Clay Saftner, COO, is a principal of Simpson McCrady, a privately held, independent boutique risk management firm based in Pittsburgh, Pennsylvania, and Washington, DC. For decades, he has specialized in serving as the outsourced risk manager for private clients and commercial entities, utilizing proprietary methodology to identify gaps and holes and seize risk management opportunities to reduce, transfer, avoid, or eliminate risk.
Russ Alan Prince: Give me some brief background about Simpson McCrady and your role there.
Clay Saftner: Colvin McCrady and Bill Simpson formed Simpson McCrady in 1985, focusing on private clients and successful closely held businesses. Since then, we’ve expanded our focus to additionally serve larger entities and even some publicly held companies. I started with the firm in 1997 and was elevated to partner in 2005.
Most of our affluent clients have sophisticated risk management needs. They've accumulated wealth either through professional practice, business ownership, or family legacy. We also have developed a cache of multi-family and single-family offices. Complexity is the standard when managing risk related to multiple homes, fractional interest in airplanes, yachts, significant jewelry, fine arts collections, and high-end cars. Sophisticated risk management needs require expertise that is generally far greater than the typical insurance agent’s capabilities.
Additionally, we serve as the outsourced risk manager for privately held and private equity-backed companies, along with some publicly traded firms. A lot of those clients are large enough to have sophisticated risk management needs but not large enough to have a full-time risk manager in-house.
We thrive as our clients’ outsourced risk management department with a footprint in all 50 states and in 24 foreign countries.
Prince: What are the most common risk management mistakes you find when reviewing existing risk management strategies when you first meet with affluent families?
Saftner: The biggest mistake I find is that many successful closely held businesses and affluent families have overlooked or overestimated their current risk management solution. This shows itself in several ways. Here are the four most common ones:
1. The misconception is that insurance is a commodity.
Many successful closely held business owners and affluent families have developed the mistaken belief that there's no difference between the product offerings between a direct writer, such as Nationwide, a State Farm, or Allstate, and carriers who are set up to cater to private clients and successful closely held businesses.
The typical culprit for this is inertia. Very successful people will come out of college and work for decades to accumulate wealth but stick with the same agent, whom they’ve outgrown, from down the street. Often, they've gone from a starter home to a multimillion-dollar home with multiple cars and the trappings of success.
2. Using a broker as a conduit to a commodity versus giving them a “seat at the table” with their most important advisors.
Your risk manager needs to be in the loop with your tax adviser, legal counsel, wealth advisor, business advisors, and even life and business coaches. Ideally, your risk manager needs to be part of your cohesive team, implementing integrated solutions on your behalf with all other key professionals serving you.
3. Not leveraging their entire family's portfolio to obtain the best terms and conditions in the marketplace.
Successful families can derive a significant benefit from leveraging their entire family’s portfolio. Unfortunately, many successful families are not taking advantage of this significant benefit.
4. Gaps. Pure gaps in coverage as an outgrowth of all of the above.
We often see no cyber coverage, a must in today’s day and age, especially if you have children, as well as travel, personal umbrella coverage, and several other areas where critical coverage is inexpensive and readily available. For example, significant gaps in coverage form when you engage in activities such as driving for Uber or Lyft or listing second or third homes for rent on AirBnB or VRBO, which often violates the standard auto or homeowners policies. We see this many times with younger generations and even sometimes with older generations looking to stay busy in retirement years.
Prince: Given these mistakes, how would you advise successful closely held business owners and affluent families as they move forward?
Saftner: Generally speaking, the biggest mistakes come down to: (1) underestimating your current risk exposure and, because of that, (2) not choosing the right risk manager, and (3) giving that risk manager a seat at the table with your other trusted advisors.
As a result, I would advise them to partner with an experienced private client risk manager to conduct a comprehensive risk assessment. That way, they can understand their true risk exposure and put together a plan to reduce, transfer, avoid, or eliminate the risks that are exposing them to dangerous (and avoidable) gaps and holes.
Russ Alan Prince is the executive director of Private Wealth magazine and one of the leading authorities in the private wealth industry. He consults with family offices, the wealthy, fast-tracking entrepreneurs, and select professionals. Connect with him on LinkedIn.com.
