This is the step where the financial advisor and client need to really think through all the bad things that can happen, which would negatively impact achieving the previously stated goals. Such things as a tornado or fire that destroys a home, a car accident which not only destroys a vehicle but also seriously injures the family earner, a neighbor’s child seriously injured on your property, or a family member potentially inflicted with a serious, long term illness are some of the important risks which need to be identified in this step. At this point, no identified potential risk should be omitted. The decision process to avoid, reduce, retain or transfer risk will come later. Step 2 is really the brainstorming phase where ALL risks are identified, no matter how big or small. Once complete, Step 3 now provides the assessment of how likely the identified risks from Step 2 are likely to occur, and in priority order (Abbot Downing, …show more content…
Although the risks identified may be common between various clients and their families, the likelihood of them occurring and the impact may vary significantly based on different family lifestyles and priorities. The financial advisor and each respective client must objectively analyze each of the risks identified in Step 2 and assess the likelihood each may occur. In doing so, a useful technique would be to list them in a most likely to occur to least likely to occur order. In doing this assessment, the client and the advisor must also assess which risk would be the most damaging if they