LTC planning’s power lies in relationships, not revenue

By John McWilliams

Long-term care planning is having a moment right now.

There was a time when conversations with clients about their long-term care needs were like pulling teeth. No one wants to confront the point in their lives at which they will no longer be able to do the things they associate with independent life as an adult. Long-term care was a talk to have with people in their 60s.

Now, I have those talks with folks in their 40s and 50s. What happened?

There is a big shift in the way people think about long-term care, and I don’t think enough financial advisors and insurance professionals understand how addressing that shift can strengthen next-generation client relationships.

Long-term for longer

For starters, the “long-term” in LTC is a lot longer than what we might have imagined 10 or even five years ago. We aren’t talking about 24-36 months directly before a period of palliative care. There is an entire continuum of assisted living facilities, home health services and other means by which older adults can maintain their physical, mental and social health as they age. Pair this with earlier diagnoses for medical conditions and retirees have a lot more runway to plan their lives.

These facilities do not come cheaply. Costs will differ depending on where you live, but a private nursing home can cost as much as $300 per day, and we have seen annual costs stay consistent with health care increases, between 4% and 5% over time. Even in-home care can come with opportunity costs for the caregiver. Looking after your spouse can mean cutting into your prime earning years as you head toward your own retirement.

But these are costs that more of us seem to be willing to take on than in prior years. A lot of folks have had the experience of directly handling long-term care responsibilities for a spouse, a parent or even a sibling. It’s only natural to wonder if you made the right call or wonder how you would like to live your own life. My mother looked after my father for close to 15 years as he adjusted to the long-term care realities of Parkinson’s disease. She told me that she wants to try assisted living when the time comes. She wants the quality of life those kinds of facilities can offer her. But I also think she just doesn’t want to be a burden to us.

“I don’t want to be a burden” spurs a lot of these early conversations about long-term care planning. Parents want to live in dignity, but they also don’t want their adult children to worry or uproot their own lives to take care of them. They discover that Medicare won’t cover long-term nursing home stays, and they are unlikely to spend down to levels of financial eligibility for Medicaid.

Quality of care

While long-term health care costs are on the rise, the wealthier clients of financial advisors have done the math. They may feel that they can take the hit with the resources they have accumulated over their lifetimes. With these clients, the conversation is less about the affordability of long-term care and more about the quality. Maybe those clients can pay for health care, but I’m sure they would rather more of their money went toward the lifestyles they want to experience or the legacies they’ll leave to their families and causes.

The concierge service that comes with many LTC policies cannot be overlooked as an advantage to people who are ready to plan their futures. The health care industry is a frustrating, complicated mess at the best of times, and that goes double for long-term care services. A financial advisor or an insurance professional alone may not have all the answers a client needs. Researching your options, learning the difference between a long-term care facility and a memory care facility — it’s aggravating even for the people planning for their needs long before they become urgent. Good policies come with specialists who spend their workdays up to their eyeballs in this stuff. They do the legwork so the client doesn’t have to. The value of someone in your financial life who can cut through health care confusion and deliver clear answers cannot be overstated.

LTC as a relationship builder

In short, these conversations around a client’s long-term care options represent a golden opportunity to shore up client relationships during one of their greatest tests in the years to come. The generational wealth transfer will move trillions of dollars between baby boomers and their heirs, but the same tide is likely to sweep away much of advisors’ books of business. Cerulli Associates found that only one-fifth of affluent investors are likely to use the same advisor as their parents.

There are a lot of ways advisors can retain households of clients across generations, but there are few that take as much coordination between parents and children as long-term care planning. It takes a lot of coordination between advisors and insurance professionals, too. But when advisors become an indispensable part of a client’s long-term care plan, especially one that balances cost-effectiveness with a high quality of life, they position themselves as integral to the family’s financial health across generations.

Here’s the thing, though: None of this works if we think about long-term care insurance as a product to be sold, or even as a way for policyholders to shore up their portfolio performance. We really, truly, must show commitment to the client’s overall well-being. When we do, the children and grandchildren of our clients will appreciate the part we can play by imparting some grace to the clients’ lives in a time of high emotional stakes.