The Starting Point

In meeting the Client needs and objectives we find a means to achieve success for both ARIA and the Client.  This means we are prepared to deal with a broad range of financial situations with process solutions and product solutions that respond to the Client’s reality.  ARIA or any of its Select Partners will be utilized in providing the Client these solutions.  Examples or process solutions are:  wills and trusts; buy/sell agreements; qualified retirement plans; installment sales; charitable gifts; joint ownership; private annuities; and many more.  Product solutions are for example: mutual funds; insurance; real estate; annuities; and many others.

Interview the Client to “fact find” initiates the process.  It may be broken into two phases.  The first (Hard Data) involved the collection of things such as financial statements, cash flow statements, wills, trusts, notes agreements, past tax returns and prior insurance policies.  The second (Soft Data) gathers information about the Client’s needs, desires and objectives, particular worries, the willingness to accept particular kinds of risk and attitudes toward family or business partners, if applicable.

Case Analysis

Risk Management planning is that part of the financial planning process which seeks to assure that economic risks to which the client is exposed are covered in some way.  A Risk Manager or Financial Planner’s job is to assure that the business or the individual is protected against major casualties that could happen.  This individual assesses the risk exposures, and decides how to cope with the risks involved.

Some of the different types of risk are:  risk of loss of principal; market risk; marketability risk; liquidity risk; tax risk; purchasing risk; financial risk; and temperament risk.  The purposes pf risk management planning are to:  (1) to make certain that all major economic risk exposures are covered; (2) to make certain that the client’s financial plan is not unraveled by an unforeseen catastrophe; and (3) to make certain income that could be used for wealth accumulation is not used for unnecessary or inappropriate insurance coverages.

The risks with which we are concerned are economic risks that is, risks which expose a business or person to economic loss.  Seldom can the risk itself be removed but we can minimize the economic consequences of the problem if it happens.

The following are the generic strategies to risk management.
Avoid the Risk – (Sometimes avoiding one risk may lead to taking on a new risk.)
Reduce the Risk or the loss associated with it – (Take steps to make it safer.)
Retain the Risk – (Consciously or Unconsciously the Client implicitly agrees to absorb losses if they occur.)
Transfer the Risk – (Hedging; Subcontracting; Surety bonding; Incorporation; Hold Harmless Agreements; and Acquire appropriate insurance coverage.)         

The following are the basic rules of risk management.

Decision Chart

Plan Development

The plan will address the Client’s unique situation and needs rather than a generic solution statement.  The center of the plan will revolve around specific recommendations for actions the Client should take.  The document and its presentation will begin by restating the assumptions and key facts on which the plan is based.  This reminds the Client that the data they provided was used in the development of the plan.  Then each of the Client’s identified objectives will be addressed and indicated how the plan responds to each.  In certain instances there may be projections based on performance variances or best-case/worst-case scenarios illustrated.  Finally, the plan closes with the recommended action steps and the sequence of steps necessary to implement the plan.

Implementation

An action project plan will be developed that identifies each action that must be taken, who is responsible for doing it and when the action is to be accomplished.
Example:

Monitor the results

The risk management program is dynamic.  Change in ever present and with it will come variation in risk, which in turn may call for a change in the plan.  Additionally, past decisions may not have been the best or wisest and need to be modified.  The Client must be alert to when changes occur and consider what if any response is called for in the risk management program.

Selection of Insurer’s