President's Blog - Preparing For When Your Client Gets Sick, Or Old, Or Both

7/23/2018

Everybody gets ill.

In some countries in the world, the sickness is treated without a corresponding financial illness attached. For many people in America, however, getting sick can translate to a fatal disease infecting their wallets and portfolios.

Between escalating drug prices and confusing and ever-changing standards for health insurance, the cost of health care in America is a constant drain on the psyche and the pocketbook of average Americans. Either they are dealing with the cost of caring for themselves or loved ones, or they are worried that someday soon they will need to deal with the cost of caring for themselves or a loved one.

That concern, which seems to impact most affluent investors, is the topic of Spectrem’s new study The Convergence of Health and Wealth, an in-depth examination of what investors do (or have not yet done) to protect themselves financially from the storm that comes when someone gets sick or suffers the ignoble attacks of the elderly.

A conversation with clients about health care costs cannot be a 5 or 10 minute discussion. The combination of numerous potential crises (lengthy illness, dementia, extensive surgery) and the numerous potential products investors can purchase (annuities, long-term care insurance, last will and testament) to protect themselves and their families from the financial ruin such health matters can cause, requires a long and thoughtful meeting.

To indicate how much health issues prey on the mind of investors, the Spectrem study asked them to rate on a 0-to-100 scale their level of concern about a variety of topics, and the topic with the highest rating was “healthcare event that requires a much greater level of care than I presently have”. The rating was 58.43, followed by concern over a spouse’s health (57.15), paying for healthcare services (56.50) and the investor’s own health (55.86).

It is a shame (and perhaps a part of modern life) that people not only need to worry about their health but also about how they are going to pay to treat themselves or other family members once they get ill. But it is a reality that advisors need to discuss with investors to assist in preparing a portfolio for the eventuality that someone in the family will get sick, or get too old to care for themselves properly.

A quick run through the potential topics to discuss indicates the complexity of the topic:

An investor’s health: If the investor is still working and his or her family relies on his income, there needs to be protections against a loss of income due to illness. Is the investor protected through health insurance from his company, and if so, how extensive is that coverage?
An elder family member’s health: Working investors likely have parents who are still alive, and their health must be on the minds of the investor. Can the investor cover the costs of extended health benefits for a father or mother who gets ill?
Living arrangements: As people get older and the eventuality of age makes it more difficult to care for themselves, living arrangements can change. Is a retired investor planning to move in with the kids someday, or do they plan to stay in their home come hell or high water and pay to bring in expensive nursing care? Will an investor’s parent put up a fight when it is time to move into a care facility in part because the parent knows how expensive such a decision can be?

These matters, and others, can be made less critical if the investor is properly prepared financially to handle changes in health for themselves and family members. But it is more than creating a rainy day fund; it is complicated, and difficult for an investor to know what products or services best suits their needs.

That is where the advisor comes in. A knowledgeable advisor can point an investor to a program that suits their family situation and their financial situation. Such advice, when aimed at easing an investor’s concerns over the potential for a health crisis in their family, can be rewarded by a sense of loyalty one often feels towards someone who goes out of their way to assist.

However, having knowledge about healthcare costs, medical insurance coverages, and types of living arrangements requires study. Advisors and providers should have sources or experts related to health care to provide educational guidance which the advisors can then use to guide the investor in the best and financially healthiest direction.