THE ECONOMIC BLUEPRINT: Protecting your client's ­economic engine

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The anticipation is palpable, there's a buzz in the air, and finally the lights go dim. The audience roars, the actors take the stage, and for the next three hours everyone in attendance is simply blown away. Such is the magic of seeing a Broadway show and I had the incredible pleasure of seeing the musical "Hamilton" earlier this year.

Theatre has many special attributes including the ability to have a "lasting impact" on the audience. For me, seeing "Hamilton" made me want to learn more about the Revolutionary War and its aftermath, specifically the military strategies of the day.

As a trusted advisor, it is important to give your client their own "tactical plan" toward a successful financial campaign. Financial and military strategies have many similarities, such as never focusing your efforts in only one area, as it could cause unintended or devastating results elsewhere.

Protecting the most valuable asset

For many clients, their most valuable asset is their ability to earn. That's right, your client's biggest asset is NOT their home, but their ability to earn an income. Particularly for a client of yours who is in the first half of his or her career. For example, a 35-year-old earning $100,000 for the next 30 years would earn $3 million over that span.

Accordingly, it is your fiduciary duty to help protect your client's "economic engine." Sadly, income protection is often overlooked. Remember, disability income insurance functions to replace a portion of your client's income if they get sick or hurt and can't work. And the likelihood of needing disability insurance at some point during a 30+ year career is not remote: more than one in four of today's 20-year-olds are likely to be out of work for at least a year prior to retirement.

Focus in All Directions

Once we understand the need for protecting your client's economic engine, it's important to understand how it works. Often times, employees receive disability insurance from their employers, but fail to understand how much of their income is protected. Even if the employer provides maximum coverage, the benefit would be taxable when recovered, leaving an enormous gap between insurance coverage and actual needs. NOT GOOD!

In addition, there is considerable variation between what different policies cover. For example, depending on the definitions in the policy, the insured may not receive benefits if they were able to work at a lower-level job than their regular profession, if their income was merely reduced instead of wiped out, or if their inability to work was due to mental health issues. In this instance what your client doesn't know WILL hurt them.

Don't throw away a shot at building wealth

If military strategy only focused on offense and didn't consider defense, it would cause devastation. Similarly, if someone's wealth building strategy only focuses on growth and not protection, it will leave them exposed. Building wealth should be possible under multiple circumstances, including the potential for injury and illness. Help your clients keep their shot at a successful future by protecting their economic engine and they'll thank you for reducing their risk.

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Attorney Kyle Zwiren works with Financial Architects Inc., an independently-owned company located in Farmington Hills. Zwiren and his team serve attorneys and other professionals to help them design financial plans in line with their goals and based on optimal efficiency. He practiced law prior to becoming a Financial Architect and left the practice to follow his passion. To talk to Zwiren about other topics featured in The Economic Blueprint, email him at kzwiren@financialarch.com or call him at 248-482-3622.

Published: Fri, Aug 02, 2019