Health Wealth Convergence: An Opportunity for Advisors - Part 1

Health Wealth Convergence: An Opportunity for Advisors - Part 1

It is no secret that today’s advisors face a fiercely competitive business landscape that requires a differentiated manager. Time and again investors report that they look to advisors to do more than manage money; they want someone to solve their broader financial problems. Sometimes financial problems come from unexpected sources. Take, for example, the “convergence” of health and wealth. Escalating health costs and Health Care Reform are creating new savings and spending challenges for investors. With challenges, come new opportunities for advisors.

Simply defined, convergence is the intersection of rising health care costs and inadequate retirement savings. To help your clients make informed decisions and to improve their odds for success, an advisor should be armed with an understanding of some bigger-picture implications within the convergence landscape.


Consider recent data:

  • Average per employee medical expenses for workers between the ages of 60 and 64 are more than double the cost for employees between 35 and 39 years old.1
  • Eighty percent of Baby Boomers cited uncovered health care expenses as their top concern in retirement2, yet only twelve percent of workers have a financial plan for retirement that considers health care costs.3
  • A Deloitte 2012 Survey of U.S. Health Care Consumers has shown that:
    • Almost one-third of households increased their health care spending as a proportion of their household’s total spending, as compared to the previous year 4
    • Approximately one in five insured consumers feel somewhat “insecure” that they’ll be shielded by their insurance from cost-related (health care) impact. 4
  • Regarding family coverage, total premiums have increased approximately 97% from 2002 to 2012 ($8,003 vs. $15,745, respectively)5

It is evident that health and wealth have become inextricably linked. An advisor’s role of helping clients to improve outcomes is more important than ever, amidst rising health care costs and evolving legislation. Understanding convergence is an opportunity to create more meaningful dialogue to help drive outcomes, whether at the individual or employer level.


The Impact of Health Care Reform and Convergence

The Patient Protection and Affordable Care Act (ACA) provisions, or Health Care Reform, is key to your convergence discussion. While speaking about the ACA’s legislation is complex, and perhaps outside of your comfort zone, it is important to have a basic fundamental understanding of the impacts it may have on your clients.

First, recognize that as an advisor, you need to be aware of how changes to health plans from the ACA can impact decisions faced by individual investors and employer sponsored retirement plans. Health Care Reform introduces new options for individuals purchasing health coverage, new benchmarks for employers offering their employees health coverage and new penalties for most individuals who fail to purchase coverage and large employers who fail to offer coverage.

The coming changes have many investors wondering what the new options mean for their immediate and longer term financial outlook. Likewise, many employers are re-evaluating their total benefits strategy to minimize risk, and maximize their investment in retirement and health plans amidst regulatory changes.  As an advisor to either audience, you should have a general understanding of applicable legislation.

Beyond a greater understanding of health plan changes, every advisor should recognize how strategic partnerships with health plan specialists can provide clients more holistic offerings. In many cases, partnering with health benefits brokers/ consultants, CPAs, or attorneys offers a gateway to a holistic and valuable problem-solving approach with your clients.

As you start to help clients navigate the health-wealth convergence, we offer several tips:


Working with Individuals

  • Recognize that spending and savings have become inextricably linked:
    • Read up on recent health care cost data impacting individuals’ spending and savings decisions
  • Have a basic understanding of key ACA provisions impacting individuals:
    • Example: the individual mandate and availability of the “exchanges” for individuals not already covered under a plan
  • Define individual objectives:
    • Use objectives-setting to help clients to understand how health plan choices play into overall goals
  • Monitor changes:
    • Helping clients manage risk means understanding how the current environment shapes the risks impacting them
  • Work with industry partners to understand the impact of Health Care Reform:
    • As mentioned above, partner with a benefits broker or other experts to help broaden your network of resources and keep clients informed as legislation evolves


Working with Employers

  • Ask employers you work with these questions about health plan design changes to determine best use of benefits dollars in retirement plan design:
    • Do you plan to offer health coverage in 2014?
    • Are you planning to make changes to your workforce?
    • Are health benefits a component of your executive compensation package?
  • Work with industry partners to understand the impact of Health Care Reform:
    • Again, as mentioned above, partnering with a benefits broker or other experts can help broaden your network of resources
  • Define plan objectives:
    • While benefit brokers are key to helping employers identify health plan objectives, advisors play an important role in helping to identify retirement plan objectives
  • Prioritize action items and monitor changes:
    • Understanding if and how an employer’s objectives have changed will help you to prioritize items such as plan governance review, plan benchmarking and administration, fiduciary risk, etc.
    • Monitor changes in the environment and offer retirement plan practices that will manage risks and further employer-based client objectives


While the health and wealth convergence can create numerous challenges and a little extra homework at times, it also creates new opportunities for advisors. Those who recognize convergence as an opportunity are likely to be highly sought-after resources by clients. We will explore this further in part II of our series, when we do examine considerations for higher-earners and small business owners.





1The Aging Workforce: Challenge or Opportunity?”, World at Work Journal, 3rd quarter 2006

2Middle Income Boomers, Financial Security and the New Retirement”, Banker’s Life and Casualty Company Center for a Secure Retirement, May 2011

3 Lifetime Income Scores II: “Our Latest assessment of retirement preparedness in the United States” Putnam Investments, May 2012.

4 “Deloitte 2012 Survey of U.S. Health Care Consumers: The performance of the health care system and health care reform”

5 “Family Health Premiums Rise 4 Percent to Average of $15,745 in 2012, National Benchmark Employer Survey Finds,” The Henry J. Kaiser Family Foundation, Sept. 11, 2012


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