The following is my answer to a Quora question: “What is the wisest financial advice you have heard from a rich person?”
One of my ultra-high net worth clients once told me, “The banks are not there to make you money; the banks are there to make the banks money.” What this means is that while banks are useful, it is never wise to keep money only in the banks. It is important to diversify assets and financial instruments. And that is why he bought a lot of insurance policies, in addition to his other investments.
In every financial crash, it is banks that collapse, and require bail outs, not the insurance companies – somebody needs to insure the banks. In the 2011 crash, AIG was the only insurer that was in trouble, and it was because of credit swaps, not a weakness in the insurance industry. It is because of the weak US regulatory regime that a major insurer could engage in such a risky practice.
This is the same person who also said, “Poor people have savings accounts. Rich people have investment accounts and current accounts.” This means we should separate our accounts for bills from our accounts for wealth accumulation and management.
Terence Kenneth John Nunis
[Shared with permission from: https://terencenunisconsulting.blogspot.com/2020/04/quora-answer-what-is-wisest-financial.html?m=1 ]