Health care costs are likely to be any retiree's greatest expense. Financial advisors, then, need to address the potential havoc health risks can have on a client's financial plan. The problem is: How to get clients to actually give personal medical information to an FA, and how to make sure this info is comprehensive and accurate.
Not an easy assignment! One thing an advisor can do easily is monitor the health care industry to help craft financial plans for their clients. The popular press, health magazines, the Internet and even prestigious specialty journals are rife with articles discussing the financial and financial planning ramifications of various health and health care problems. These types of articles are common, but often overlooked. A specific strategy is needed to enable the individual advisor to find accurate information when needed and in a manner that ensures veracity and reliability, as well as convenience.
For Your Information
We recommend following books and health newsletters published by reliable sources, such as Harvard, Johns Hopkins and the Mayo Clinic. Of course, the Web is chock full of health care sites, but the trick is to find reliable ones. In general, federal government Web sites are the best for clear and accurate medical health care information (studies have shown that, as a group, they have the least amount of inaccurate information).
We suggest beginning with MEDLINEplus.gov (also for Spanish-speaking readers, MEDLINEplus.gov/esp). This is a joint service of the National Institutes of Health and the National Library of Medicine. The site covers over 700 “topics on conditions, diseases and wellness,” and drug information; it also features a medical encyclopedia, a dictionary, physician directories (find doctors, dentists and hospitals) and other resources (local libraries, health organizations, international sites and more). In addition, it features a handy news section, a depository of “health news from the past 30 days.”
This treasure trove of information is user friendly and provides facts on just about everything from screening for various diseases, such as the common cancers, to caregiving for persons with Alzheimer's dementia. In addition, the links provide details on Medicare, Medicaid, long-term care and other issues germane to financial planning.
We're not urging anyone to try to act like a doctor, of course. The idea is that medical needs have an impact on a retiree's financial plan; a financial advisor should be prepared to help his client navigate these issues, to be prepared, financially, to face them.
Say “Family History”
It goes without saying that people are reluctant to discuss this most personal of topics (health care sure is a far cry from discussing asset allocation!), and you need to tread gently, even asking permission to go there. Begin by expressing your genuine concern for their retirement goals and remind clients that health care is likely to be their most significant financial and emotional issue. Inquire about potential risks as part of your interview or review process; be professional and matter-of-fact as you gather the information. There are four key areas of investigation:
Ask about parents and grandparents. If deceased, what was the cause of death? Do (did) they suffer from any other illnesses or debilitating maladies? Family history can provide meaningful insight into future risks.
Yup, this one is tricky. Personal habits like smoking, alcohol/drug use and obesity are the immediate causes of most debilitating health care events, such as stroke and cardiovascular disease. Compared with genetic risks, which are involuntary, lifestyle risks are just that — choices made by a person who may not be motivated to change. One way to get lifestyle information into your reviews is to provide a checklist of personal health care factors.
Senior Housing Preferences
Try speaking in the abstract, “Where do you see yourselves in 10 years, 20 years, 30 years?” It all depends upon their health, of course. For a couple, what would change if one spouse died? How would that alter the big picture? This is an area of concern to most retirees, and most have some notion of what they will do. If you can get pre-retirees talking about the potential for different retirement phases, you can better gauge how practical they are about future planning. Do they buy the sunny advertising pitch of the southern golf community, or do they know they might have to move closer to the kids if one of them has a heart attack?
What steps have been taken to deal with any of the issues above? Here you are looking for the basics, such as long-term care policies or a medical savings account to self-insure against expenses. But there are many other measures to assess:
Legal — Are there advance directives, living wills, health care proxies? Do the children know the contents and the preferences stated therein? If they exist, where are the documents? Do they have copies?
Housing — Have the clients planned for housing options, such as life care in a continuous care retirement community? Have the clients discussed several scenarios with each other, and with their children? What if a health care event changes the current picture?
Medical risks — What is the annual medical plan for maintaining health care? What tests should be conducted on a regular basis and are specialists identified to provide those tests? Are there special risks to consider?
Daily living — Just as toddlers can surprise us with their ability to find new hazards as they grow, seniors uncover risks even in the most familiar surroundings. Bathtubs can become skating rinks without safety bars, and small area rugs help break hips every day. Is there a handy reference for emergency medical information if required by emergency personnel? Many seniors keep such a list on the refrigerator.
Advisors who can address highly personal and emotionally charged topics — such as where a client might live if her spouse has a stroke — are in a special class of trusted advisors. A recent survey of affluent investors said that the No. 1 reason clients retain their advisor is the trust they have in that person. The trusted advisor's value transcends markets and modern portfolio theory, and is based on the real life concerns of most families as they approach retirement. By facilitating a discussion of practical issues, you can help clients make a successful transition to a lifestyle choice with solid guidelines to help them enjoy their golden years.
Writer's BIO: Stephen D. Gresham is executive vice president of Phoenix Investment Partners.
Glen E. Gresham, M.D., is professor emeritus of rehabilitation medicine at the University at Buffalo, The State University of New York.