3 steps to assist your clients in planning for their healthcare expenses

By Cynthia Stephens, VP of Marketing, ByAllAccounts on Tuesday, February 11th, 2014

According to Dinesh Sharma, the financial planning business is about managing “unpredictables” such as investment outcomes or lifespan.  Health care expenses – with their high degree of uncertainty – are more of the same.  “It [uncertainty] doesn’t mean you shouldn’t plan”, says Dinesh.

This blog is the second in a series that provides information, tips, and resources to help you become more confident broaching the subject of health care needs with your clients. Dinesh says that “advisors are avoiding talking about health care expenses.”  However people, he says, are worried.

“There is a realization that Medicare doesn’t pay for everything and Medicaid has strict requirements with regard to your assets”, says Dinesh. “At the same time, what are the choices?  Long term care has become extremely expensive.  What’s the next best choice?  There really isn’t one.”

Dinesh and his team advocate a three-step approach for advisors who are ready to differentiate their practice by advising clients on planning for health care expenses:

  1. Educate your clients

  2. Estimate their health care expenses

  3. Develop and implement a financial plan to help them save for health care

The health care consultants Dinesh works with say clients wish an advisor had told them about the steep costs of health care.  They could have avoided “sticker shock” and planned for it.

Provide educational resources for your clients

“An educated client gives you a much more powerful relationship than someone who doesn’t know what they are in for”, says Dinesh.  “Educating clients on health care costs is a way to differentiate your business from other providers”, he adds.

There are organizations that will help individuals come up with a number for expenses.  For instance, if you are 65 years of age and will retire this year, and are healthy, it might suggest planning on $250,000 if you don’t go into long-term-care.  “Not many people fall into that category”, he says. 

The other challenge in using simplistic tools is that the cost varies geographically. Dinesh says “If you are in Boston it could cost $120,000 annually for a private nursing home.  In Phoenix it might be $40,000 per year.”

To help you get started ByAllAccounts has compiled a list of resources for advisors who want to tell their clients what choices are available and what the costs are. To request your free copy of the Health Care Resources Guide for Financial Professionals email us at salesmarketing@byallaccounts.com.

Estimate health care costs

Asking clients about their health history and needs in order to estimate future expenses can be challenging.  Dinesh and his team offer advisors three choices: 1) ask their clients to complete a short questionnaire by paper; 2) give their clients access to an online tool to enter their height, weight, etc; 3) use an online tool themselves to enter the information.

How do you know what to ask and how to turn their answers into a reasonable, personalized estimate of health care costs?  The OMYEN Corp. has built a web-based Retiree Health care Planner.  The firm worked with doctors and researched health care data to build an online tool.  It takes into consideration current health, family history, lifestyle and other factors to present expenses during retirement.  These are based on the care that an individual would like to receive (such as in-home nursing).

Whether you use a web-based tool like theirs, work with a health care consultant, or use a generally available tool to get started (e.g., the AARP Free Health care Cost Calculator), estimating expenses is a necessary step of the planning process.

Develop and implement a financial plan to help them save

Once you help estimate health care expenses, developing a plan to ensure your client’s financial portfolio will suffice is the next step.  Dinesh sees that some advisors serving high-net-worth clients may be able to self insure.  For others insurance products may be a solution for advisors in the business of recommending products.  “The third choice for advisors who are fee-only would be to create a portfolio to generate an income stream to support expenses,” he says.

If staying up to date on the latest insurance products (e.g., life insurance with a long-term-care rider) or annuities is important to you, you might be interested in our March webinar. You’ll hear from Kellan Finley with Insurance Decisions, an insurance resource for Registered Investment and Independent Advisors.  Register now for the March event.

Health care planning is a complex topic and one that we obviously won’t fully address in a single blog.    If it is something you’re thinking about, doing, or challenged with, I’d like to hear from you. I’ll do my best to address it in future articles.

The inclusion in this guide does not imply endorsement or support by ByAllAccounts of any of the listed information.

Dinesh Sharma is the CEO of OMYEN Corp.  Dinesh is a passionate advocate of financial planning literacy and affordable financial advice with more than 15 years experience in financial services. Before Omyen Corp, Dinesh worked at Fidelity Investments where he ran the financial planning and brokerage account services business for financial advisors and was responsible for developing product strategy and executing wealth management solutions.

Cynthia Stephens is the Vice President of Marketing for ByAllAccounts where she provides executive leadership and management of the marketing organization and marketing activities.  She has helped build a brand that was ranked as the #1 account aggregator for two consecutive years in 2011-2012 by Investment News and ranked 405th on the 2013 Deloitte Technology Fast 500™.

You may also be interested in:

How you can make your firm more attractive to clients concerned about healthcare costs (Blog post by Cynthia Stephens, VP of Marketing, ByAllAccounts)

Ask ByAllAccounts how we can deliver annuity data and life insurance cash values into your portfolio accounting system

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