If you're like most financial advisers, you are focused on how to capture a piece of the lucrative IRA rollover market as baby boomers transition into retirement. But fast forward 10 or 20 years and those same clients may be less interested in golf and travel and more concerned about assisted living and estate planning. Will you be ready to address their evolving needs?
Dennis Gallant, president of GDC Research, a consulting firm that provides market research and analysis for the financial services industry, has discussed how aging clients and end-of-life issues will affect advisers' practices over the next few decades. As clients age and their needs grow, advisers will face both enormous challenges and business development opportunities, Mr. Gallant said during a recent webcast sponsored by the Retirement Income Industry Association.
It's easy to ignore the long-term implications of the aging baby boomers — for now. Advisers are busy helping their clients figure out when to retire, creating a vision for that retirement, identifying their income needs and wants, and managing an income portfolio for a retirement that could last a very long time. And with 43 million Americans age 65 or older, it's a huge and growing market.
But as those clients enter their late 70s and early 80s, their needs and focus will likely shift away from managing assets to passing them on to heirs. At the same time, their demand for nontraditional support services, such as referrals for elder care, housing assistance and estate planning, will grow.
Today, advisers may see the value of partnering with CPAs and tax attorneys to more fully serve their clients' needs — a popular discussion topic during the
InvestmentNews Retirement Income Summit in Chicago last week. But in the future, financial advisers may need to expand their circle of experts to include an elder care attorney, family counselor, and senior housing and home-care experts.
And as the number of Americans age 65 and older is projected to top 80 million by 2050, the number of people who are likely to require long-term care is expected to more than double from today's 12 million to 27 million, according to the U.S. Census Bureau.
Up until now, financial planners have merely tiptoed around the issue of long-term care, recommending insurance when appropriate or earmarking other assets if the need for custodial care arises. But there are millions of Americans who don't have long-term-care insurance and are forced to pay for care out-of-pocket.
“The need for the elderly population to receive financial planning support for long-term-care expenses beyond the recommendation of long-term-care insurance is exploding,” Thomas West, a veteran financial adviser with Signature Estate and Investment Advisors, told attendees of the Retirement Income Summit.
“The general rules of how money works in retirement don't apply,” Mr. West said during a panel discussion of how to adapt a financial plan when life throws clients a curve ball. For example, he said, large medical expenses can wipe out a client's tax bill, making it an ideal time to take IRA distributions — now tax-free — to pay for care.
While ancillary services that complement financial planning add value, they also can be time-consuming and hard to monetize, Mr. Gallant warned during the RIIA webcast. But the risk of ignoring these looming issues is losing business to other advisers who are willing to tackle them.
Looking for a business opportunity? Mr. Gallant said the financial services industry could desperately use a directory of services ranging from daily money managers who can help clients with routine bill paying to building contractors who can provide renovations to allow a client to age in place.
In the meantime, you might want to brush up on your communication and listening skills needed to raise difficult issues such as failing health and to navigate the potential landmines of family dynamics.
If you're up to the challenge, the rewards are enormous. It's an excellent way to differentiate your practice, increase client satisfaction and retain assets by working with the clients' heirs, Mr. Gallant said.
Even if your core practice revolves around middle-age clients today, they are probably grappling with health care and elder care issues for their parents. Consequently, sponsoring seminars or client appreciation events on topics such as Social Security, health care, elder care and estate planning can be a big draw, Mr. Gallant added.
As your client base ages, you may want to review whether your office space is accessible to elderly clients. Consider improving the lighting, increasing the font size on paperwork and reassessing your office furniture to ensure it's easy to get in and out of — and to maneuver around with a wheelchair.
You may also have to provide a little extra time for review sessions and be sure to take note of a client's personal situation, including health, family and living arrangements. And an occasional house call could provide real insight into your clients' needs.
(Questions about Social Security? Find the answers in my ebook.)
