Long-term planning for your client and your practice

Clients want to build wealth that can sustain them through their retirement, and they want to leave a legacy for their children and grandchildren. However, according to the research study “Managing Long-term Care Risk,” by Lincoln Financial Group and Hanover Research, long-term care expenses can deplete client resources two to three times faster than intended, risking the wealth they want to transfer to the next generation. The wealth that advisors have helped baby boomer clients build will soon shift to the next generation, and advisors need to ensure a smooth transition of that wealth from generation to generation. Advisors must build relationships with the beneficiaries to help ensure the management of those assets across generations.

Long-term Care Awareness Month and the upcoming holidays present an opportune time to open up the dialog with clients about long-term care solutions that may prevent this loss of wealth. It also offers an opportunity to bring the next generation into the conversation. After all, long-term care planning centers around clients’ loved ones. At the end of the day, risk management planning happens because clients want to make sure their loved ones will be okay no matter what happens to them. What if a long-time client has a sudden health event? The financial burden may well fall on their children with whom the advisor does not have a relationship. Involving beneficiaries in the planning conversation can alleviate this risk and increase the likelihood that they will turn to you with their own financial planning needs. 

According to Cerulli, 41 percent of wealth advisors do not offer family wealth planning services. This can prove detrimental to the client, their families, and the advisor’s firm. Effective multigenerational planning is key for advisors who want to maintain assets across generations. After inheriting assets, 42 percent of beneficiaries leave the firm that served their parents. Financial advisors should ask themselves if they are doing all they can to build and strengthen relationships with clients’ children. According to a 2015 InvestmentNews article, 54 percent of advisors meet with clients’ children once a year or less, and 18 percent never meet with children. This might initially create a predicament for advisors, since they may already have a strong relationship with the parents and therefore may not meet with them all that frequently either. It may require a significant change in behavior to have the children begin to see the advisor as a resource. 

Retaining family assets starts with conditioning clients to prepare not just for income during retirement, but for the potential need for long-term care and death benefits. A holistic understanding of the client’s family’s needs is necessary to offer them the best products. Clients and their families need to understand the costs associated with caring for a loved one. The costs for in-home health care and nursing homes are estimated to rise 3 percent annually and the average life expectancy gets higher every year. This longevity puts more people at risk to develop illness and/or disabilities. 

Solutions for long-term care need to fit into the client’s long-term needs. Whether a particular client will benefit most from long-term care solutions that are self-funded, which keeps cash liquid, a hybrid policy that combines benefits from annuities and life insurance policies with some level of long-term care coverage, or a traditional long-term care insurance policy which only offers coverage for care, advisors need to work with clients and their family members to craft holistic solutions that work to safeguard the families’ assets. To figure out what solution will fit best for clients, it’s important to determine what their needs are. 

Are they looking primarily for long-term care coverage? A death benefit? Income in retirement? The range of solutions in the industry offers varying degrees of flexibility, leverage and legacy protection.

It is simply good practice to keep clients’ children in the loop to avoid future confusion or issues. Demonstrating a high level of service and attention to long-term care planning to boomer clients may open the door to working with their children, and it ensures that the assets are not lost due to unforeseen health events.

Joe Biloon, CFP®, AEP®, is partner of The Financial House in Centreville, DE. He is a registered representative of Lincoln Financial Securities, Corp., Member SIPC. Branch Office: 5818 Kennett Pike, Wilmington, DE 19807