Wealth management is making and maintaining a plan to grow and preserve your wealth. Managing your wealth includes investing, saving, and spending your money in a way that aligns with your goals and values. Different services fall under the umbrella of wealth management, including investment management, financial planning, estate planning, and risk management.
When it comes to protecting your wealth, risk management is one of the main aspects you need to consider. Many different risks can impact a business or individual. Without proper risk management, you could lose everything in an instant, so it’s essential to have a solid plan in place.
This blog post will discuss risk management, the importance of protecting your wealth, the types of risks that can impact our lives, and more. We’ll also talk about some relevant risk management documents everyone should have: a medical and durable power of attorney and a living will. Whether you’re the head of the household or a business owner, protecting your wealth should be one of your top priorities.
What Is Risk Management?
Risk management is identifying, assessing, and taking steps to reduce or eliminate risk. In the business world, risk management is a vital part of ensuring the longevity and success of a company. Individuals also need to practice risk management in their personal lives because no one is immune to risk. People face many different health-related risks daily, which we’ll discuss in more detail later.
Like other areas of financial planning, risk management must consider your objectives and operating environment to be effective. It should also be an ongoing process; you can’t just create a risk management plan and then forget about it. As your life changes, so do the risks you face. You must regularly assess your risks and update your plan accordingly for it to remain relevant.
The Importance Of Risk Management
There are many reasons why risk management is so important. Here are some of the most significant benefits of having a risk management plan:
- Avoid Financial Ruin: If a risk does occur and you haven’t taken steps to mitigate it, the consequences could be severe. For example, if you don’t have health insurance and get sick, you could end up with a huge medical bill you can’t afford.
- Feel Relieved: Worrying about risks that could impact your business or personal life can affect your mental health. When you have a solid risk management plan, you’ll rest easy knowing that you’re prepared for whatever comes your way.
- Save Money: Many people think that risk management is all about spending money on insurance and other protection measures. While this is true to some extent, effective risk management can save you money in the long run because you may not have to pay for as much damage control if a risk does occur.
Business owners, entrepreneurs, and others can benefit from risk management equally. By understanding and managing the risks that can impact them, they can put strategies to help minimize those risks. Overall, risk management will help anyone who wants to protect their wealth and ensure its long-term security.
How Does Wealth Management Play Into Risk Management?
Wealth management is a broad term encompassing many aspects of financial planning. It includes goal setting, asset allocation, investment selection, and more. As mentioned, risk management is just one element of wealth management, but it’s crucial.
When developing a wealth management plan, you need to consider the risks that could impact your ability to achieve your goals. If you or someone in your family are saving for retirement, you need to be aware of the health risks that could prevent you from reaching that goal. Developing a serious health condition may force you to retire earlier than planned, making you financially vulnerable if not prepared.
How Can Wealth Services Help You In Risk Management?
If you’re not sure where to start with risk management, wealth services can help. A wealth management firm can help you assess risks and develop a mitigation plan. They can also guide you in investing your money so that you’re less likely to experience financial losses due to an unforeseen event.
When choosing a wealth management firm, try to select one with experience in risk management. Don’t forget to ask about their fees and services to know you’re getting the best value for your money. Wealth services may include creating legal documents like a living will, medical power of attorney (MPOA), or a durable power of attorney (DPOA).
Types Of Health Risks That Can Impact You
Many different types of health risks can impact you, both physically and mentally. Some of the most common include:
Physical Health Risks
Poor physical health can increase the risk of developing cardiovascular disease, type II diabetes, cancer, and more. While you can relatively control your physical health through diet and exercise, there are some risks that you can’t do anything about, such as your family history.
Mental Health Risks
Mental health disorders like anxiety and depression can impact your ability to work, maintain relationships, and take care of yourself. For example, someone with Alzheimer’s disease may lose their ability to work and earn an income to support themselves and their family.
Accidents can happen at any time and often result in serious injuries. Types of accidents you may be at risk for include car accidents, slips, falls, and workplace accidents. If you get injured in an accident, you may have to miss work and incur medical expenses.
Natural disasters, such as hurricanes and earthquakes, can also impact your health and wealth. It’s important to have a plan in case a natural disaster occurs, especially when you live in an area prone to them. In addition to the physical risks posed by these events, they can lead to financial losses due to damage to your property or loss of income.
Legal Documents You Can Use For Risk Management
Medical Power Of Attorney
What Is A Medical Power Of Attorney?
A medical power of attorney (MPOA) is a legal document that gives someone the authority to make medical decisions on your behalf if you can’t do so yourself. You can appoint anyone you trust as your medical power of attorney, such as a family member, friend, or doctor.
How Do MPOAs Work?
If you have an MPOA in place, you’ll need to designate someone as your healthcare agent. This person will be responsible for making decisions about your medical care if you’re unable to communicate your wishes yourself. For example, if you have a terminal illness, your healthcare agent will be responsible for deciding when to end life-sustaining treatment.
Why Are MPOAs Important?
MPOAs allow you to receive the medical care you want in case of an unexpected incapacity. Without an MPOA, your family or friends would have to make these decisions for you, which can be difficult if they don’t know what you want.
Durable Power Of Attorney
What Is A Durable Power Of Attorney?
A durable power of attorney (DPOA) also gives someone else the authority to make decisions on your behalf. However, in this case, they can decide on financial and legal matters rather than medical ones. Your financial agent will be able to sign documents, pay bills, and manage your property.
How Do DPOAs Work?
Similar to an MPOA, having a DPOA requires you to name someone you trust to act as your financial agent. You may want your financial agent to have authority over all of your financial and legal affairs or only specific ones. You can use DPOAs in various situations, from managing your affairs while you’re out of the country to handling things if you become incapacitated.
Why Are DPOAs Important?
Having a DPOA is a way to protect yourself and your finances. If you don’t have one, your loved ones may have to go through the court system to get the authority to manage your affairs. Going through court can be costly and time-consuming; even then, they may not act as you would want them to.
What Is A Living Will?
A living will is a document that allows you to express your wishes regarding medical treatment if you become incapacitated and can’t communicate your decisions. Living wills fall under the category of advance directives.
How Do Living Wills Work?
In most cases, a living will takes effect only if you have a terminal illness or are in a persistent vegetative state. Then, your medical team will need to follow the instructions that you’ve provided. The document can include your preferences for life-sustaining treatment, organ donation, pain management, and more.
Why Are Living Wills Important?
Living wills are an essential part of advance care planning and guarantee that your wishes are respected if you become seriously ill or injured. While living wills aren’t legally binding in all states, they can provide valuable guidance for your loved ones and healthcare providers.
Nesso Wealth – Protect Your Wealth By Managing Your Risk
At Nesso Wealth, we believe wealth isn’t just about money – it’s about your health, family, and peace of mind. Therefore, we offer a comprehensive approach to wealth management that includes risk management strategies. We provide different wealth management services in Connecticut to help you protect your assets and make informed decisions about your future.
Our experts will work with you to design a custom wealth management plan according to your definition of wealth. We aim to simplify the complex so you can focus on what’s important to you. At Nesso Wealth, we care about our clients and deeply want them to achieve their life goals.