A newly widowed Forbes 400 billionaire recently was on the verge of hiring a nanny for his two children. Though he had selected a candidate from a well-known domestic employment agency and personally interviewed her at his residence, he was overwhelmed with the prospect of bringing a new unknown person into his household.

Under stress, he sought assistance from Teresa Leigh, whose firm Teresa Leigh Household & Property Management LLC in Raleigh, N.C. (http://www.teresaleigh.com), specializes in searches of domestic staff to prevent risk for the exceptionally affluent community across the U.S. The firm works closely with high-net-worth clients of the Chubb Group of Insurance Companies.

In the course of a background investigation, Leigh's firm was forwarded paperwork by the agency the woman had used, interviewed the nanny candidate and discovered her identification and photo IDs did not match. In fact, the Social Security number the person had given the agency had been used by three other individuals. Further, she had been arrested within the last six months for a DWI. A bench warrant had been issued after she had failed to appear in court.

Wait. It gets worse. She had also declared bankruptcy within the last year, and her brother was serving time for unlawful acts with a minor and possessing drugs, among other serious offenses.

"Was she a pleasant and kind person? Did she have good nanny skills? Did she have good job references? Was she willing and available for work today? Yes," says Leigh, "but obviously she was not the person for the job."

The hiring of domestic employees, such as personal assistants, house managers, butlers, housekeepers and nannies, is a high-risk business, Leigh maintains, but too often affluent individuals take the hiring and vetting process for granted.

"It can be difficult to educate the affluent community about the importance of protecting their identity in the process of hiring domestic staff. They often do not believe they come into contact with psychopaths or known criminals," she says. "How would a CEO or CFO be aware they are sitting across the table during an interview with a butler or nanny that may have a criminal record?"

To be sure, you won't find criminal offenses in the backgrounds of most domestic workers. Still, there is risk involved regarding your wealthy clients' personal safety and their assets.

Among the concerns: Do your clients have adequate protection against property damage and liability? What happens if their domestic workers get hurt on the job? Are they properly covered? What if they turn out to be illegal immigrants? What is the advisor's role in all this?

Covering The Nanny Gap
    Due to certain dynamics in the P&C industry, as well as a reluctance by many financial planners and wealth managers to stray too deeply into the P&C realm, chances are high many clients lack adequate protection from common and uncommon hazards involving domestic employees, according to P&C experts and other industry observers.  

The reason is that most advisors predominantly are concerned with their areas of expertise, says Jim Fiske, vice president of personal insurance for Chubb. "There is a natural progression for advisors to have either a life insurance background or a background in securities. They earn their livings based on helping clients manage their investable assets. Wealth preservation, however, is a key component of the overall wealth process. Generally speaking, advisors are not experts in property and casualty, and that results in a significant hole in the offerings they make to their clients."