President's Blog - Taking Your Client’s Temperature


A chatty advisor might start a meeting with a friendly investor by saying “So, how are you feeling?” 

For advisors, that question needs to be more than just a conversation-starter. The investor response needs to be followed with the question, “No, really, how are you feeling?” 

Concerns over future health issues and the cost those issues will ring up prevail among all investors. Preparing a portfolio that can provide the income necessary to cover the costs is a primary focus of many investors. 

But, like investigating the proper time to take Social Security or how to handle the transfer of wealth, investors sometime skirt the issue of the cost of future health concerns. Many investors need to be prompted into having difficult conversations, and when finances are involved, that prompting often comes from financial advisors. 

What specific questions should be asked, or what topics should be addressed? Answers to those questions are covered in Spectrem’s new study The Convergence of Health and Wealth. The study covers questions about the financial preparations made by working investors for future health issues, as well as the preparations in place for retired investors for whom such issues are likely closer to mind. 

When an investor reaches a certain age, whether they are working or not, their focus on investments turns from growth to future income and security. Those changes are part of an advisor’s routine check of an investor’s current frame of mind. It’s about paying for future needs, and investors are likely to want to have that conversation sooner rather than later, as long as they know the conversation needs to occur. 

But there are topics that need to be addressed that go beyond the basic cost of medical and health care expenses, and advisors can and should get involved because these topics can lead to a distinct set of medical costs. 

The study asks numerous questions about the plans investors have for when they are no longer deemed capable of living alone. According to the study, rather than consider any sort of nursing home or continual care residence, the most popular choice among investors is to have their home converted to a safe place to live with caregivers coming into the home either permanently or regularly.  

Investors may see that as a less expensive option, but the cost of in-home care is pricey. All options are pricey. Nursing homes and continual care facilities are not cheap. Investors would benefit from comparing the costs of those living choices and decide which they can afford, or how much they need to have in financial reserve to afford the choice they prefer. 

As with other topics, the family often plays a role in the eventual care of an aging investor. Children and grandchildren are possibly going to be asked to provide care, and may need to get involved with the finances of future care depending on the intellectual health of the investor. 

But, according to The Convergence of Health and Wealth, less than 50 percent of working investors and more than one-third of retired investors have not discussed their future living arrangements with their children! Sure, it can be a difficult conversation, but what are they waiting for? 

Perhaps they are waiting for a push from their advisor, who can provide not only the numbers they need regarding some cost options, but also may be able to provide relief in the form of explaining how well-prepared the investor is financially for the upcoming changes in lifestyle or medical care costs.  

Of course, advisors may end up telling an investor they are not well-prepared, but that is perhaps even more important. It could serve as a wakeup call to have conversations with the family about investment options that will provide better financial support when it is most needed. 

 © 2018 Spectrem Group