesca, Andrew, and Peter John (PJ), who remind me each day of the joy of being a dad. Dream big and great things will happen!

My late father, Gerard, who taught me the insurance business and the importance of integrity.

My mother, always excited to hear my dreams and ambitions, no matter how outrageous, encouraging all the way to always reach for the stars.

Terry, my brother and business partner. A great pilot, captain, and navigator in business, in the air, and on the seas.

Introduction

May you live in interesting times.

—Ancient proverb

These are, indeed, interesting times for people of wealth, but perhaps not in the way you would like to think. I had always thought this ancient proverb to be a blessing that wishes the gift of wisdom for someone. However, it was recently explained to me that it is actually a curse—a less-noble wish for an experience of upheaval and anxiety. While I wouldn’t necessarily wish that upon anybody, the adage turns out to be appropriately prophetic for what has transpired over the last several years in the lives of people who have attained higher levels of wealth.

As anyone would have expected, the extraordinary convergence of a housing and stock market crash, a credit crisis, a recession, and years of irresponsible fiscal management of our government has taken a severe toll on the American psyche. As if suffering significant losses of net worth during the extended crisis wasn’t enough, the wealthy have become ground-zero in the politically inspired tumult that spawned the “Occupy Wall Street” movement and ignited a heated election-year debate over their “fair share.”

In this new theater of class war, people who would otherwise desire to live quiet, productive, and often charitable lives now find themselves targeted by government redistributionists and resented by the “99 Percent.” But, if recent trends are any indication, the wealthy may have bigger worries than mere taxes and scorn. As the growing income disparity continues to widen the divide between the so-called “haves” and “have-nots,” the wealthy now face a much higher risk of becoming the target of “citizen redistributionists”—those seeking their “fair share” through an accommodating justice system.

We’re all familiar with the general theme: A group of teenage boys stage a harmless prank that goes bad, injuring an unsuspecting boy. Three of the boys, sons of local manufacturing workers, receive nothing more than a verbal lashing and a school suspension, while the fourth, the son of a high-profile CEO, becomes the subject of major lawsuit. Follow the money. Fortunately, the injured boy just suffered a broken collar bone and the trauma of humiliation; so the court merely awards $100,000 in damages. Had the prank gone really bad, resulting in a brain injury or death, the damages would have rocketed into the tens of millions of dollars. It always comes down to a capricious twist of fate that could have life-changing consequences.

In a society already deemed the most litigious in the world, the stakes for people with assets are increasing at an alarming rate; yet, many high net worth individuals remain dangerously unprepared. As you might expect from a financially astute segment of the population, it’s not necessarily from a lack of awareness of the risks; rather, it is generally from a drastic underestimation of their liabilities and a lack of understanding of how to effectively use personal risk management strategies and insurance to protect themselves and their assets.

THE CHALLENGES OF WEALTH AND THE NEXT LEVEL

Property, casualty, and liability coverage is difficult for most people to understand at any level; but when you spend your life building wealth, and, as a byproduct, adding multiple layers of liability, it can become overwhelmingly complex at the next level. The problem for people who ascend to the next level of wealth is that they continue to rely on insurance coverage designed for their simpler, past lives. Several pieces of real estate, a few staff hires, and a couple of new luxury cars later, and their patchwork of mass-market insurance policies provides less protection than an umbrella in a cyclone.

At the other end of the spectrum are those who do expect to pay more for higher-end coverage, but, through a piecemeal approach to addressing their protection needs, they wind up overinsuring for smaller losses, or shelling out more for premiums than they should. In reviewing the insurance policies of wealthy individuals, I constantly come across exceedingly high deductibles on small risks, or I find a complete lack of policy coordination, both of which result in highly inefficient pricing, not to mention the failure to take advantage of significant discounts.

Underestimating risk or using inefficient solutions is likely to occur when people climbing the wealth ladder outgrow the capacity of their original property-casualty agent, who may not have access to the specialized risk management solutions needed at the next level. For the same reason why a high net worth investor wouldn’t seek off-the-shelf investment advice from a stockbroker, people with substantial assets to protect shouldn’t rely on mass market solutions to navigate the liability minefield. Perhaps the more appropriate analogy is the Maserati owner who takes his car to a Volkswagen mechanic. You don’t do it because, although he may be a great mechanic, he would quickly hit his ceiling of competence, which is well below what would be required.

In each of these circumstances, the level of complexity—be it managing a $2 million investment portfolio, protecting $20 million of assets, or keeping the most technologically advanced car precisely tuned—far surpasses both the competence level and the resource capacity of the provider to understand it, let alone provide the proper solutions.

There are those who don’t know their limitations, but they earnestly try to do what they think is best for the client; there are also those who know that they don’t know and yet are willing to offer solutions they know to be inadequate. Both present a danger to high net worth individuals who simply don’t know what they need to know, and who continue to treat insurance coverage as a commodity.

With the vast majority of wealth climbers still being served by mass-market carriers, there remains a severe knowledge gap that will continue to cost them billions of dollars a year in losses. While an increasing number of people are awakening to the deficiency in their coverage, it’s not until they are on the business end of lawsuit or learn that their property loss far exceeds their current coverage that many finally seek expert guidance. And, of course, at that point it’s too late. But their consolation is that the likelihood of another high-stakes occurrence is probable for people of wealth, so it can never be too late to seek the proper guidance.

WHY WEALTH EXPOSED NEEDED TO BE WRITTEN

We have entered an extraordinary period when “winning by not losing” is of paramount importance. That has become true of investment management in a much more volatile market. And it is becoming even more critical in risk management at a time when our litigious society grows more restless in the pursuit of its fair share. While it is in the best interest of high net worth individuals to seek the guidance of a well-qualified, objective professional in both of these disciplines, it is also to their advantage to at least become conversant in the language so they are aware of what they don’t know.

Having worked extensively with high net worth clients for more than 20 years, I can appreciate the extraordinary sacrifices they make in climbing the ladder of success. These sacrifices include the cost of navigating the complexities of a comprehensive financial plan and managing their ever-increasing risks.

I have observed that successful people are particularly disadvantaged when it comes to acquiring the essential knowledge needed to protect what they have. Most are so deeply involved in their business or in pursuing the expanding body of knowledge required to keep on top of their professions that they have little time to even think about the perils that lurk about them.

Accordingly, I have made no attempt to create a “deep-in-the-weeds” textbook-style resource that only insurance professionals, lawyers, and financial advisors could appreciate. Rather, this book is intended to demystify the world of risk management and provide a practical guide for preoccupied, successful people to familiarize themselves with the risks they face, as well as the insurance solutions designed specifically for the high net worth individual. At a minimum, this is what you need to become more fully engaged when you do sit down with a qualified, objective insurance professional. And this will also help you tell the good ones from the bad ones.

Essentially, I wrote the book that I have long searched for but could never find as recommended reading for my own clients, who appreciate clarity without all of the jargon, and who want to be better prepared when they discuss their protection needs with their advisors.

HOW TO USE THIS BOOK

While Wealth Exposed does require at least a rudimentary understanding of how insurance works, the more advanced concepts presented are written in clear and concise language to facilitate an easy and, I hope, an engaging learning experience.

Equally important, this book is written in the context of the high net worth lifestyle, replete with concepts, case studies, and tips specific to your unique needs. The detailed table of contents is your compass, pointing you to your most pressing needs, or you can simply follow the clearly marked path of concepts that are lined with all of the key elements of an integrated, comprehensive risk management plan.

The information contained in this book is for informational purposes only and is not to be construed as advice. A qualified, independent personal lines insurance specialist should always be consulted before making any decision regarding your personal risk management plan.

The characters and cases used in the book are based on actual client situations but their names and specific details have been altered to protect their privacy.

Please be sure to visit www.wealth-exposed.com to find additional Personal Risk Management resources.

CHAPTER 1

Welcome! You Are at the Next Level

Who doesn’t love an inspiring “rags-to-riches” story? We’re fascinated when we learn about a Harvard dropout who fails in his first venture but goes on to build one of the most successful computer software companies ever. We’re enamored with the young man who sold Coke bottles to stay in school and ate charity meals before collaborating with another young man in his parents’ garage to create the world’s first personal computer. His creation ultimately built the world’s most valuable company in terms of market capitalization.