On Retirement

The coming financial caregiving crisis

How financial advisers can assist clients in unchartered waters

Nov 1, 2017 @ 2:07 pm

By Mary Beth Franklin

Here's a riddle for you. What is one of the largest, yet virtually invisible, segments of the population? Answer: Caregivers.

Today's 40 million family and friend caregivers make up about 16% of the adult population in the United States. And as 75 million baby boomers move through their 70s and 80s and beyond, the need for caregiving will only increase.

As former First Lady Rosalynn Carter, founder of the Rosalynn Carter Institute for Caregiving, put it so eloquently: "There are only four kinds of people in the world: Those who have been caregivers; those who are currently caregivers; those who will be caregivers; and those who will need caregiving."

As more and more Americans find themselves thrust into the role of caregiver, whether for a parent, a spouse or other family member or friend, financial advisers can help clients navigate this new territory.

Although financial advisers can't draft legal documents, they can urge their clients and their family members to execute essential documents, such as financial powers of attorney and advance medical directives. Advisers can then assist clients to ensure they have powers of attorney on file with the relevant financial partners, such as banks, mutual funds, brokerage firms and insurance companies. Being prepared to help a loved one by having the appropriate documents in place is much easier than scrambling to respond in an emergency.

Advisers can also address the funding of potential long-term care needs through insurance and earmarked funds and discuss how caregiving responsibilities may affect a client's personal financial plan. For example, scaling back work hours to perform caregiving duties can impact current finances and the ability to save for the future.


While money may not be the first thing that comes to mind when we think about providing care, more than 90% of caregivers say they are also financial caregivers, according to a newly released report from Merrill Lynch and Age Wave. The study, The Journey of Caregiving: Honor, Responsibility and Financial Complexity, was based on a nationwide sampling of nearly 2,400 adults and takes a first-of-its-kind look into the world of financial caregivers.

"We believe we have identified a big and growing need," Surya Kolluri, managing director of Merrill Lynch, said in a telephone interview before the study was released Wednesday. "Advisers who engage clients on life events and stages find their practices transformed by establishing deeper connections with their clients and their families."

"I think one of the big takeaways is that people's financial lives cannot be viewed in isolation but as part of a family network," said Ken Dychtwald, president and CEO of Age Wave, a research firm focused on the impact of aging on business and culture. "Recognizing the complexity of our longer lives, how can I make sure that I have the financial strategy in place to do the right thing?"

Take that, robo-advisers.


Financial caregiving describes both caregivers who are "financial contributors" who pay for the cost of care and "financial coordinators" who oversee and organize other aspects of their care recipient's finances, such as paying bills, managing investments, preparing taxes, handling insurance and monitoring accounts.

On average, caregivers spend $7,000 on caregiving per year, which goes toward paying for personal, medical and household needs, according to the report. Yet many contribute far more than average. Caregivers for people with Alzheimer's/dementia spend 54% more on average than the typical caregiver, and caregivers for a spouse spend 68% more than average. Long-distance caregiving is even more expensive, costing 71% more than the national average.

Regardless of what financial caregiving tasks caregivers are providing, it is likely that their involvement in the care recipient's finances will escalate. The report found that after two years of care, financial caregivers report more than 53% of care recipients need full assistance with their finances. Yet one in four financial coordinators struggles to be granted permission from banks to access financial accounts, and nearly half do not have the legal authorization to perform their role.

Financial coordinators need help, and two-thirds of caregivers feel they could benefit from financial advice, the report found. Financial caregivers are often a first line of defense against fraud as they are not only helping their care recipient pay bills, but also monitoring their accounts for suspicious activity.

An estimated $36 billion—an amount that is likely underreported—is stolen through elder financial abuse each year. When asked about what might help them in their roles, more than half of financial caregivers said they would like banking alerts for unusual purchases from their recipient's account.


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