Dear Advisors, Try Talking About Health Care

About 50 percent of clients expect their financial advisor to give them some form of health care advice, according to survey data.

But only 13 percent of those financial advisors deliver. That’s according to data published by Senior Market Sales, Practical Perspectives and Financial Advisor Magazine.

With about 76 million baby boomers marching toward retirement, Steve Saltzman said advisors are missing a huge opportunity by not incorporating health care discussions into their financial planning with clients.

Saltzman, principal with Saltzman Associates in Waxhaw, N.C., is a panelist today at the LIMRA Life Insurance Conference 2016 in Las Vegas. Today’s session will cover emerging trends in living benefits linked with life and annuity policies.

As long-term care policies collapse amid inaccurate pricing models, seniors are in the market for alternative strategies to fund their health care costs.

“Consumers are engaged and they’re looking for help as it relates to having a better plan and potentially transfer some of that risk, and that’s what these products tend to do,” Saltzman said.

“When seniors were polled about what their greatest financial worry is related to retirement, health care expenses top the list,” he added. “Not only is it one of the most significant areas of concern, but even among the highly affluent, this is a significant thing that keeps them up at night.”

The age 60+ population will spend the largest percentage of their income on health care costs (33 percent), larger than recreation and housing combined, according to a Credit Suisse study.

Sixty-one percent of affluent baby boomers said wish they had a better understanding of their Medicare coverage, according to Saltzman data. Two-thirds can’t estimate their health care costs in retirement.

Step up to the Plate

For advisors and firms who step up to engage clients in comprehensive retirement planning that includes health care budgeting, Saltzman said the benefits are threefold:

•    Working the book. Engaging existing clients on a broader range of topics can improve the client relationship and potentially induce the client to consolidate more assets with the firm and the advisor.
•    Protect client assets. Employing proper risk transfer of financial risks from health care events can preserve client assets that might otherwise be consumed for related expenditures. This planning protects the base of wealth for clients while preserving assets under management for the advisor and firm.
•    Additional, non-correlated revenue. Commissions associated with insurance products placed in support of managing financial risks from health care events can be a welcome source of revenue for the firm and the advisor that is not correlated to equity markets.

Some financial advisors have embraced the health care discussion with their clients and have found life and annuity products to fit their needs, Saltzman said. As an example, he said living benefit riders are meeting needs for long-term care.

“But there are not enough of these conversations going on,” Saltzman said. “There’s a gap between the percentage of advisors who kind of get into that kind of conversation with their clients.”

Many advisors don’t feel adequately trained and believe they don’t have enough background to engage in the conversation intelligently, Saltzman said. That’s where the carriers can step in.
“There is a need by the advisor from the companies that provide them with those solutions to give them better training and help them become more articulate in terms of explaining the need and the potential solutions to the clients,” he said.

Many Product Innovations

For advisors who educate themselves and are able to discuss health care planning, the market is inviting. Carriers are rolling out creative new living benefit riders annually, said Carl Friedrich, principal and consulting actuary for Milliman. Friedrich is on the LIMRA panel with Saltzman.

A 2015 Society of Actuaries report by Milliman turned up 83 different living benefit plans. In addition to LTC riders, carriers are offering chronic illness, critical illness and terminal illness riders.

Clients can lock in premiums for many of these policies, Friedrich said, which advisors can use as a big selling point.

“These products are emerging in part because traditional interest in standalone long-term care has been challenging in recent years,” he added.

InsuranceNewsNet Senior Editor John Hilton has covered business and other beats in more than 20 years of daily journalism. John may be reached at john.hilton@innfeedback.com.

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