Financial Advisor Reveals: Insurance Truths, Investment Strategies, and Industry Secrets

I have one client and he genuinely believes that the insurance companies don't pay. So the only time an insurer won't pay. What are some of the weird and wacky questions that a client will ask you? What return can you get? Yeah. How do you answer that? I want 10%. I want 30%. How do you answer that? It's as simple as this. What risk are you willing to take will be depending on what return you want to get. If you're a high risk investor, you're going to get a higher return. But in saying that too, there's going to be quite a bit of volatility in the market. You've got to understand the macro side of things as well. If we typically see that the markets aren't doing too well or they are doing well, it's got to be for a client to understand what is my risk profile, what risk am I willing to take, but also be educated enough to understand that if you're going to get a high return, there's going to be a high risk and there's going to be quite a bit of volatility. So to answer that question is everyone wants the highest return, but they also are the first to pick up the phone if the markets tank and say, well, what have you done here as well? So I think the easiest thing to do in that situation is to understand what clients, what risk a client is willing to take, educate them into things like volatility. So then when something like that happens, it's an easy conversation to have. Any other FAQs? What are some of the other things that people ask you? Like, oh, not another one. Insurance premiums. Every year, insurance is going to go up. The older you get, the more the premium is going to be. You've got to understand how an insurance company works is everything goes into a pool, okay? As you get older, the more riskier it is, the more likely you're going to make a claim. So every year, an insurance policy will come up. Getting itchy on cancelling them. Or, you know, when things at the moment, you know, expenses are going through the roof at the moment, inflation's high, okay? What's the first thing people want to cut out? Insurance isn't a tangible object. You don't see it, okay? The only time you see it is when you make a claim on it, okay? The other thing for insurance as well is, this is another one probably to answer that question, when somebody calls you up asking for insurance, you know that there's probably something wrong, okay? Because no one ever calls you asking you for insurance. Usually, you need to educate them and you need to, you know, give them an understanding as to why they need it. I have one client that I've been trying to educate and convince to take up some policies around insurance and he genuinely believes that the insurance companies don't pay. Can you rebut that fear where the insurance companies do not pay the actual claims if they're legitimate? So the only time an insurer won't pay a premium or a claim, sorry, not a premium, the only time an insurer won't pay a claim is if you haven't been honest from the start, okay? Because any comprehensive insurance policy we take out, it gets underwritten at the start, okay? So what you need to disclose is your personal health information. If you have lied about that, okay, and then it gets to a point of a claim, it's just like, let's just say I'm a smoker but I put on the application I'm not a smoker, then I get lung cancer, okay? The doctor does a medical report for me and they say, yeah, well, this guy's been smoking for the last 30 years. Of course, they're not going to pay out. You're lying on the application. But we typically do underwriting initially. So then when we do do a claim, the process is very, you know, streamlined. Okay. Well, let's go through investments. We talked about insurance. Investments are an interesting game. You know, you're probably asked a crystal ball, a fair chunk of the future in lots of meetings. What's your investment philosophy in general? Okay, so it all depends on where a client is in their life. Life cycle. Okay, but I'll probably, to give you a good understanding, move towards more of a retirement client, okay? So what we typically try and do on an investment side is break down, you know, break down buckets. So we'll have a short-term, your medium-term, and your long-term bucket. In that long-term bucket is where we would hold your growth assets, okay? So your high-risk assets, your Australian shares, your international shares. In the mid-term bucket, we would have things that are a little less risky, okay? But they will give you an income generation for about two to five years, okay? And in the short-term bucket, we usually look at things that you'll need immediately within the next 12 months, okay? So if we break down our retired client, we know that in the first 12 months, what they're going to need is pension payments, okay? So what we usually do is we keep those pension payments in a bucket of cash, okay? Where it's still giving us some sort of return, but if something goes wrong in the market, that still is, you're not going to lose money on it, okay? The second bucket would be your two- to five-year bucket, something that's a little bit higher risk, but you're getting a higher return. That's something that we'd probably look at as term deposits, fixed interest, something that you're getting higher than the cash rate. And then your last bucket will be anything 10 years plus, okay? So that bucket's giving us a high return. If something goes wrong in the next two years, we know we've got enough cash in the short-term bucket to, you know, ride the wave of volatility, okay? And that bucket would also continue to add to the short-term area as well. Typically, you're not going to see that set up. All you're going to see is your investments and what they do. But we know that that's the way it's set up. So when a client comes to us and they're worried about what's happening in the market, as long as we're in line with what risk they're looking to take, they should be fine.