Many wealthy people are grossly,

dangerously underinsured. Their liability

limits don't begin to cover their assets; a
large claim, lawsuit or any other disaster
would wipe them out.
Many wealthy people are grossly, dangerously underinsured. Their liability limits don't begin to
cover their assets; a large claim, lawsuit or any other disaster would wipe them out.
Their coverage has not been updated to reflect the current value of their possessions or business
risk. They

are ripe to lose so much if a disaster strikes.

This is a well-known industry trend, and it reflects that some financial advisors are not educating
their clients or in some instances are too afraid to offend their client by informing them of the full
shortfall in insurance and its implications to the wealthy persons family, business and estate
planning.

This is a major problem most wealthy

people are underinsured.
If you were my own brother I would tell you what Im about to tell you next..
If you havent had a recent and accurate financial needs analysis done, you are 80% likely to be
underinsured, and you and your family are at great risk due to the 5 major problems of life.
You want to make sure you and your family are fully protected against risk dont you? Read on..
I know its not what most of us want to think about but its so important it gets handled so that you
can rest easy and peacefully knowing that your family is protected if anything should happen to you
or your spouse.
Most people know they need the correct insurance and are delighted to have it dealt with, but some
people, would rather ignore the very real risks and would rather avoid thinking about life insurance,
disability, dread disease and income protection, debt cover and bond cover. You know the type,
they prefer to drink beer, surf the internet and play videogames rather than take care of business.

So how do you know how much cover

you need?
The truth is, you probably need a financial adviser to do a complete financial needs assessment to be
100% certain and make sure you are on the right track.
Trying to figure it out on your own is a bad idea, as there are factors such as inflation and taxes and
interest rates and future value of your investments all to be considered.
Why trying to figure it out on your own is a bad idea:
I often find most people to be very off target in their estimations, Ive even had some people
assume, Hey Im insured for x million rand, so Im sorted! And as youll see below that is very far
from the truth.
Making assumptions that could cost your family very dearly in the case where you are not insured
adequately and there is about an 80% chance that if you do it yourself you could make a serious
misjudgement that when eventually realised (at claim stage) would be too late(i.e.: on death of the
insured)
A mistake financial advisors are trained to avoid by using a proven process and foolproof software,
You would probably agree that its better to be safe rather than sorry, and having a professional
financial needs analysis done by a financial advisor is the correct way to avoid a mistake that could
ruin you and your families future.

Solution: The Financial Needs Analysis

A financial adviser uses a complex procedure and software to calculate your unique financial needs
and risks, this is done via a consultation and questioning to check your goals and unique situation,
and the amount will vary uniquely for every individual.
You need to have your financial situation regularly checked and updated, when you see a financial
advisor and do this he or she should do a financial needs analysis on your unique situation and
provide you with a financial plan or at the very least let you know where you are exposed to risk.
He should provide you with what we call full shortfalls in regard to the 5 major risks in life.

The problem that happens between some financial advisers and

clients.
Most financial advisers are highly competent professional people and yet sometimes I find that
financial needs analysis protocol is ignored either in fear of shocking the client or in favour of being
/staying popular and only addressing what the client wants.
Alas the best thing is not always done, I have met financial advisors who only do what the clients
want, which is for a number of reasons, these financial advisors are obviously insecure and easily
intimidated by wealthy individuals who have more success than them and lets be honest, a high
powered executive or CEO is used to giving orders and driving decisions, some people are very easy
to intimidate inadvertently by the charm and authority of a wealthy professional.

Unfortunately the reason could also be that the financial advisor listens to the executive and
discards his own wisdom in dealing with his clients needs, he shys away from telling it like it is,
sometimes the truth is very unpopular, but its always important to address needs honestly with
integrity even if you are not going to be popular.
As you will see below this can have devastating results, not only for the client but for the advisor and
the company he represents.
One example I often come across is where new prospective clients of mine tell me they have had a
bad experience with xyz financial service providing company as they invested with a Financial
Adviser and got little or no returns, it is all too common. And from what I have been able to ascertain
is that the cause is bad advice from the financial advisor or a combo of bad advice and the FA being
insecure and listening to the clients advice instead of what he SHOULD know and do.
One of my friends had this experience, he got no return at all just the money back that he had
invested, and the reason was that he was put into an endowment policy with guarantees on it
I will spare you too many details as to why that could be a very bad idea but basically he was put into
too conservative a portfolio (so very conservative portfolios have no equity (shares) ie they invest
only in cash or bonds and almost never outperform inflation) they are super safe but dont grow
much..

Add to this the service fee,

The agents commission
Fee for the guarantee.
In addition to this endowment policies are taxed at 30% internally so this means you really
need to have certain circumstances before investing ie if your tax rate is already above that.

Add all these factors up and you have negative growth instantly! A loss of growth due to inflation,
Here is where the Financial Advisor should have recommended to his client(my friend) to put his
money into something with a proven track record of outperforming inflation, (This is not financial
advice it is specific to this case and scenario used here as an example only.) even without the
guarantee..
In this case his investment would have had to outperform inflation (6%-7%) guarantee fees(up to
1.50% pa from my Financial Services Provider) initial service fee and initial advice fees a tall order
for something invested in only conservative asset classes as they rarely beat inflation.

The Tendency of the Wealthy to be

underinsured, and why..
For some reason people prefer not to think about the inevitable, or very morbid situations such as
death, disability, dread disease, income protection, lets be honest its not a fun subject, reality is
harsh and the sad fact is we all have the chance (ok death is inevitable!) of these things happening to
us sooner or later.
I had some personal friends recently who suffered a major unforeseen setback due to this tendency
for otherwise wealthy and financially smart individuals to overlook their insurance needs.

Possible reasons why you may be underinsured

1. The huge problem is probably due to people being so busy focussing on their businesses or
career that they dont have time or are not being shown how much insurance they actually
need by their financial advisors.
2. In some instances their financial advisors become so busy that they dont get to taking
proper care of their people as they grow in wealth and family their needs increase, they
dont see their clients more than once a year.
3. Client disinterest i.e., I know a lot of financial advisers who call their clients and tell them
they need to update their investment profiles and do a review but the clients are so busy
with life they do not prioritise it enough so it never gets done.
4. Making assumptions that all is well and avoiding looking at the painful truth.
5. Some people have had insurance for years and feel that is handled, they dont need more
insurance, yet the amount of benefits covered by the original insurance is vastly obsolete
compared to current liabilities the client has.

Another common problem: often if there is one major breadwinner in

the family and he or she will only insure themselves to protect their
children and spouse in case of death and sometimes that is it! If something were to
happen to your wife or children there is no cover for them and this is a risk that needs to be
addressed immediately.

Introducing the Major Risks (The stuff you

need to be insured against)
There are 5 major risks that need to be covered to protect your spouse, children and business.
Dying too soon, Becoming disabled, Dread disease, Losing their income, living too long (Tax
retirement and/business continuity.)

RISK 1: They dont cover the risk of becoming disabled or unable to

earn an income,
Would you agree that if you were to lose the ability to earn an income from now until retirement
you would lose a ton of money! Lets use a quick example.
Say Joe who is 25 years old, has an accident and his salary is R20 000 per month but now he is blind
and can no longer work as an IT support consultant.. He had 480 paydays to retirement and he has
essentially lost (if he never got an increase ever) R9600 000 thats 9 million rands earning power..
In actuality that would have been more that we need to include increases and inflation but for
simplicity sake I think ive made he point.
This is a relatively simple fix as disability insurance is not expensive.. but people forget to do it.
Story: I have a good friend who was a financial advisor, and she tried to get her brother in law to
take insurance, and the brother in law was young and healthy and felt invincible like we all do in

our youth.. he refused to take life cover or disability, and kept putting it off, well one day he met
with an accident and became disabled and somewhat damaged not only his body but his mind he
was an engineer, and can no longer do his duty as he would have.. and he was unable to work for
about a year. Thank god they let him come work there again but Im not sure of his ability to do keep
the same capacity in his job, (the accident damaged h

Risk 2 Not covering your spouse against life, dread disease and
disability..
Ive had close friends who because I am a friend, I didnt approach to be their financial advisor, its
always strange because they said they had a friend who did all their financial planning for them, so I
respectfully kept a professional distance, (you know as a financial advisor you see very personal stuff
like their income etc) So I completely understand and generally dont try to do business with my
friends, unless they ask.
My friend had a tragedy in that his wife discovered that she had who did not have their spouse
protected by dread disease and then statistically there is 40% chance that a person will get cancer..
and its very expensive to treat.
When tragedy struck this disease would not have been the strain it became on their finances.

Risk 3 Not covering yourself and your family from Dread disease,
As I said earlier there is a 40% chance of getting cancer, to protect yourself and family dont you
think you need this covered rather urgently?
It is a high risk so you would want to make sure you have peace of mind by being covered dont you?

Risk 4)Dying too soon, much like becoming disabled, if you die your
family is without your earning power.
And your wife and children will suffer and could be even thrown out of the family home if they cant
afford to pay the bond or your creditors.
And even if the house is paid off the children need to have the same standard of living as when you
were around to provide it for them so that they can afford to go to school, university etc.
Not only is the loss of income a factor, at this point your estate gets wound up and all the creditors
come and can stake a claim on your estate, so if you have any unpaid debt, they will get it from your
estate and are able to lay claim to your assets if you were married in community of property or ANC
with accrual.
Creditors come knocking, and can literally throw your family out of their home as they sell your
home to pay debts off
There are ways to protect your family from that, for example a popular choice is having a trust set up
and having the assets owned by the trust, however there are tax implications as trusts are taxed at
maximum rates.

A far simpler way to protect your family is simply have enough life insurance to cover all your debt
and the familys needs as well as all the estate duties and taxes.
The payment on a life insurance policy doesnt even hit your estate, it goes directly to your
beneficiaries, so it will not be touched, this is a very very good thing, so that your spouse can choose
to pay off the bond on the house and still take care of the family.

So how much life cover do you need?

Roughly?
This is relatively simple to work out (in a very rough guide) for every R5000 you want your family to
earn per month you must be insured for R1000 000, as very roughly this will give you 5k per month
in interest even if invested badly.(ie left in a bank where inflation can chew through it)
So for example a person would need at least 4 million cover or above if they want their family to
have at least 20k per month to live on in case something happens to them..

Risk 5 Living too Long (Not having sufficient Retirement Savings)

This risk is the one where you have insufficient investments, savings or retirement planning in place
to take care of yourself and your spouse, can be complicated by inflation (which is 6.7% now) the
solution is to have a retirement plan in place, and sufficient funds to meet your needs, or having a
passive income from your other investments.

The Solution:
The solution for all these problems is to have the correct amount of insurance to cover all of your
needs and risks to make sure your children and spouse are protected. This is done by a financial
needs analysis.
This is not a simple or easy thing to determine as there are many factors that need to be considered
when calculating a financial plan and doing a financial needs analysis.
Including the future value of money, the impact of inflation and its effect on savings, tax, estate duty
and a myriad of other things.
The first stage in planning financial freedom is having adequate insurance, it is the foundation of
your families generational wealth and stability. The primary benefit is peace of mind knowing that
no matter what your family will be taken care of-PROPERLY.

What to do:

My suggestion is to get a comprehensive financial needs analysis done

by your financial adviser, in this vein make sure that the following
points are covered.

How the inflation rate affects your investments including your retirement investments and
capital growth.
The future value of any capital you have and how the above comes into play.
Estate planning fees and how much you get tax free transferred to your spouse. (Should be
R3500 000 if left exclusively to your wife/husband.)
Your spouse is also due to R3500 000 tax free totalling 7 million
Investments suggested need to outperform inflation consistently if you are aiming for capital
growth.
Capital preservation is more conservative but should also not underperform inflation, if you
keep your money in the bank or in a money market account your capital will over time lose
its value.
Remember to insure your spouse too, a common mistake is to only insure the breadwinner,
leaving the spouse dangerously exposed should she get sick from a dread disease, lose her
ability to earn an income, etc and then put unnecessary strain on the only source of income.
Make sure that you have at least 4- 5 times your annual income insured against the
following risk areas in order to meet any debt requirements, alterations in a home, home
care or to clear bonds and any other outstanding debt.
o Dread disease, I often find clients have not got adequate dread disease cover to
protect them should they contract a dread disease such as cancer.
o Disability Cover lump sum 4-5 times annual income.
o Income protection this provides a monthly income for you and your family should
you be unable to work for the rest of your life or until retirement depending on
how you structure your financial plan. its limited to your net income for 24 months
and then it goes down to 75% of your original net income, until retirement age or
70. A lot of people I encounter have no income protection whatsoever.
o Life cover for all the family, this needs to be able to cover all debt and liabilities
and still provide an ongoing income and adequate standard of living for the surviving
family for the rest of their lives.
Retirement planning is done without locking you into an endowment policy structure
Retirement annuity, rather use a collective investment scheme(unit trust based) structure as
this has a lot less consequences if there are payment issues. Life has unforeseen
circumstances sometimes even high net worth individuals have temporary problems that
can cause them to miss a few payments on their RA, if this happens in an endowment
structure it causes it to become paid up and you will not be able to continue paying into
your RA this is not a problem with the alternative RA structure mentioned.

Make sure your financial advisor shows you the full shortfall on his next review so you can get
any gaps covered, immediately or alternatively if you wish to employ my services.. read on.

What to do if you want to work with me:

Do you think its a good idea to have your financial situation
specifically your insurance needs checked and updated to be current?
If I could show you how to cover all your exposure to risks youd be
interested in knowing more about it, wouldnt you?
If you are looking for accurate tell it like it is financial advice from someone who is unafraid to tell
you the truth and give you information straight from the hip, then I can help you.
I will give you Individual personalised attention and professional advice, I will calculate your financial
needs and full shortfall.

Full shortfall financial needs analysis to establish if there are any shortfalls or if and where
you are underinsured.
Financial plan or quote to cover any gaps in your insurance profile.
Retirement planning and investment advice for lump sums and tax avoidance.
How to structure your estate to avoid unnecessary arguments and taxes, and how to protect
your familys wealth from overzealous spending.

Things that will need to be considered or covered are:

Bonds /Mortgages for your residence

Bonds /Mortgages/loans for your business assets or buildings
Loans or Debts for your business
Personal loans or Debts
Loss of income from disability, dread disease, inability to work, or death
Education expenses for your children
Retirement needs for you and your spouse

Quick Quiz to determine if you need my

help:
Do you have a nagging feeling that you may be underinsured, or are not completely
covered?
It has been several years since you reviewed your financial situation and adjusted your
insurance and financial plan to suit
You know or feel that you need more life insurance or you are not sure the amount you have
will cover and support your family should anything happen to you.
Has it been several years since you have had your financial plan /financial needs reviewed?

 You are nervous and confused about how much life insurance you need to protect your
family from creditors, estate duty, government tax, banks and still leave enough for your
family to live a decent quality of life.
You own your own family home outright or have a bond on it and it hasnt been covered or
protected from creditors or the tax man and you have potential debt if you were to die
prematurely.
You run your own business and have not structured it to survive your death, ie if youre a
sole trader and the business is you, your business ceases to exist on death and your accounts
are shut down and you legally cannot trade..
You have no dread disease cover or less than 4 X your annual income in dread disease
cover?
You have no disability or impairment cover or less than 4X your annual income in disability
cover?
You have no life cover to meet your debts and liabilities such as bonds, debts and other
expenses.
You have no income protection ie if you lose the ability to work and earn a living you have
no continuous income to meet your families needs. (this is an income not a lump sum)

If you answered yes to any of the above questions it may be a good

idea to let me have a look at your financial plan or do a financial needs
analysis so that I can put you and your family onto the path of all things
good, this will give you true peace of mind knowing that everything is
taken care of properly and accurately.
All I can do is conduct the accurate financial need analysis and give you a quote and then its totally
up to you, to choose whether you want to have full cover or not.. As you can understand its very
hard to put the value on a human life, who can really asses the real impact of such a loss?
We can only calculate the economic impact should risks and disaster occur.
And as you know correct insurance, is the foundation of your families generational
and economic stability.

wealth

The primary benefit is peace of mind knowing that no matter what.. Your family
will be taken care of-PROPERLY.

Benefits of working with me:

When you implement a financial plan by me you can rest assured your children will get their
education in public or private schools(with limits) and they will be able to go to university here in SA
or abroad, including Oxford, Cambridge, Stanford, Yale, Harvard etc.
Your family will be able to have enough money to live on and meet its financial needs within the
current standard of living.

Your family home will be protected and no creditors can attach it.
You will be told straight what you need to do to cover yourself, and protect your family, if you refuse
to follow my advice I am happy to cancel our professional relationship as I dont want to be the
person giving your wife a considerably smaller payment than she or your children need to survive,
had you taken my advice re proper financial planning.
All Debt will be covered : including Estate duty, taxes and debt will all be paid in case of death,
disability, dread disease or impairment.
To have me do a no obligation financial needs analysis for you simply email me at
brian.colborne@liblink.co.za and I will have my secretary contact you to schedule an appointment.

PS: A reminder:
What I need from you before we do the
assessment.
Typical financial planning protocol
Stage 1(eliminate or cover risks) and draw up a will.
Stage 2 wealth generation (investments/lump sums and retirement planning/tax avoidance)
Stage 3 Ongoing advice as your situation changes
These financial planning factors are

All your assets including properties and business assets

Your annual income.
Your business interest or share in a business
What form of proprietary ownership your business is structured under(for business
continuity and tax purposes)
All your debt
Tax considerations
Investments
Retirement planning

What documents you will need to bring:

1.
2.
3.
4.
5.
6.

Irp5
Income
Payslip
Bank statements
Any pension or group benefit statements
If you own a business please bring your memorandum of association and or certificate of
incorporation.(if youre a sole trader obviously this is not necessary)

I look forward to hearing from you and working with you to secure your families future with sound
planning and advice.

Kind Regards
Brian Colborne

Brian Colborne is a Financial Advisor and representative of Liberty, he has a strong passion for
helping families and loves working with people who place high value in integrity, honesty, family
values and professionalism in their advisors.