Ahead of the Game – Episode 14: Assessing Personal Risk (Changing the Game Part 4)
Welcome to Ahead of the Game, a podcast brought to you by KMT Partners. I am Andrew Montesi. We are continuing on with our “Changing the Game” theme with our very own Lachlan Kennett, providing us with some short and sharp tips and insights on personal risk.
AM Andrew Montesi
LK Lachlan Kennett
AM Welcome to Ahead of the Game, a podcast brought to you by KMT Partners. I’m Andrew Montesi. This instalment of our miniseries Changing the Game, KMT Director Lachlan Kennett provides short and sharp tips and insights on personal risk. Lachlan, welcome.
LK Thank you.
AM Now entrepreneurs and business owners are typically risk takers. In your experience, does this extend to their own personal risk as well?
LK It often can. The other part of it is also the fact that they tend to be very busy, and sitting down and understanding risk and having that risk conversation isn’t always front of mind.
AM What questions should entrepreneurs, business owners, business leaders be asking themselves about their risk position?
LK That can often be hard because nobody wants to think of themselves as mortal and that something may happen in the future, but having the discussion around what if my income stops? What if I can’t go to work tomorrow, how will I fund my living expenses going forward? Can I come up with a lump sum of money if I’ve got medical costs or rehab costs or what have you? And things such as what happens if I’m not here, who’s dependent on me and what position do I want to leave behind?
AM What are some risk mitigation strategies? I would imagine that insurance is just one.
LK Yes. A lot of times people think of a risk discussion as an insurance discussion, it’s not necessarily the case. For a lot of people who are working, they’re working for a reason because they need income. And just as you might do with your house insurance if your house burns down, you don’t want to take that risk of having to pay for the rebuild yourself so you outsource that to someone else. You pay someone else to take that risk for you.
It’s exactly the same with your life insurance or your income protection insurance or what have you that insurance discussion, it comes down to what risk do you want to outsource to someone else. You may decide once you’ve gone through all of your risks that you outsource some others and you also take some of the risks yourself. So a lot of people will say, well, maybe I won’t have quite the retirement I was hoping if something happens, and I’m comfortable with that risk and I’ll take that risk on.
And then obviously there’s the option to, I suppose fund insurance or perhaps fund it through perhaps a loved one who’s able to do that for you. And that conversation tends to steer less towards insurance and more towards making sure the asset pool that you have behind you to support yourself is liquid, and you can get access to it in the future.
AM Risk is often key to entrepreneurship and business growth but I think sometimes what we often forget is those risks can also affect loved ones as well. Who else should be brought into this conversation?
LK Essentially, the whole family. So if we look at it, if you’re not here tomorrow, who do you leave behind? And if we’re having a conversation about that exact event, well, that conversation probably shouldn’t be had with you. Although it might be a discussion about your life and you passing away, that discussion really needs to be had with the person that we’ve left behind. Because it’s not necessarily what you feel comfortable with, it’s what they’ll feel comfortable with and hopefully your views are one.
AM I would imagine that a lot of people in business just simply wouldn’t be, I don’t know if qualified enough is the right word but simply wouldn’t be able to even understand where their risks are. There might be some obvious ones but there might be others that they’re just not aware of. How do you go about properly assessing your risk position?
LK Yes. So what we tend to do is sit down and go through their current position and then do, I suppose a role play and say, well, you’re no longer with us unfortunately but what does your financial position look like? So income sources has stopped, you’ve still got this debt, what would you like to see going forward? And it’s not necessarily a conversation that’s easy to have and it’s often easier if there’s a third person driving it, and that’s where we come in. But it’s a conversation everyone needs to have.
AM Thanks very much.
LK No worries. Thanks.
AM Thanks for listening to this game changer episode with Lachlan Kennett from KMT Partners. Your next step, contact KMT and arrange a time to meet. KMT will wear the cost of this initial discussion. Get in touch and find out more about KMT’s accounting, business, management, growth, compliance and advisory services. Get in touch at kmtpartners.com.au.
This podcast is brought to you by KMT Partners. KMT is a leading accounting and wealth management advisory firm in South Australia, assisting you to emerge, renew, grow and build resilience in business, themes which are central to this podcast series. For more information visit KMTpartners.com.au
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This podcast is hosted and produced by Andrew Montesi from Apiro Consulting apiroconsulting.com