One Thing You Should Never Tell Your Aging Investors

One Thing You Should Never Tell Your Aging Investors

Dec 30, 2020 | aging, aging in place, aging investor, cost of aging, cost of long term care, elder investor, elderly, finances for elders, financial advisors, handling money for seniors, investor, long term care, medicare, retirement planning, senior investor, seniors finances

In retirement planning discussions, we see this statement financial professionals often publish for their clients:

“The average lifetime out of pocket costs for healthcare for a 65 year old couple retiring today is $285,000.”

Why should you never say this? It’s misleading at best and at worst, it’s false. From my own research as to where the number came from, I found it in government sources calculating Medicare deductibles and supplemental insurance payments, and co-pays Medicare does not cover. Generally, the out of pocket calculation refers to non-covered “medical” costs. But when that term gets diluted to mean “healthcare” it is far too broad and it simply ignores the reality that long term care is indeed healthcare. Medicare does not cover that at all, except for limited stays in skilled nursing homes following hospitalizations. It is noteworthy that when the Federal government uses data to calculate what out of pocket medical costs will be, the subject of long term care is entirely omitted.

The “average” lifetime cost of long-term care for two people in this country is far greater than $285,000. According to research by long term care insurance provider, Genworth, seven in ten people will need long term care at some point in their lives.

The comprehensive Genworth cost of care study, done annually, was published for 2020. Consider that at some point, with longevity being as it is, an older person with multiple medical conditions may need 24/7 care. Almost everyone will tell the advisor that he or she wants to stay at home and age in place. What will that cost at home in any of the most expensive states? In California, for example, the median cost of in-home care with a non-licensed caregiver full time, 27/7 is $252,000 per year! This is not medical care, in the sense that no skilled nursing is part of it, no doctor’s prescription is involved, and the agencies that supply unlicensed home care workers can charge whatever the market will bear.

A truthful financial professional will never mislead aging clients, or those planning for retirement by telling them that all they have to worry about for their future out of pocket healthcare costs is $285,000. Prudent financial advisors will themselves look annually at the Genworth study and help clients calculate the costs of long-term care, which every person should know about.

Costs of care, whether at home, in an adult day health center, in assisted living or in a skilled nursing facility vary widely from state to state. Looking at national median costs can be of little benefit to anyone doing retirement planning. Instead, using data from the Genworth study, one can look state by state for the real, most applicable numbers derived from where your client lives or plans to retire.

From my perspective, financial advisors are not educated to fully understand the difference between government provided statistics about out of pocket, non-Medicare covered medical costs and what we mean by long term care. They are quite different terms. It is distressing to me, with substantial experience in nursing, to see the fallacy of statements published by financial professionals about what retirement planning should include. Clients will be shocked to find that their own experience with having to pay for long term care out of pocket is not what their own advisor told them years before.

If you are in the retirement planning business and you want to serve your clients well, bear in mind that the data telling us that seven in ten people will need long term care at some point is likely true. Don’t fool yourself into thinking that retirement planning is just fine if a couple puts away enough to generate $285,000 for out of pocket medical costs. They also need to plan for how to pay for long term care, which they are statistically likely to need. That cost can destroy the most carefully laid plans for retirement income.

As a real-life example, take a client of ours, “George” at AgingParents.com, where we offer advice and guidance to families with aging loved ones. The advice encompasses legal, financial and healthcare issues as well as diminished capacity issues. George is 98 years of age and still sharp, though with some memory loss problems. He was wealthy at one point, after two successful careers. He owns his own home and wants to stay there for the rest of his days. His physical health is fragile and he now needs 24/7 help. He hired a good agency to provide in-home care. He spends in excess of $300,000 a year for caregiving alone, not counting the cost of everything else involved in home ownership, food, recreation, and out of pocket medical costs. Those medical costs involve dental surgery and equipment he needs at home. He has less than $400,000 left in savings. What if he lives another two to four years?

As you can see from this example, George is not a rare case. Many people do live into their 90s and beyond. Many start out with financial security, only to see assets rapidly depleted as the cost of care escalates to heights no one wanted to think about in retirement planning.

The Takeway

If you pride yourself in doing great retirement planning with clients, get real. Sit down with the data and find out what your clients might expect to need if they live long and require help at home or elsewhere. Tell the truth about it. If they need long-term care insurance to feel secure, talk about it. If they have sufficient assets to make it to 100 or so with full time care, they don’t need to get long term care insurance but they will need to have access to sufficient cash to cover the actual, not fantasy, costs. Above all, be clear in your own mind about what “out of pocket medical costs” means as compared with long term care costs. You are the key to these honest calculations. You can be the hero of the retirement planning story when you present an honest picture to every client you have.

By Carolyn L. Rosenblatt, RN, Attorney, AgingInvestor.com

About Carolyn Rosenblatt and Dr. Mikol Davis

Carolyn Rosenblatt and Dr. Mikol Davis are co-authors of The Family Guide to Aging Parents (www.agingparents.com) and Succeed With Senior Clients: A Financial Advisors Guide To Best Practices and Hidden Truths About Retirement and Long Term Care. Rosenblatt, a registered nurse and elder law attorney, has more than 45 years combined experience in her professions. She has been quoted in the New York Times and, Wall Street Journal, Money magazine and many other publications. Davis, a clinical psychologist and gerontologist, has more than 44 years experience as a mental health provider. In addition to serving his patients, Davis creates online courses and products to assist professionals and the public with understanding aging issues. Rosenblatt and Davis have been married for 36 years.

 

Five Very Personal Questions Older Advisors Need To Ask Themselves

Five Very Personal Questions Older Advisors Need To Ask Themselves

Feb 5, 2020 | business transitions, financial advisors, financial judgement, handling money for seniors, investor, legacy planning, retirement, retirement planning, senior investor, seniors finances, wealth transfer

Advisors talk to clients all the time about the big topic of retirement. The industry inundates the media with advertising among competitors about who can do retirement planning best. You help clients plan for how to reach their goals. You do your research and calculations. You offer sage advice after years of experience. And then there’s your OWN plan: when is it time to schedule your own exit from the burdens of your work?

We often hear “age is only a number” or “age is just a state of mind”. That’s not really true. Age is a process that takes its toll and ignoring it can be costly. We work, we have our self-image of productivity and success. We pass 50, then 60 still going strong. But one day, you forget an important phone number you should know. You quietly ignore it. Until it happens again. You forget names and that’s not really such a big deal, as lots of your age-mate friends laugh about the same thing. But at the back of your mind there is that tiny, creeping doubt: am I starting to “lose it”?? Fear has emerged in the shadows of your consciousness. “How long can I keep going?”

The literature of the financial services industry is replete with advice about advisors’ succession planning. Sounds good, but it never tells you exactly when to move on, to merge your business with one managed by younger folks, or sell the book of business to someone you trust.

Here at AgingInvestor.com, we offer a deep dive into information about aging clients and how to spot signs of trouble. We give you our professional guidance as aging experts on how to understand when your client is demonstrating dangerous signs of diminished capacity. We give you concrete suggestions about what you need to do. We spend a little time on the subject of the impaired advisor too, and how firms can deal with that. But we have not asked you to look within and formulate a plan for your own exit strategy when you, yourself see any warning signs that age is affecting you in your work.

It’s time to do just that. We know that many advisors are still doing fine at 60, 65, 70 and up. However, age statistics don’t lie and loss of sharpness can happen to anyone. Advisors don’t age differently from anyone else in the world. A few firms do have a mandatory retirement age but most don’t. Independent advisors are independent for a good reason. You didn’t want to march to the beat of an institutional drum. That independence has likely led to greater job satisfaction and perhaps even greater financial success. But it leaves you vulnerable when you are on your own, getting on in years and not clear about whether to merge with a firm, sell, or otherwise set a date for realizing your own exit strategy.

Here are five things to ask yourself in considering the question: when is it the right time for me to exit this business?

  1. Am I noticing any changes in my memory such as forgetting appointments or important phone numbers I ought to remember easily?
  2. Am I having any difficulty concentrating on complex financial information that is part of the nuts and bolts of my work?
  3. Has anyone in my life encouraged me to retire, “take it easy” or otherwise modify my work life?
  4. Have I failed to create an exit plan for myself the way I help my clients set their retirement dates?
  5. Am I afraid that if I retire, merge my business or sell my book that I will lose a sense of my own self-worth or identity?

If the answer to the first two questions is “yes”, that’s a signal to attend to rather than ignore. It may be time to quit while you’re ahead. If you have not thought these things through, that’s what needs to happen. As for the last questions, 4 and 5, consider this. Anyone who gives up a long-held identity based on what you do for a living has to face the same challenges. And many people do transition successfully to a different lifestyle, to finding purpose in other pursuits or in removing a major source of stress that can come from your work. The life cycle does not go on forever, despite society’s denial of aging. Kicking the bucket at your desk is not a pretty picture. On the contrary, you can set your glide path out in a graceful way.

The Takeaways:

If you are 65 or above, you really do need an exit strategy. It could take some years to execute it but have a plan. If you do not have one, create one. If you have any small, back-of-your-mind doubt about being as sharp as you once were in a younger day, pay attention to that little doubt. It just might be your internal nudge to make your exit happen. Consider a strategy that allows this at a time when you can make the most of the benefits involved while you’re still at the top of your game. What you have created has value. Take advantage of negotiating with that value at its high point.

Carolyn L Rosenblatt, RN, Attorney, AgingInvestor.com

What Extraordinary Advisors Do For Retiring Clients That Other Advisors Miss

What Extraordinary Advisors Do For Retiring Clients That Other Advisors Miss

Jan 4, 2020 | aging investor, elder investor, elderly, finances for elders, financial advisors, handling money for seniors, investor, retirement, retirement planning, senior investor, seniors finances

Every advisor wants clients to think that he or she is unique, different, better than the competition. Maybe you are. But if your retirement planning with them stops at calculating their planned retirement income and preserving their assets, you’re not extraordinary. It takes more than that to be outstanding.

Standing out among the others means that you are looking at the client’s entire life and relationship to their family members. Acquiring the courage and skill to do that is how you distinguish yourself from the next advisor down the street or anywhere. So how do you do that? Aren’t you just supposed to do a good job managing the money?

Advising about and managing the money is your essential bedrock, and then there is service above and beyond. That’s the unique play, going beyond average. It’s not so hard to do, but it may be outside your usual comfort zone. You assess. You discuss difficult subjects clients may not want to talk about. You take the time. You communicate more often than the next guy or gal. You offer tools. You become a sort of coach, encouraging a retiree or soon-to-be-retired client to do things that will make life easier for everyone around them. Your guidance can help not only your client, but every person whose life is touched by what your client does and fails to do. Most will likely think how wonderfully unusual you are for doing this. The average advisor won’t bother with any of it but not being ordinary, you can shine.

Let’s start with one tool you can use, created at AgingInvestor.com (free download here). In this article, we address the first item on our Ten Step Checklist For Smart Retirees. The first step is:

“Decide whom you want to communicate with about your future. Set a date and sit down together.”

This sounds simple but it’s not. Clients’ families frequently have poor communication about aging, the potential for needing help, and finances. The elders may want secrecy. Everyone may be afraid to talk about end of life. Although wealthier folks usually do better with estate planning than the less wealthy, not everyone takes the time to update their legal documents and your client’s loved ones need to know this. If you, the advisor encourage a family meeting (or friends meeting if there is no family) specifically about basic topics in your client’s future, that can get the ball rolling on communication about other essential matters related to getting older. The communication must address the real risk of becoming impaired with aging. The checklist is a guide for your client, a place to start. If a client does these steps, it will save everyone enormous and avoidable aggravation later.

Our checklist has ten steps in it. We’ll go through all the ten steps and why they are crucial in subsequent posts. Get your copy today and consider having a conversation with every client age 55 and older in your book about the checklist. You hand it out to them and discuss how to use it. You can bring it up at portfolio review, on the client’s birthday or at the time of retirement. If you want to set yourself apart, talking about things besides the client’s income in retirement will indeed set you apart.

By Carolyn Rosenblatt, RN, Attorney, AgingInvestor.com

 

The Big Tabu: Facing the Financial Industry’s Older, Impaired Financial Advisors

The Big Tabu: Facing the Financial Industry’s Older, Impaired Financial Advisors

Nov 13, 2019 | ageist, aging, aging investor, declining health, diminished cognition, elder investor, elderly, finances for elders, financial advisors, financial capacity, financial judgement, handling money for aging parents, handling money for seniors, investor, retirement, senior investor, seniors finances

At its Senior Protection Conference on November 12, 2019, FINRA took a cell phone poll of broker-dealers. They wanted to find out how many were worried about aging registered representatives at their firms.  The result: 65% were worried, according to the report published in Financial Advisor.  Yes, aging B-Ds are a problem.

Here at AgingInvestor.com, we’ve been sounding the alarm about this problem since 2016, when we published our book, Succeed With Senior Clients: A Financial Advisor’s Guide to Best Practices. “The Elephant in the Room” chapter dives into how impairment in advisors affects the industry and how that most definitely will affect their work with clients. A B-D or advisor whose memory and judgment are impaired, even in the early stages, can expose the firm to liability for mistakes these folks make. Cognitive decline should not be taken lightly.

The speakers at the conference offered attendees very little concrete advice on how to address the problem of an impaired advisor. What could one expect of them? They have no training nor skill set in identifying diminished capacity themselves. Without expertise, their discussions lack action plans.

As aging experts ourselves (RN, Elder law attorney and geriatric psychologist) and a resource to the industry, we question the suggestion that one should wait for “performance issues” to surface before any firm does anything about an impaired professional in its midst. If there is a “performance issue” visible to management, it is likely that it existed for some time and harm to clients already could have occurred. The notion is reactive, not proactive. Isn’t that contrary to the essential philosophy of financial planning itself to look ahead, strategize and don’t wait for a crisis??

Waiting for a manager to call a special team assigned to address the problem is not the best approach, as we see it.  For one thing, most firms don’t have a special team that would serve the purpose of knowing what to do with an impaired advisor. Yes, every firm would be well protected if such a team were formed and that is something we always recommend. However, failing to screen advisors with any in-house tools when impairment is suspected is to ignore the lurking possibility of harm to clients.  What do we mean by an in-house tool? Start with a checklist.

On our website is a free downloadable Financial Advisor's Checklist: 10 Red Flags of Diminished Capacity to help you spot the warning signs in clients. There is no reason any firm could not use relevant parts of the same tool to spot signs of diminished capacity in its own employees. It is not across-the-board applicable to the professional as compared with a client showing red flags but some points do apply to anyone. For example, memory loss, failure to appreciate the consequences of decisions, confusion, loss of ability to process basic concepts are all on the checklist and are universal warning signs.

What Can You Do With An Advisor You Think Is Impaired?

Proactive steps are essential.  Here are our recommendations:

  1. First, record your observations of changes in the advisor’s behavior. For example, forgetting appointments, failure to meet on schedule with clients, seeing too many blank stares in your interactions with him or her, becoming withdrawn from interactions can all be signs of trouble a manager must address. They could be associated with cognitive impairment or with other health conditions. Managers need to ask the advisor about what they and other colleagues see that looks like a possible red flag.
  2. Ask about general health issues, which can directly impact how an advisor does the job of handling clients. Is it nosy? Yes. Is client financial safety at stake if you don’t ask? Yes. Take the risk of opening the conversation. That is smart. Waiting for a disaster is not.
  3. Establish an in-house policy for what should be recorded by colleagues and reported to managers about possible signs of cognitive decline and the direction you want to take after signs are identified. The policy should be in writing and distributed.
  4. Have a plan to closely watch the apparently impaired advisor.

Asking the advisor to work with someone to supervise transactions is one option. Reviewing how the advisor is managing his or her work at short intervals is another option. And with obviously impaired folks who do not themselves recognize their own cognitive changes (not an uncommon thing), have a suspension or graceful exit means to stop the impaired person from putting clients at risk.  This falls under what those conference speakers vaguely referred to as “other arrangements”. Be specific.

This is uncomfortable territory for managers, compliance officers and for colleagues of older advisors in firms. However, the FINRA poll is telling. If this problem were not rising in our midst, 65% of those polled would not be worried. If you are concerned where you work, get your copy of Succeed With Senior Clients: A Financial Advisor’s Guide to Best Practices, now or get a live or online presentation from us at AgingInvestor.com. Don’t put your firm and your clients at unnecessary risk.

By Carolyn Rosenblatt, RN, Elder law attorney, Consultant, AgingInvestor.com

Do Your Older Clients A Favor: Warn Them About This Scam

Do Your Older Clients A Favor: Warn Them About This Scam

Sep 5, 2019 | aging, aging investor, cost of aging, declining health, diminished cognition, elder investor, elderly, finances for elders, financial advisors, financial capacity, financial elder abuse, financial judgement, handling money for seniors, investor

Attempts to scam money from seniors never stop. And the thieves keep getting better at thinking up ways to extract information from older folks. Here’s another one—a different phony Medicare trick.

People hear ads on TV about genetic testing and how it can predict disease and protect them. They also hear ads that they’re not getting all the Medicare benefits they deserve. Who doesn’t want to get all the benefits they should get? It’s a perfect moment for scammers.

They may call your retirement-aged client and tell them that new genetic testing is available that Medicare will pay for, worth thousands of dollars. Of course, all your client has to do is to give them their Social Security number and the free testing kit, signup papers, or other inducement will be mailed to them immediately.

Let’s be clear: Medicare does not pay for genetic testing as a “new benefit”. If for any reason such testing were needed, a physician would order it and explain why it was needed. Such testing would not be ordered without any discussion with one’s MD.

Your client should never, ever give out a Social Security number or other personal information such as date of birth or address over the phone. Your client must never accept a genetic testing kit not ordered by one’s own doctor. If it is accepted and the cheek swab, DNA test or anything else is given to the sender, your client may be billed directly, potentially incurring a debt for thousands of dollars. It would be a sad day for your client to mail in a claim for reimbursement to Medicare for a fake benefit and realize that the claim is denied. They’re on the hook for the full price.

These kinds of scams are used to get information to commit identity theft and Medicare fraud. No matter how smart your client is, anyone can be caught off guard and tricked.

What Advisors Can Do

Here are some ways to let your client know you care about their financial safety.

  1. Prepare a friendly form letter to send to all clients over age 65 and inform them about this scam. Warn them not to fall for it.
  2. Keep abreast of all the latest scams in over 30 categories at the Federal Trade Commission, which explains what they are and how they work. Keep clients advised.

If identity theft has happened, direct your client to the Federal Trade Commission website for instruction on what to do.

Carolyn Rosenblatt, RN, Elder law attorney, AgingInvestor.com

About Carolyn Rosenblatt and Dr. Mikol Davis

Carolyn Rosenblatt and Dr. Mikol Davis are co-authors of The Family Guide to Aging Parents (www.agingparents.com) and Succeed With Senior Clients: A Financial Advisors Guide To Best Practices. Rosenblatt, a registered nurse and elder law attorney, has more than 45 years combined experience in her professions. She has been quoted in the New York Times, Wall Street Journal, Money magazine and many other publications. Davis, a clinical psychologist and gerontologist, has more than 44 years experience as a mental health provider. In addition to serving his patients, Davis creates online courses and products to assist professionals and the public with understanding aging issues. Rosenblatt and Davis have been married for 34 years.