An audit is typically a word that makes most cringe, maybe not so different than when a person hears about a root canal. refers to an audit as an official examination of an account, building etc. that evaluates or improves its appropriateness, safety or efficiency. 

So why is it that most fear this process that can create good results?

I would suggest that it is most often done to someone instead of being chosen by them. Do you follow that logic? For example if the IRS contacts you and says, “Congratulations, your tax returns are being audited,” it’s not such a good feeling, right? I wanted to suggest that we shift the dynamic of the audit so that we choose it, instead of it choosing us.

Our firm routinely audits all different types of financial documents for our clients. In most cases we find numerous inefficiencies and errors. This process gives us alongside of our client an opportunity to address the particular situation in a controlled environment where we can improve or fix the problems. One of the most common areas that we see results is when performing Life Insurance Audits.

Face it, most feel similar to the root canal example above when it comes to discussing their life insurance. So that mentality often allows for years to pass without reviewing and updating these policies. In fact, 65% of Life Insurance Audits performed by Ash Brokerage reveal the potential for improvement. Catalyst Wealth Management advisor, Christopher D. Pullaro, CPA, CFP recognizes the following as the most common areas that can be improved:

-- Underwriting Class or your health rating from when the policy was issued.

-- Overall performance of the policy.

-- Beneficiaries are not coordinated with Wills or Trusts.

-- No Disability provisions.

-- No Long-Term-Care Provisions.

Most clients, and even advisors, unfortunately treat life insurance as a “buy-and-hold” strategy. I would suggest that it should be a “buy-and-monitor” part of a portfolio. With medical advances and greater longevity, new policy pricing is improving rapidly. Insurance carrier profit margins, however, are being squeezed because of historically low bond portfolio yields. This is creating different levels of pressure for insurance company’s ratings and performance. So with all of these ever changing variables when should this audit process take place? Here are some guidelines to follow every year:

-- Review coverage amounts to determine if the coverage amounts are at maximum levels as it relates to the insured economic value.

-- Review in-force illustrations (re-projections) under various interest rate assumptions.

-- Review all carrier ratings and financials.

And every three to five years:

-- Conduct a full portfolio audit.

-- Collect in-force illustrations and compare them to the products and pricing currently being offered.

-- Compare new products to those held in trust, evaluating performance and guarantees.

-- Scrutinize the design, including the tax and legal structure, and the premium payment method.

-- Estimate the value of contracts in the secondary market and factor those results into decisions.

So what’s stopping you from doing the right thing? Make financial and insurance audits part of your process.


Todd Burkhalter is a financial planner and managing Partner at Catalyst Wealth Management. He has worked in the financial service industry since 1997, and is a member of The National Association of Insurance and Financial Advisers, and a Licensed LEAP Practitioner. Email him directly at



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