Health Care Costs in Retirement - Why The "Cheese" Will Be Moved for the Financial Industry

If you do not change, you will become extinct

Words to live by from a book “Who Moved My Cheese” written by Spencer Johnson, MD, and if we draw a correlation to financial services industry, it is possible that a lot of financial professionals may be going the way of dinosaurs and VCRs .

In doubt? Let’s take a look.

The job of a typical advisor is to examine a client’s finances and construct a sensible financial plan that will weather market turbulence and provide long-term stability. A good advisor will meet regularly to re-balance portfolios based on market volatility and soothe client fears in times of calamity. Hopefully, this approach will yield a steady flow of accumulation and distribution throughout retirement.

But what we are starting to see, especially in the current world economy, is that the traditional methods of doing business and “building plans” is going to lead to many people in the financial industry to extinction.


Because the typical clients between 46 and 64 earning somewhere in the low-to-high six figures are not simply planning for their own futures. In fact, the Baby Boomers should consider re-naming themselves the Sandwich Generation.

This group not only has to prepare for retirement in an historically tenuous economy, but also simultaneously endure the burdens of assisting parents who are living longer while providing financial support for children who are having difficulty navigating through today’s unsteady job market. This at a time when guaranteed pensions are almost obsolete and the cost of living—especially in terms of healthcare—is skyrocketing.

Let’s examine Mike, a typical client. Mike is married, highly educated with a great job as Chief of Technology at a successful software company and an income sufficient to allow his wife to focus on taking care of the family. He also has 2 children who will soon be entering college.

Mike’s situation resembles the foundation of what was, at one time, a very attainable American Dream.

Everything seems fine for Mike, so much so that financial advisors would line up to take him on as their newest client—and why wouldn’t they? From an advisor’s point of view, Mike needs extra savings in vehicles like mutual funds to keep ahead of inflation, 529 Plans for college (assuming he has not done so already), life insurance for both spouses, a properly balanced 401K, etc. Mike’s needs can create a bevy of accounts—and commissions—for an advisor.

But the world…it is a changin’…

We forgot to add that both of Mike’s parents are in their late seventies and are slowly becoming unable to take care of themselves. In fact, Mike’s mother was recently diagnosed with Alzheimer’s and was sent home with little hope for a cure—but a bill for $2,125. Mike’s father has rheumatoid arthritis and the only medication that allows him to be functional, Enbrel, was recently taken off the Medicare D coverage list and now costs over $600 per month. They subsist on the father’s small pension, Social Security, and some savings.

We also forgot to add that both of Mike’s children would like to attend private universities, and with Mike’s income, it is unlikely that either will receive much financial aid. Of course, with the grim economy and the prospect for a turnaround seemingly light-years away, it is a pretty fair bet that one or both kids will be back home after graduation.

Feeling the squeeze?

So how can an advisor adapt to these changing times? First, it will be important to realize that having multiple accounts scattered across the stratosphere is both confusing and time-consuming.. The concept of the traditional client having a checking/savings account at one bank, a mortgage at another, equity investments with multiple brokerage firms, and life insurance somewhere else while taking care of the parents’ accounts as well is too much to bear. The successful and adaptable advisor will learn how to aggregate accounts by offering one-stop shopping that offers tracking of bill-paying and investments, as well as a long-term financial plan that covers the number one concern of Baby Boomers: healthcare expenses.

Now what company can provide products for all of these needs? Right now - Fidelity.

Fidelity is, at this time, the only firm trying to tackle this issue at the client level by offering checking and saving accounts, funds, investments, insurance, and the one trump card that no one else the financial industry currently offers–healthcare expense planning—all under one roof. (Nationwide Press Release has actually just begun to address healthcare at the advisor level.)

Fidelity’s approach is going to revolutionize the financial planning industry, and those who don’t follow suit will be left behind. Don’t believe that a paradigm shift of this magnitude can happen?

All we need to do is look at the Baby Boomers themselves. This generation has changed the way games are played in all facets of American culture.

And now where is this generation headed? To retirement, which will once again alter how the financial world does business… because there are 78 million Boomers out there, just like Mike.

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