Financial planners and accountants often understand their clients’ businesses better than almost anyone outside the business itself.
You may know when a client is expanding, acquiring equipment, employing people, taking on debt or preparing for succession. You may also see how heavily the client’s personal and financial plans depend on the continued success of the business.
This makes business insurance a valuable topic to include in client conversations.
You do not need to become an insurance expert or provide general insurance advice. Sometimes the most valuable contribution is recognising when a review may be needed and introducing the client to an appropriate insurance broker.
Business risks can affect the wider financial plan
A financial plan may address investments, superannuation, personal insurance, retirement and wealth creation.
For a business owner, many of these objectives depend on the business continuing to generate income.
An uninsured or inadequately insured loss could affect:
- Business cash flow
- Loan repayments
- Personal guarantees
- The value of the business
- Retirement plans
- Succession arrangements
- Family assets
- The ability to retain employees
- The client’s capacity to continue trading
General insurance is therefore connected to the broader financial position, even though it is a separate area of advice.
Accountants often see changes first
A client may not think to contact their insurance broker when their turnover increases or they purchase additional equipment.
Their accountant, however, may see these changes in the financial records.
Possible warning signs include:
- Significant growth in revenue or wages
- The purchase of new machinery or vehicles
- A move to larger premises
- The creation of a new entity
- Increased stock levels
- The use of subcontractors
- Expansion into new products or services
- A business acquisition
- New borrowing secured against business assets
These events can change the client’s insurance requirements.
A simple question such as, “Have you discussed this change with your insurance broker?” may help prevent an important issue from being overlooked.
Financial planners understand the client’s future direction
Financial planners frequently help clients look ahead.
A client may be preparing to sell the business, bring in a partner, fund an expansion or reduce their involvement as they approach retirement.
These plans may create new insurance considerations.
For example, a change in ownership may require policies to be updated. A loan agreement may impose insurance conditions. A new contract may require higher liability limits. A growing workforce may increase employment-related risks.
Early communication between the client’s professional advisers can make these transitions smoother.
You do not need to provide insurance advice
Accountants and financial planners do not need to recommend a policy or decide how much cover a client should purchase.
The role of a referral partner can be much simpler:
- Identify that the client’s circumstances may have changed
- Ask whether their business insurance has been reviewed
- Obtain permission to make an introduction
- Refer the client to an insurance professional
The insurance broker can then gather the relevant information, assess the risks and discuss the available options with the client.
This allows each adviser to remain focused on their own area of expertise.
Questions you can ask clients
Business insurance can be introduced naturally through questions such as:
- When was your business insurance last reviewed?
- Does your broker know about the recent changes in the business?
- Have the new assets been added to your insurance?
- Does your current policy reflect your increased turnover and wages?
- Have the insurance requirements in the new contract been checked?
- Is your broker aware that you now use subcontractors?
- Have you reviewed the business interruption implications of the expansion?
- Do you know who you would contact if a claim occurred?
These are prompts for a discussion, not recommendations about what the client should purchase.
A strong referral relationship protects the client relationship
Some advisers hesitate to make referrals because they do not want to lose control of the client relationship.
A good referral arrangement should do the opposite.
The insurance broker should respect the existing relationship, communicate appropriately and focus on the work they have been asked to perform. The referring adviser should remain the client’s trusted accountant or financial planner.
At Surety Risk Solutions, we view referral partners as part of the client’s professional support network.
Our role is to assist with general insurance while respecting the advice and relationships already in place.
Better communication can produce better outcomes
Clients do not always recognise how one business decision can affect several areas of risk.
An accountant may understand the financial change. A financial planner may understand the personal objectives. An insurance broker may understand the general insurance implications.
When these advisers communicate, with the client’s permission, important issues are less likely to fall between the gaps.
The objective is not to complicate the client’s affairs. It is to help the client make informed decisions with the right people around them.
General Advice Warning
The information in this article is general in nature and does not take into account any person’s objectives, financial situation or needs. It is not intended to constitute legal, accounting or financial advice. Before acting on this information, you should consider whether it is appropriate for your circumstances and seek advice from an appropriately qualified professional.