Advisers short-sighted about long-term care

Advisers short-sighted about long-term care
Don't see the ripple effect on other retirement assets, says Harley Gordon; often don't even know how to raise the subject
MAY 10, 2012
Apparently, the best way to get a client thinking about long-term care is to turn the attention on family members. Few clients — particularly male ones — think seriously about the possibility that they could require care in a nursing home or help at home with the activities of daily living. Harley Gordon, president of The Corporation for Long-Term Care Certification Inc., said the best way to get the point across is to emphasize what extended medical assistance would mean for the client's loved ones. “Men aren't motivated by risk; they believe the worst will happen to someone else,” Mr. Gordon said on Tuesday at InvestmentNews' Retirement Income Summit in Chicago. “But they respond to consequences." The consequences of long-term medical problems can be severe, and often have a devastating impact on loved ones. What's more, paying for such care can dramatically impact a client's ability to keep financial commitments, Mr. Gordon noted. Simply telling clients that they may end up requiring care can trigger a great deal of denial, he said. Clients tend to be more open to the subject when they understand that caregiving will fray the physical and emotional well-being of their family members. That also requires advisers to reposition long-term-care insurance as not a mere product, but as a stream of income that can help fund the overall financial plan. “The daily benefit is used to pay for care, which allows those the client loves to supervise rather than provide the care,” said Mr. Gordon. “If the care is paid for, there is no reason to reallocate dollars that were previously committed to supporting his lifestyle.” Mr. Gordon added that advisers ought to rethink the idea of self-insuring for long-term-care events. Surprise medical events could require clients to liquidate assets and subject themselves to a raft of taxes, as well as run the risk of selling investments in a down market. And while investments and other assets, when totaled, may sound like a lot of money — at least enough to cover long-term care emergencies — it really isn't much. For instance, $1 million in assets will only provide a gross amount of $50,000 per year for care, Mr. Gordon said. Additionally, misconceptions abound on how Medicare, Medicaid and the U.S. Department of Veterans Affairs cover the cost of care. The facts: Medicare doesn't pay for custodial care, while the VA's Aid and Attendance Enhanced Pension Benefit program subjects elderly veterans to strict asset limits, requiring them to have no more than $80,000 in assets, Mr. Gordon said. He added that while Medicaid provides custodial care in a facility, clients need to qualify financially, which means they need to spend down their assets and are subject to a five-year “look back” period. The spend-down can easily derail any plans a client may have had for retirement. Mr. Gordon warned that advisers who ignore long-term care do so at the peril of their own clients and their practice. “Many advisers don't understand the impact a need for care has on their business model,” he said. “You have to believe it has an impact on what you do each day.”

Latest News

Investor anxiety hits six-year high amid market turmoil, Allianz finds
Investor anxiety hits six-year high amid market turmoil, Allianz finds

New survey reveals heightened investor concern over market volatility, retirement readiness, and the impact of tariffs on living costs.

Stifel star broker, Chuck Roberts, leaves firm under cloud of investor complaints
Stifel star broker, Chuck Roberts, leaves firm under cloud of investor complaints

Stifel – so far - is on the hook for more than $166 million in damages, legal fees and settlements in investor complaints involving Roberts, a 35-year industry veteran.

RIA moves: The Mather Group, Brand Asset Management announce deals
RIA moves: The Mather Group, Brand Asset Management announce deals

Consolidation continues in US wealth management industry.

US broker-dealer fintech aims for global footprint as it acquires international firm
US broker-dealer fintech aims for global footprint as it acquires international firm

Tech company democratizes access to US trading infrastructure.

Advisor moves: RBC swipes $1.7B UBS team, Baird duo departs for LPL's Linsco channel
Advisor moves: RBC swipes $1.7B UBS team, Baird duo departs for LPL's Linsco channel

RBC Wealth Management's latest move in New York adds an elite eight-member team to its recently opened Westchester office.

SPONSORED How advisors can build for high-net-worth complexity

Orion's Tom Wilson on delivering coordinated, high-touch service in a world where returns alone no longer set you apart.

SPONSORED RILAs bring stability, growth during volatile markets

Barely a decade old, registered index-linked annuities have quickly surged in popularity, thanks to their unique blend of protection and growth potential—an appealing option for investors looking to chart a steadier course through today's choppy market waters, says Myles Lambert, Brighthouse Financial.