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When Advisors Become Minders

When Advisors Become Minders

The gentleman was in his mid-70s. A successful businessman, now retired, he had always played the odds, so naturally he thought he would die before his wife. He was wrong. His wife died first, and the businessman went to pieces. He became depressed, didn't go out, stopped eating well, got behind on his bills and didn't pay his taxes.

The gentleman was in his mid-70s. A successful businessman, now retired, he had always played the odds, so naturally he thought he would die before his wife. He was wrong. His wife died first, and the businessman went to pieces. He became depressed, didn't go out, stopped eating well, got behind on his bills and didn't pay his taxes.

The gentleman's Wells Fargo banker, noticing his client's sudden change in behavior, contacted Wells Fargo Elder Services, a premium holistic service Wells Fargo Private Bank has offered to high-net-worth clients since 1997.

“The first thing we did was help him get to a medical professional,” says Keith Klovee-Smith, senior vice president and national manager for Wells' Elder Services division. “He was diagnosed and received a prescription for an anti-depression medication. Then we began to look at things at home, and focused on bill pay, taxes and making sure he had properly prepared food. He has also become socially isolated, and we helped re-introduce him to his church,” Klovee-Smith recounts. “Over the next year, there were ebbs and flows in his progress, but he started getting healthier and becoming more functional. We support him when needed, but back off when we're not, although he knows the safety net is there. I would say he is a classic elder services client.”

While Wells has been a pioneer in catering to specific needs of its older clients, the San Francisco-based firm is hardly alone, and for good reason.

A Market You Cannot Ignore

Over 40 million Americans are already over age 65, more than 13 percent of the population. By 2050, the 65-plus population is projected to more than double to 88 million, according to the U. S. Census Bureau. That would represent one-fifth of the population. Not only will there be more older people, they will also be living longer, with average life expectancy to rise 18 years by 2030, according to the U.S. Health and Human Services Department's Administration on Aging.

Baby boomers, of course, will be well represented: 77 million began to turn 60 five years ago. And that wave of aging boomers means a lot of liquid assets are on the table. Households that include someone age 60 and older have more than $11 trillion in cumulative investable assets, according to Barclays Wealth Report.

“It's a market you simply can't ignore given the demographic shift and the money involved,” said Nalika Nanayakkara, principal at New York-based consulting firm CapGemini's wealth management practice.

Some firms, like Wells and Harris Private Bank, are charging an extra fee for their elder services, adding a revenue stream, and, they say, making a profit. Others, like Northern Trust, U.S. Trust and Morgan Stanley, see additional services for older clients as a value-add to both solidify relationships and extend them to a younger generation. But there is a common denominator: Services for older clients are becoming increasingly important, and those offerings go way beyond asset management, estate planning and other traditional financial-oriented wealth management tasks.

In fact, Wells Fargo Elder Services' “customized care plan” includes a physical, medical and psychological evaluation as well as a financial review. Clients' nutrition and diet are analyzed, and their homes are inspected for safety and mobility hazards. Once the plan is implemented, the Elder Services team is on call 24/7 and works closely with the client, family members and Wells Fargo advisors and specialists.

“We sit down and talk to clients about what's going on in their lives and what keeps them up at night,” Klovee-Smith says. “I've found that these conversations are frequently not held in families, and behaviors tend to be glossed over. We ask clients questions like how they're getting up in the morning, how their food is being prepared, if they have urinary incontinence. We want to find out what the problems are, and not just solve them, but make sure there's a real solution.”

For example, elderly people who act confused and seem “out of it” are often thought to have Alzheimer's disease, when in fact they may simply have a urinary tract infection that is causing the problem, says Klovee-Smith. Likewise, an older person who is having problems hearing may not be deaf, but have wax in their ears, he notes. “We have a tendency to apply stereotypes,” Klovee-Smith says, “when what we really need to do is investigate more closely.”

In addition to focusing on “soft” issues of daily living, Elder Services also pays clients' healthcare expenses, coordinates Medicare and insurance benefits, keeps clients' documents up to date and, of course, works on asset and liability management and tax and liability planning.

Clients must have a minimum of $1 million in investable assets and are charged a maximum of 2 percent of their assets under management for the service on a sliding scale, down to 80 basis points.

A Multi-Generational Effort

Over 100 people work for Wells' Elder Services, which is available in 70 markets and will expand to additional markets around the country this year, according to Laura Houston, director of strategic business services for Wells Fargo. Houston declines to reveal exact numbers, but says the service is profitable and is a “growth area” for the company. “It fills needs clients have, it helps to meet family objectives and builds bridges to the next generation,” she says.

Debbie Korompilas, a senior vice president at Harris Private Bank, who heads the firm's three-year-old Harris enCircle service for older clients, also stresses the need to work with multiple generations, especially those who are forced to be long-distance caregivers.

“These days you can have children in their 30s, parents in their 60s and grandparents in their 80s or 90s,” says Korompilas, who also heads the bank's Trust & Estate Services. “In our mobile global society, they are often no longer living in the same community. There are an estimated 7 million long-distance caregivers right now and that number is expected to double in the next 15 years.”

As a result, referrals for home and healthcare service providers are a prominent feature of Harris enCircle, along with a Harris specialist who coordinates bill payments, taxes and investments. In the firms' marketing materials, these offerings are explicitly pitched to allow the “busy professional” to spend time enjoying his or her parents, and not having to deal with the details of parents' finances.

Most Harris enCircle clients have investable assets of at least $1 million, according to Korompilas, and are charged 30 additional basis points on top of the existing fee on assets. The service is offered in Harris Private Banks' U.S. markets (Arizona, Florida, Illinois, Indiana, Virginia, Washington state and Wisconsin), and last fall Harris enCircle launched a channel on YouTube featuring experts talking about elder care planning.

Elder services are also a high priority at wealth management firms who are not charging an extra fee. “We are very focused on this area,” says Keith Banks, president of U. S. Trust Bank of America Private Wealth Management. “The demographics tell you that you have to be there. We're ramping up to ensure all our advisors have this conversation.”

From a business standpoint, giving special attention to older clients highlights the “breadth and depth” of the firms' capabilities, Banks says, and not only strengthens relationships but puts the firm in a good position to be considered when wealth transfer takes place from one generation to another. “It's a nice hook,” he says. “It shows that we don't just manage money but can do other things to meet the intimate and personal needs of a family.”

Northern Trust charges a “modest fee” for its Medicare service which handles clients' medical expenses and insurance claims process, says Hugh Magill, executive vice president and chief fiduciary officer for the firm. But Northern doesn't charge extra for working with older clients on issues like finding care management firms, evaluating contracts for assisted-living facilities and handling tax and employment details for hired household staff.

Morgan Stanley Smith Barney's effort to work closely with older clients centers on its Wealth Planning Services, which covers issues ranging from cash flow analysis to wealth transfer. Although not exclusively for older clients, most plans are done for people over 60 transitioning to retirement, says Kenneth Jordan, executive director for the firm's Chicago and Heartland Regions Wealth Advisory Resources.

The growing importance of the older market is reflected in the rise of the number of plans per planning director, which has jumped from 118 in 2007 to 189 last year, a 62 percent increase. And Jordan sees no end in sight: “We expect steady growth, we're hiring and we're continuing to build out.”

Not Everyone Sold

Some financial service observers, however, remain skeptical. “Everybody says they want these premium elder care services, but from what I've seen, people don't want to pay for it,” says Richard Trumpler, chief operating officer of the New York Private Trust Company. Extensive elder services can also lead to confusion, according to industry analyst Darren Courtney of Boston-based Tower Group.

“It's an area that needs to be approached carefully,” Courtney says. “Once you start doing this you're working with all kinds of outsiders, from medical people to different attorneys and accountants. There's a chance of getting too many cooks in the kitchen, and it may be unclear what the wealth management firm is responsible for and what it isn't.”

But no matter how firms choose to work with older clients, it's clear they will have no choice but to work with more of them, more closely and for longer periods of time. “Clients of financial advisors aren't just going to be older, they're going to be much older, and advisors are going to see very different family dynamics,” says Michael Herndon, manager, financial security, for the American Association of Retired People (AARP).

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