Before financial planning became a profession (offering qualifications) in its own right, the first planners came from the insurance industry. After all, who knew their clients better and wanted to help them plan for a future that mitigated contingency risk than those employed within the insurance industry. Within modern context, insurance professionals (CLU, ChFC) were and are still consummate financial planners.

In the late 1960s in the United States, however, with the finance and legal industries, financial businesses tended to be one-dimensional. Stemming from the Glass-Stegall Act of 1933 which banned any connection between commercial banks and investment banking, there were other state and federal legal restrictions within the industries themselves (talk about free market impediments). Insurance companies could only sell insurance, banks - deposit taking and loans, brokerage firms - investments, law firms ? legal advice, and accounting firms ? only tax, broad financial advice coupled with minimally related investment advice. Clients spent their days scurrying between all of these, often buying inappropriate investments and receiving totally conflicting advice from every different quarter, often with disastrous results. While in a vested fashion, it appeared that these industries served themselves first, and the integrated financial profiles of their clients last, it could be partly blamed on the laws of the time.

Farsighted enlightened insurance and investment professionals cumulatively committed to serve their clients a different way. They developed a national qualified comprehensive financial programme that would help all clients find integrated financial solutions for ongoing financial issues. They structured standards of professional care in a six step process: understanding the client(s) and their goals, quantifying the client(s) financial issues, reviewing and analyzing them, prepare written recommendations, helping them implement the advice, and monitoring the client(s) progress. These visionaries were so determined to carve out multi-disciplined educational curriculum as well as ethical practice standards for all planners, that over the next few years the College for Financial Planning was founded in Denver, Colorado, and the licensing and use of the Trademark CFP? was legally registered.

Now more than 40 years old, the concept of integrated planning putting the needs of the client first, along with a curriculum and national licensing structure to identify professionals concentrated in this area grew swiftly. While the number of planning professionals has not replaced the number of licensed accountants, insurance professionals, or generic brokers, the planning profession has grown exponentially across the globe particularly in Australia and the Far East, now numbering close to 100,000.

In many cases a finance professional will have both an expertise in insurance, investments, taxation or law combined with planning. It is quite common to see Chartered or Certified Public accountants, Chartered Financial Analysts, Chartered Financial Consultants, Charter Life Underwriter and many other designations also broadening their scope and their knowledge with the planning designation, all with one common goal in mind, that of better serving their clients.

The demonstrated ability of these professionals to truly help clients solve their financial problems is clearly recognised by global financial governing bodies and governments. In Australia, for instance, it is legally mandated that whenever a client makes a major financial decision such as buying a home, they must consult with a planner prior to purchase.

In the early 1990s the restrictions of the Glass Stegall Act (US) were lifted, and a fully competitive financial market economy roared into action. Realizing that perhaps the client did need integrated financial solutions all available at one firm, Merrill Lynch became one of the first brokerage firms to cross the line, offering money market funds to businesses and individuals coupled with overdraft facilities and mortgages to their clients. Revolutionary for the time, the staid community banking sector was caught blind-sided and was to spend more than a decade in mergers, acquisitions, upgrading and expanding to meet the fierce competition for client business. Insurance companies, not be outdone, became banks or bought banks as well as entering the investment sales arena.

We see the one-stop financial shopping model happening in a broad scale on a global basis, even in Bermuda, as financial service firms seek to enhance competitiveness in an open internet market structure to better serve their clients. What goes around comes around, in a full circle as the lines between banks, investment houses, insurance companies, have almost completely blurred as the emphasis has again focused on total client service.

In a pure sense, comprehensive financial planning provides total client need focus, and one of the first things the planner will review is the client(s) contingency structure.

As stated earlier, the Romans formed burial insurance clubs to plan for the unexpected. Catastrophe at its worst, for many families. In my own family, my grandfather after severely wounded during the First World War, was mustered home to Bermuda. He would die year later. Shortly thereafter, my grandmother had twin daughters. Within two years, one of these dear girls was gone also. Almost destitute with no resources for living let alone to bury her child, neighbours and friends donated the funeral. Thus, our baby Auntie was entombed in another family?s gravesite.

For whatever reason, gentlemen don?t like to talk about life insurance, possibly because ?they don?t think it has any value!? Well for them it does not, meanwhile, the terribly concerned wife is sitting there wondering what the heck she will do if he passes prematurely. Two things are certain, at least on this side of the Atlantic Ocean, most of us arrive in this world through a window of opportunity and leave through an exit door. In my prior practice, the first four or five client cases I encountered were young widows whose husbands had left us all, far too soon. Most of these women had woefully little life insurance to fall back on. In my grandmother?s case, insurance was a prerogative of the wealthy. Having none, she would still somehow survive in the absolute sense for another fifty years alone.

Risk Management (Insurance) is one of the major components of any financial plan. Next week, we discuss why, when, how (much), and what kind may be appropriate for you.

@EDITRULE:

Martha Harris Myron CPA/PFS CFP? is a VP and Senior Sales Manager at The Investment Centre, Bank of Bermuda member HSBC group where she provides investment advisory services and financial planning, especially for clients contemplating lifestyle / career changes and retirement.

She can be reached at 299-5578. Confidential email can be directed to marthamyronnorthrock.bm

The article expresses the opinion of the author alone. Under no circumstances is the content of this article to be taken as specific individual investment advice, nor as a recommendation to buy/ sell investment products or financial plans. The Editor of The Royal Gazette has final right of approval over headlines, content, and length/brevity of article.