Every year since 2004, private long term care insurer, Genworth has conducted a national survey to determine the average costs of care at home, and in facilities. The data is broken down by state, with the median price listed. The bottom line: the cost of care is rising significantly in all the four general areas Genworth studied. It is also rising in the areas it did not study. Inflation is affecting how much it costs elders and families to keep them at home or in any living situation. The Genworth study includes home care, adult day health, assisted living and nursing homes. There is a lot more to consider than what the Genworth study shows. Long-term care is not limited to the things this insurer pays for when you buy a product from them.
The median monthly costs in the U.S. for two of the services studies are outlined in the 2021 report from Genworth:
Homemaker services (help with cooking, cleaning, transportation, shopping, etc.) $4957
Home Health Aide (personal care: eating, bathing, dressing, walking, bathroom, etc.) $5148
In a book we wrote for financial planners, Hidden Truths About Retirement & Long Term Care (AgingInvestor.com, 2017), we detail how about 70% of us are going to need some kind of long term care in our lives. And we discuss how most of us live in The Great American Fantasy that it won’t happen to us, that we will be fine and die quietly in our sleep at age 100 in full control of our faculties. In the book, we urge financial advisors to help clients get out of fantasy and into the reality that dollars need to be set aside to pay for what Medicare does not cover; so called “custodial care” that is not medical in nature. That includes things like home care workers, home modification to accommodate disabilities, assisted living and other things many people eventually need. We discuss the advantages and disadvantages of all the choices.
Here are actual costs we learned about from clients in two real cases.
Four Years of Home Care
One of them, described in our book from 2017, was about a man who lived to be 95 and never wanted to be in a facility. His wife hired caregivers to keep him at home. Long term care insurance defrayed some of the cost but most came out of pocket. The bill for the 24/7 care he received over four years of increasing dependency: $2M. There was nothing unusual about his needs. He just got more frail and had more care issues over time. That’s typical of how some of us are going to age. At the end, he had four caregivers in shifts, a specially fitted van with special wheelchair, a home stair chair, a lift to get him into the bath, numerous other kinds of devices to help and huge increases in the cost of maintaining the home with all the help. That cost would be significantly higher in today’s dollars.
The Outrageous Cost Of A Difficult Elder’s Care
In another, current case we work with at AgingParents.com, there is an elder with unusual needs. The family has a very difficult mother with dementia. She is calm until certain personal care must be given. Her mental state is confusion. She hallucinates and thinks she is being attacked when the family member or paid caregiver attempts to clean or bathe her. She gets very combative, with kicking, biting and punching those next to her. She calms down after the personal care but it takes two people to keep her from hurting anyone. She is astonishingly strong for a woman in her 80s. Her physical assaults happen multiple times a day when she needs cleanup. The family will not put her into a care home. No home would accept her this way. Rather, they would medicate her into a stupor so she would be more manageable. The family won’t have that. Her lighter medication at home allows her to be engaged with those around her in a good way. All except at those time of the close personal care.
This family is paying $50,000 a month for home care workers from two different agencies to help them. They can’t do it alone. They can’t manage with just one caregiver at a time. It takes two at a time to do the job. The cost is draining their assets and there is no end in sight. As this keeps up, the family will be spending $600,000 in 2022 to care for their mother.
Assuredly, not every elder is as difficult as the combative and confused mother in this case. But some elders do become very hard to care for. If one has strong feelings about not over-medicating a loved one, the choices can get very expensive.
It can take a good strategy to manage the care of an elder at home. It is not as simple as just buying long-term care insurance when the elder still can qualify for it. It may take working with a competent financial planner who understands that the limited things this insurance pays for do not fully protect anyone from out-of-pocket costs. Many additional things may be needed to maintain an aging loved one at home, where most people want to be. Financial planners tend to promote having income to pay for “the lifestyle to which you are accustomed”. No one is accustomed to a lifestyle of needing 24/7 care at home. However that is a reality anyone needs to discuss with a competent financial advisor, as it can happen to any of us.
Overall, this is a wake-up call for anyone who has not thought through how to pay for long term care. If it is your own aging loved one, you can’t ever be sure that they won’t need assistance from a paid source in the future. If it is yourself, at or near retirement age, be wise about how you look at the need 70% of us may have as we get older. Long-term care can be simple for some. It can be a huge, heavy burden for others. The wise retiree will consider the risks of getting old, living long and the likely need for paid help at some time in their future.
In retirement planning discussions, we see this statement financial professionals often publish for their clients:
“The average lifetime out of pocket costs for healthcare for a 65 year old couple retiring today is $285,000.”
Why should you never say this? It’s misleading at best and at worst, it’s false. From my own research as to where the number came from, I found it in government sources calculating Medicare deductibles and supplemental insurance payments, and co-pays Medicare does not cover. Generally, the out of pocket calculation refers to non-covered “medical” costs. But when that term gets diluted to mean “healthcare” it is far too broad and it simply ignores the reality that long term care is indeed healthcare. Medicare does not cover that at all, except for limited stays in skilled nursing homes following hospitalizations. It is noteworthy that when the Federal government uses data to calculate what out of pocket medical costs will be, the subject of long term care is entirely omitted.
The “average” lifetime cost of long-term care for two people in this country is far greater than $285,000. According to research by long term care insurance provider, Genworth, seven in ten people will need long term care at some point in their lives.
The comprehensive Genworth cost of care study, done annually, was published for 2020. Consider that at some point, with longevity being as it is, an older person with multiple medical conditions may need 24/7 care. Almost everyone will tell the advisor that he or she wants to stay at home and age in place. What will that cost at home in any of the most expensive states? In California, for example, the median cost of in-home care with a non-licensed caregiver full time, 27/7 is $252,000 per year! This is not medical care, in the sense that no skilled nursing is part of it, no doctor’s prescription is involved, and the agencies that supply unlicensed home care workers can charge whatever the market will bear.
A truthful financial professional will never mislead aging clients, or those planning for retirement by telling them that all they have to worry about for their future out of pocket healthcare costs is $285,000. Prudent financial advisors will themselves look annually at the Genworth study and help clients calculate the costs of long-term care, which every person should know about.
Costs of care, whether at home, in an adult day health center, in assisted living or in a skilled nursing facility vary widely from state to state. Looking at national median costs can be of little benefit to anyone doing retirement planning. Instead, using data from the Genworth study, one can look state by state for the real, most applicable numbers derived from where your client lives or plans to retire.
From my perspective, financial advisors are not educated to fully understand the difference between government provided statistics about out of pocket, non-Medicare covered medical costs and what we mean by long term care. They are quite different terms. It is distressing to me, with substantial experience in nursing, to see the fallacy of statements published by financial professionals about what retirement planning should include. Clients will be shocked to find that their own experience with having to pay for long term care out of pocket is not what their own advisor told them years before.
If you are in the retirement planning business and you want to serve your clients well, bear in mind that the data telling us that seven in ten people will need long term care at some point is likely true. Don’t fool yourself into thinking that retirement planning is just fine if a couple puts away enough to generate $285,000 for out of pocket medical costs. They also need to plan for how to pay for long term care, which they are statistically likely to need. That cost can destroy the most carefully laid plans for retirement income.
As a real-life example, take a client of ours, “George” at AgingParents.com, where we offer advice and guidance to families with aging loved ones. The advice encompasses legal, financial and healthcare issues as well as diminished capacity issues. George is 98 years of age and still sharp, though with some memory loss problems. He was wealthy at one point, after two successful careers. He owns his own home and wants to stay there for the rest of his days. His physical health is fragile and he now needs 24/7 help. He hired a good agency to provide in-home care. He spends in excess of $300,000 a year for caregiving alone, not counting the cost of everything else involved in home ownership, food, recreation, and out of pocket medical costs. Those medical costs involve dental surgery and equipment he needs at home. He has less than $400,000 left in savings. What if he lives another two to four years?
As you can see from this example, George is not a rare case. Many people do live into their 90s and beyond. Many start out with financial security, only to see assets rapidly depleted as the cost of care escalates to heights no one wanted to think about in retirement planning.
The Takeway
If you pride yourself in doing great retirement planning with clients, get real. Sit down with the data and find out what your clients might expect to need if they live long and require help at home or elsewhere. Tell the truth about it. If they need long-term care insurance to feel secure, talk about it. If they have sufficient assets to make it to 100 or so with full time care, they don’t need to get long term care insurance but they will need to have access to sufficient cash to cover the actual, not fantasy, costs. Above all, be clear in your own mind about what “out of pocket medical costs” means as compared with long term care costs. You are the key to these honest calculations. You can be the hero of the retirement planning story when you present an honest picture to every client you have.
Carolyn Rosenblatt and Dr. Mikol Davis are co-authors of The Family Guide to Aging Parents (www.agingparents.com) and Succeed With Senior Clients: A Financial Advisors Guide To Best Practices and Hidden Truths About Retirement and Long Term Care. Rosenblatt, a registered nurse and elder law attorney, has more than 45 years combined experience in her professions. She has been quoted in the New York Times and, Wall Street Journal, Money magazine and many other publications. Davis, a clinical psychologist and gerontologist, has more than 44 years experience as a mental health provider. In addition to serving his patients, Davis creates online courses and products to assist professionals and the public with understanding aging issues. Rosenblatt and Davis have been married for 36 years.
Few things are more stressful than family disagreements, especially related to helping an aging family member. You’re invited to a VIP Virtual Event: How to Resolve Family Conflicts, Care, Control and Money Approaches from Legal, Psychological and Compassionate Perspectives
Wednesday, December 9 I 4:00 – 5:00 pm Pacific Standard Time
Featuring special guest speakers Carolyn L. Rosenblatt, RN, Attorney and Dr. Mikol Davis, Psychologist of AgingParents.com
RSVP david@eleganceatnovato.com (Link will be provided with RSVP)
The first 20 attendees to RSVP will receive “The Family Guide to Aging Parents: Answers to Your Legal, Financial and Healthcare Questions,” by Carolyn L. Rosenblatt.
Danger: You Need To Act Fast When Your Client Seems Cognitively Impaired
This really happened. An advisor was managing a portfolio for a client we’ll call “Janet” with about $5M in assets. She seemed to be “with it” most of the time. But she had become confused in some of their conversations, unable to follow what her advisor was saying. (It was not complicated). She called several times in one week, asking the same questions over and over. She forgot that they had already been answered. She missed two appointments, apologizing that she had been really busy. The advisor didn’t seem to take all this seriously and didn’t do anything differently from how he had always interacted with this client.
Janet had always been a generous person. She liked to help people out. She got drawn into a “friendship” with a stranger, who was very sweet and complimentary to her and it made her feel good to hear all those nice things. He saw her often. And after awhile, he asked her for a loan. She gave it to him. He kept up the frequent calls and visits. Perhaps she was addicted to them. The loans continued. Her advisor was concerned, but he figured it’s her money and she can do what she wants with it. The amounts climbed, first to $100,000 in these “loans” and over three years the amount she had given to this false friend reached over $500,000. Of course he never intended to repay any of it.
The advisor finally seemed to catch on that something was wrong. He contacted Janet’s daughter, and steps were taken right away to stop the drain on her assets, stop the phony friend and stop Janet from making those poor decisions.
The takeaways that every advisor should know are these:
When your clients seem confused, forgets phone conversations and misses two appointments, these are RED FLAGS of diminished capacity. The time to contact the family is right then, not after some disaster happens.
Even if your client has ample assets, it is wrong to simply allow a predator to manipulate her or him out of them. You, the advisor have the obligation to do all things possible to stop financial manipulation. It is not an excuse that “it’s her money and she can do what she wants with it.” That aids and abets elder abuse.
You need advance information in your file when you accept the client into your book. That information must include more than one alternate contact and written permission from your client in a legally sufficient document, to contact the responsible others when you see fit.
An unusual change in your client’s spending pattern, such as Janet’s taking out huge sums to “loan” to this fake friend should be red flags of financial elder abuse for you. Please don’t wait until a thief takes a half a million dollars from someone before you catch on that something is very wrong here and you need to act right away.
If you are not sure about the warning signs of diminished capacity to look for, you can get a free checklist at AgingInvestor.com. Download yours today and you won’t make the same mistake as the anonymous advisor in this case study. If you aren’t sure about the major warning signs of financial elder abuse, we can help you there too, with another free checklist. Get yours right away and keep those aging clients financially safer.
Carolyn Rosenblatt, RN, Elder Law Attorney, AgingInvestor.com
Dr. Mikol Davis and Carolyn Rosenblatt, co-founders of AgingInvestor.com
Carolyn Rosenblatt, RN, Elder Law Attorney offers a wealth of experience with aging to help you create tools so you can skillfully manage your aging clients. You will understand your rights and theirs so you can stay safe and keep them safe too.
Dr. Mikol Davis, Psychologist, Gerontologist offers in depth of knowledge about diminished financial capacity in older adults to help you strategize best practices so you can protect your vulnerable aging clients.
Financial professionals often use the term “financial wellness”, referring to a client’s comfort level with their assets in retirement. That sounds good. But is there any connection between finances and wellness of the body and mind in retirement? Perhaps there is a vague belief that if you’re financially secure, all is well. In reality, how much money you have does not automatically make you physically nor mentally well, nor does it protect anyone against the one thing many people fear most: Alzheimer’s disease. Dementias are no respecters of the wealthy. No one is immune to brain disease.
You may hear the well-worn adage, “Without your health, you have nothing”. OK, that’s not completely true either. Even with declining health related to aging, you may still have excellent quality of life. That is a matter of perspective, and a matter of using assets you have to make the most of life, even with disabling conditions. The one factor that makes for a more secure longevity is what you can afford in terms of care, as aging takes its toll on independence.
Research clearly shows that how we live our lives, our healthy habits or lack of them is responsible for about 70% of how we age. Aging is different for each person, with the other 30% of the picture directed by genetics. Suppose you have a client with longevity running in the family. That may affect your client’s life span but it will not guarantee a great “health span”; i.e., how long one is healthy. What we already see with our aging population is an increase in disabling illnesses in seniors coping with diabetes, heart disease, obesity, high blood pressure and yes, Alzheimer’s disease and other dementias. Genetically predisposed to live long? How fun can it be to live to be 100 if you have a combination of these illnesses, cutting off the things that make life worth living for most of us?
It is extremely unlikely that any financial professional is going to convince a client to lose weight, exercise, stop smoking or cut out junk food so they can enjoy retirement more. That’s not your job. Managing assets is your job and the assurance you can provide is that your client, with a strategically managed investment portfolio, will be able to afford high quality care in old age.
What does high quality care mean for one’s retirement years? It means that if enough assets are available, your client will never have to go to a nursing home. It means that they can afford well trained caregivers at home from high quality agencies, licensed, bonded and insured.
Here’s an example from real life with one of our clients at AgingParents.com, the companion site to AgingInvestor.com. Timothy is 97 years old, living in a lovely home he’s been in since 1960. He is widowed. He needs a walker. He doesn’t cook for himself. He’s very alert but with lung disease, he’s frail. He has a high-end agency providing care management as well as caregivers day and night. He has the means and the right to spend his last days in his own home. Even if his health deteriorates further, he can afford a Registered Nurse to oversee his treatment or give additional skilled care to him at home. Licensed home health agencies can give skilled nursing to anyone at home for a price. A concierge physician can also visit him at home and direct the medical treatment for any illness or chronic condition. That is high quality care, and it comes only at a high quality price.
If you are in the business of managing client assets as they age, don’t just talk about how fun retirement will look at age 90 because they have plenty to spend. That may not be true at all if health is an issue. At that age, declining health is usually problematic. Be truthful. Let your clients know about how you are working to protect them in longevity, no matter what health conditions they may face. That protective spirit feels good to people, knowing you’re watching out for them and that you support the notion of staying in one’s home to the end of life. You have foresight they may lack. And you know the dollars they’ll need for what is likely to become necessary with long life.
If you do not know details of just what dollars those are, the nuts and bolts of how much it actually costs to pay for the numerous kinds of care a person may need, you can quickly find out. It’s laid out for you in our book, Hidden Truths About Retirement & Long Term Care, available at AgingInvestor.com and on Amazon. Increase your expertise! Get your copy today by clicking here
By Carolyn Rosenblatt, RN, Attorney, AgingInvestor.com and AgingParents.com
Tips-Having Calming Conversations With Upset Clients In This Pandemic
The coronavirus-related market turbulence is making a lot of clients nervous. Some are probably calling you demanding answers. Some are highly emotional and the incoming intensity feels intimidating. You didn’t sign up to be a therapist. But you have to do something, say something to try to calm them down. But what? You don’t want to blow it. You don’t want to feel helpless, not knowing how to respond. If this kind of highly emotional stuff is not exactly in your lane, a few tips about what works and doesn’t work are in order.
Here at AgingInvestor.com, we are fortunate to have an experienced psychologist and a nurse-attorney to offer you some guidance. What to do with very emotional clients is definitely in our wheelhouse. Imagine this: the client who is sometimes a problem anyway calls you in a frantic voice. He’s, well, freaking out. Your default setting is to start giving him a logical explanation of the facts. He gets even more emotional when you do that. You feel bad. He hangs up in a huff. Has he lost trust in you over something that’s not your fault? Here is an important thing to understand about those very emotional folks who call you and blast you with it: logic at that moment is lost. Fear makes people go to the automatic “reptile brain” response to fight or flee. At that point, reasonable explanations are useless because the client can’t take them in. What are you to do?
First, listen. Listen without interrupting, with your undivided attention. Speak slowly. Repeat what the client has just said. It sounds like this: “Jack, I hear you saying you think you’re going to lose all your retirement investments and you feel pressure. Did I get that right?” Then you might ask Jack if there is anything else going on right now. Maybe he’ll tell you some of the other things he’s worried about. As he does, you do the same thing, which is to keep listening. The fact that you heard him and communicated that actually has a calming effect. It works. There are a lot of things that are fine at other times that don’t work in this highly tense time of uncertainty. One example, related to logical explanations, is to get out the graphs and charts and attempt to show the client how markets historically have recovered. This can only be effective with some clients, likely those who respond to reason and history lessons. For the ones who are being irrational, that is not an approach that works, at least initially.
Getting the client calm with the way you offer reassurance and emotional support must happen first. Getting to the next point, which may take more than one conversation, you can ask “Jack, can I show you some things about how markets have recovered after multiple crises, over many decades in the past?” If he’s willing, go ahead. If he’s in no mood for a history lesson, save it. You will probably be able to do that later. Learning the art of (virtual) hand-holding is not so complex that you can’t pick up the basics fairly quickly. For most people with your job, these techniques do not come naturally. They are not part of an advisor’s training. You can avoid mistakes and making clients even more upset when you know the right approach.
Here’s Some Practical Help We offer a 22 minute tutorial to guide you on what to say or not say. You can get it here, anytime. We cover the Five Do’s and Five Don’ts for dealing with those highly emotional folks you may encounter in this time of crisis. There is a bonus with it: a quick 10 point summary, you can keep for reference and reminders. You will soon have the skills you need so you can have those calming conversations. CLICK HERE now.
If you have a particularly difficult client you don’t want to lose, and you need some private individual guidance so you can deal with it skillfully, you can get that at AgingInvestor.com too. Your own confidential advice session with us will get you through it smoothly and smartly. Contact Dr. Davis for a consultation: drmikol@aginginvestor.com
About Carolyn Rosenblatt and Dr. Mikol Davis Carolyn Rosenblatt and Dr. Mikol Davis are co-authors of The Family Guide to Aging Parents (www.agingparents.com) and Succeed With Senior Clients: A Financial Advisors Guide To Best Practices. Rosenblatt, a registered nurse and elder law attorney, has more than 45 years combined experience in her professions. She has been quoted in the New York Times, Wall Street Journal, Money magazine and many other publications. Davis, a clinical psychologist and gerontologist, has more than 44 years experience as a mental health provider. In addition to serving his patients, Davis creates online courses and products to assist professionals and the public with understanding aging issues. Rosenblatt and Davis have been married for 38 years.
Advisors talk to clients all the time about the big topic of retirement. The industry inundates the media with advertising among competitors about who can do retirement planning best. You help clients plan for how to reach their goals. You do your research and calculations. You offer sage advice after years of experience. And then there’s your OWN plan: when is it time to schedule your own exit from the burdens of your work?
We often hear “age is only a number” or “age is just a state of mind”. That’s not really true. Age is a process that takes its toll and ignoring it can be costly. We work, we have our self-image of productivity and success. We pass 50, then 60 still going strong. But one day, you forget an important phone number you should know. You quietly ignore it. Until it happens again. You forget names and that’s not really such a big deal, as lots of your age-mate friends laugh about the same thing. But at the back of your mind there is that tiny, creeping doubt: am I starting to “lose it”?? Fear has emerged in the shadows of your consciousness. “How long can I keep going?”
The literature of the financial services industry is replete with advice about advisors’ succession planning. Sounds good, but it never tells you exactly when to move on, to merge your business with one managed by younger folks, or sell the book of business to someone you trust.
Here at AgingInvestor.com, we offer a deep dive into information about aging clients and how to spot signs of trouble. We give you our professional guidance as aging experts on how to understand when your client is demonstrating dangerous signs of diminished capacity. We give you concrete suggestions about what you need to do. We spend a little time on the subject of the impaired advisor too, and how firms can deal with that. But we have not asked you to look within and formulate a plan for your own exit strategy when you, yourself see any warning signs that age is affecting you in your work.
It’s time to do just that. We know that many advisors are still doing fine at 60, 65, 70 and up. However, age statistics don’t lie and loss of sharpness can happen to anyone. Advisors don’t age differently from anyone else in the world. A few firms do have a mandatory retirement age but most don’t. Independent advisors are independent for a good reason. You didn’t want to march to the beat of an institutional drum. That independence has likely led to greater job satisfaction and perhaps even greater financial success. But it leaves you vulnerable when you are on your own, getting on in years and not clear about whether to merge with a firm, sell, or otherwise set a date for realizing your own exit strategy.
Here are five things to ask yourself in considering the question: when is it the right time for me to exit this business?
Am I noticing any changes in my memory such as forgetting appointments or important phone numbers I ought to remember easily?
Am I having any difficulty concentrating on complex financial information that is part of the nuts and bolts of my work?
Has anyone in my life encouraged me to retire, “take it easy” or otherwise modify my work life?
Have I failed to create an exit plan for myself the way I help my clients set their retirement dates?
Am I afraid that if I retire, merge my business or sell my book that I will lose a sense of my own self-worth or identity?
If the answer to the first two questions is “yes”, that’s a signal to attend to rather than ignore. It may be time to quit while you’re ahead. If you have not thought these things through, that’s what needs to happen. As for the last questions, 4 and 5, consider this. Anyone who gives up a long-held identity based on what you do for a living has to face the same challenges. And many people do transition successfully to a different lifestyle, to finding purpose in other pursuits or in removing a major source of stress that can come from your work. The life cycle does not go on forever, despite society’s denial of aging. Kicking the bucket at your desk is not a pretty picture. On the contrary, you can set your glide path out in a graceful way.
The Takeaways:
If you are 65 or above, you really do need an exit strategy. It could take some years to execute it but have a plan. If you do not have one, create one. If you have any small, back-of-your-mind doubt about being as sharp as you once were in a younger day, pay attention to that little doubt. It just might be your internal nudge to make your exit happen. Consider a strategy that allows this at a time when you can make the most of the benefits involved while you’re still at the top of your game. What you have created has value. Take advantage of negotiating with that value at its high point.
Every advisor wants clients to think that he or she is unique, different, better than the competition. Maybe you are. But if your retirement planning with them stops at calculating their planned retirement income and preserving their assets, you’re not extraordinary. It takes more than that to be outstanding.
Standing out among the others means that you are looking at the client’s entire life and relationship to their family members. Acquiring the courage and skill to do that is how you distinguish yourself from the next advisor down the street or anywhere. So how do you do that? Aren’t you just supposed to do a good job managing the money?
Advising about and managing the money is your essential bedrock, and then there is service above and beyond. That’s the unique play, going beyond average. It’s not so hard to do, but it may be outside your usual comfort zone. You assess. You discuss difficult subjects clients may not want to talk about. You take the time. You communicate more often than the next guy or gal. You offer tools. You become a sort of coach, encouraging a retiree or soon-to-be-retired client to do things that will make life easier for everyone around them. Your guidance can help not only your client, but every person whose life is touched by what your client does and fails to do. Most will likely think how wonderfully unusual you are for doing this. The average advisor won’t bother with any of it but not being ordinary, you can shine.
Let’s start with one tool you can use, created at AgingInvestor.com (free download here). In this article, we address the first item on our Ten Step Checklist For Smart Retirees. The first step is:
“Decide whom you want to communicate with about your future. Set a date and sit down together.”
This sounds simple but it’s not. Clients’ families frequently have poor communication about aging, the potential for needing help, and finances. The elders may want secrecy. Everyone may be afraid to talk about end of life. Although wealthier folks usually do better with estate planning than the less wealthy, not everyone takes the time to update their legal documents and your client’s loved ones need to know this. If you, the advisor encourage a family meeting (or friends meeting if there is no family) specifically about basic topics in your client’s future, that can get the ball rolling on communication about other essential matters related to getting older. The communication must address the real risk of becoming impaired with aging. The checklist is a guide for your client, a place to start. If a client does these steps, it will save everyone enormous and avoidable aggravation later.
Our checklist has ten steps in it. We’ll go through all the ten steps and why they are crucial in subsequent posts. Get your copy today and consider having a conversation with every client age 55 and older in your book about the checklist. You hand it out to them and discuss how to use it. You can bring it up at portfolio review, on the client’s birthday or at the time of retirement. If you want to set yourself apart, talking about things besides the client’s income in retirement will indeed set you apart.
At its Senior Protection Conference on November 12, 2019, FINRA took a cell phone poll of broker-dealers. They wanted to find out how many were worried about aging registered representatives at their firms. The result: 65% were worried, according to the report published in Financial Advisor. Yes, aging B-Ds are a problem.
Here at AgingInvestor.com, we’ve been sounding the alarm about this problem since 2016, when we published our book, Succeed With Senior Clients: A Financial Advisor’s Guide to Best Practices. “The Elephant in the Room” chapter dives into how impairment in advisors affects the industry and how that most definitely will affect their work with clients. A B-D or advisor whose memory and judgment are impaired, even in the early stages, can expose the firm to liability for mistakes these folks make. Cognitive decline should not be taken lightly.
The speakers at the conference offered attendees very little concrete advice on how to address the problem of an impaired advisor. What could one expect of them? They have no training nor skill set in identifying diminished capacity themselves. Without expertise, their discussions lack action plans.
As aging experts ourselves (RN, Elder law attorney and geriatric psychologist) and a resource to the industry, we question the suggestion that one should wait for “performance issues” to surface before any firm does anything about an impaired professional in its midst. If there is a “performance issue” visible to management, it is likely that it existed for some time and harm to clients already could have occurred. The notion is reactive, not proactive. Isn’t that contrary to the essential philosophy of financial planning itself to look ahead, strategize and don’t wait for a crisis??
Waiting for a manager to call a special team assigned to address the problem is not the best approach, as we see it. For one thing, most firms don’t have a special team that would serve the purpose of knowing what to do with an impaired advisor. Yes, every firm would be well protected if such a team were formed and that is something we always recommend. However, failing to screen advisors with any in-house tools when impairment is suspected is to ignore the lurking possibility of harm to clients. What do we mean by an in-house tool? Start with a checklist.
On our website is a free downloadable Financial Advisor’s Checklist: 10 Red Flags of Diminished Capacity to help you spot the warning signs in clients. There is no reason any firm could not use relevant parts of the same tool to spot signs of diminished capacity in its own employees. It is not across-the-board applicable to the professional as compared with a client showing red flags but some points do apply to anyone. For example, memory loss, failure to appreciate the consequences of decisions, confusion, loss of ability to process basic concepts are all on the checklist and are universal warning signs.
What Can You Do With An Advisor You Think Is Impaired?
Proactive steps are essential. Here are our recommendations:
First, record your observations of changes in the advisor’s behavior. For example, forgetting appointments, failure to meet on schedule with clients, seeing too many blank stares in your interactions with him or her, becoming withdrawn from interactions can all be signs of trouble a manager must address. They could be associated with cognitive impairment or with other health conditions. Managers need to ask the advisor about what they and other colleagues see that looks like a possible red flag.
Ask about general health issues, which can directly impact how an advisor does the job of handling clients. Is it nosy? Yes. Is client financial safety at stake if you don’t ask? Yes. Take the risk of opening the conversation. That is smart. Waiting for a disaster is not.
Establish an in-house policy for what should be recorded by colleagues and reported to managers about possible signs of cognitive decline and the direction you want to take after signs are identified. The policy should be in writing and distributed.
Have a plan to closely watch the apparently impaired advisor.
Asking the advisor to work with someone to supervise transactions is one option. Reviewing how the advisor is managing his or her work at short intervals is another option. And with obviously impaired folks who do not themselves recognize their own cognitive changes (not an uncommon thing), have a suspension or graceful exit means to stop the impaired person from putting clients at risk. This falls under what those conference speakers vaguely referred to as “other arrangements”. Be specific.
This is uncomfortable territory for managers, compliance officers and for colleagues of older advisors in firms. However, the FINRA poll is telling. If this problem were not rising in our midst, 65% of those polled would not be worried. If you are concerned where you work, get your copy of Succeed With Senior Clients: A Financial Advisor’s Guide to Best Practices, now or get a live or online presentation from us at AgingInvestor.com. Don’t put your firm and your clients at unnecessary risk.
By Carolyn Rosenblatt, RN, Elder law attorney, Consultant, AgingInvestor.com
Attempts to scam money from seniors never stop. And the thieves keep getting better at thinking up ways to extract information from older folks. Here’s another one—a different phony Medicare trick.
People hear ads on TV about genetic testing and how it can predict disease and protect them. They also hear ads that they’re not getting all the Medicare benefits they deserve. Who doesn’t want to get all the benefits they should get? It’s a perfect moment for scammers.
They may call your retirement-aged client and tell them that new genetic testing is available that Medicare will pay for, worth thousands of dollars. Of course, all your client has to do is to give them their Social Security number and the free testing kit, signup papers, or other inducement will be mailed to them immediately.
Let’s be clear: Medicare does not pay for genetic testing as a “new benefit”. If for any reason such testing were needed, a physician would order it and explain why it was needed. Such testing would not be ordered without any discussion with one’s MD.
Your client should never, ever give out a Social Security number or other personal information such as date of birth or address over the phone. Your client must never accept a genetic testing kit not ordered by one’s own doctor. If it is accepted and the cheek swab, DNA test or anything else is given to the sender, your client may be billed directly, potentially incurring a debt for thousands of dollars. It would be a sad day for your client to mail in a claim for reimbursement to Medicare for a fake benefit and realize that the claim is denied. They’re on the hook for the full price.
These kinds of scams are used to get information to commit identity theft and Medicare fraud. No matter how smart your client is, anyone can be caught off guard and tricked.
What Advisors Can Do
Here are some ways to let your client know you care about their financial safety.
Prepare a friendly form letter to send to all clients over age 65 and inform them about this scam. Warn them not to fall for it.
Keep abreast of all the latest scams in over 30 categories at the Federal Trade Commission, which explains what they are and how they work. Keep clients advised.
If identity theft has happened, direct your client to the Federal Trade Commission website for instruction on what to do.
Carolyn Rosenblatt and Dr. Mikol Davis are co-authors of The Family Guide to Aging Parents (www.agingparents.com) and Succeed With Senior Clients: A Financial Advisors Guide To Best Practices. Rosenblatt, a registered nurse and elder law attorney, has more than 45 years combined experience in her professions. She has been quoted in the New York Times, Wall Street Journal, Money magazine and many other publications. Davis, a clinical psychologist and gerontologist, has more than 44 years experience as a mental health provider. In addition to serving his patients, Davis creates online courses and products to assist professionals and the public with understanding aging issues. Rosenblatt and Davis have been married for 34 years.
An Important Question For Your Clients Contemplating Retirement
Longevity is increasing, as millions of Americans are living to 90 years and above, the U.S. Census Bureau reports. Will any of these long-lived folks be the parents of your current clients? Some clients reaching retirement age themselves will be dealing with the challenges of their aging family members, even as they plan their own retirement years.
One critical question perhaps not built into your calculations for retirement income needs should be whether your clients can reasonably expect to have to support their aging parents. As reported by NPR citing the Census Bureau report, nearly 20 percent of 90- to 94-year-olds live in nursing homes. Among those 95-99, about 31 percent are in nursing homes. And in the 100+ population, 38.2 percent live in nursing homes. Who pays for that care?
Most financial advisors have a basic understanding that Medicare benefits are very limited when it comes to nursing home care. Post hospitalization, the maximum benefit is 100 days and most people do not receive even that, due to qualification requirements. For those who have to live in nursing homes long term, rather than for shorter stays involving rehabilitation such as physical therapy, the costs are paid out of pocket. The exception is for the lowest income elders. For them, Medicaid pays the cost of long term nursing home care. For everyone else, a long stay in a nursing home can wipe out an older person’s assets. The financial burden then falls on family who may have the means to prevent the impoverishment of their loved one.
Some adult children will not allow Mom or Dad to live in a nursing home long term. Maybe it was a promise they made to the aging parent. Essentially, it is no one’s first choice of where to go when care is needed. If a family has some assets but does not want to wipe out their own retirement income by paying for nursing home care or even full-time home care, the most cost effective solution is to take in the aging parent.
There is a cost involved in this choice as well, and it extends to many factors beyond money. Every family relationship in the household is impacted. Some adult children are not patient, not willing and not good at caring for an impaired aging parent in declining health. For others it is seen as an honor and a final chance to give back to the parent in gratitude for what the parent did for them over a long lifetime. Individuals vary in their perspectives, ability and willingness to take in an aging loved one.
Some families take in an aging parent and pay for part-time help, providing a significant part of the caregiving themselves. Others pay for assisted living for an aging parent, but that is not suitable for those who need care around the clock. Others allow a parent to spend down their assets until they can qualify for state paid nursing home care. The parent is then placed there somewhat as a last resort.
No matter what choice a client will make about an aging parent, it is important that the financial professional in their lives helps them see the big picture and plan according to anticipated needs for both the client and the elders for whom they feel responsible.
The Takeaways
Longevity is creating an issue for families who are facing years of decline in aging parents who may not have the means to pay for care on their own.
Responsible financial advisors must raise the question with every retiring client: is there someone in your life that you will likely have to support financially during your retirement?
Advisors and families alike must consider and plan for how any essential financial support should be handled by adult children of aging parents. Take in the parent? Supplement the parent’s income by paying for home care or assisted living?
When the means are not available to offer financial support, and the physical needs for care are extensive, it sometimes becomes necessary to allow the aging parent to become impoverished and to qualify for Medicaid. Medicaid does pay for long term nursing home care.
For those with sufficient investment income expected, financial support for aging parents can be part of an overall retirement planning strategy. It is up to the financial professional to help with this process.
If you the financial professional need a clear explanation of the actual costs of long term care, whether at home, in adult day centers, assisted living or skilled nursing, get the facts so you can plan with clients. It’s all laid out for you in Hidden Truths About Retirement & Long Term Care, available now. Click here to get your print, digital, or audio copy.
About Carolyn Rosenblatt and Dr. Mikol Davis
Carolyn Rosenblatt and Dr. Mikol Davis are co-authors of The Family Guide to Aging Parents (www.agingparents.com) and Succeed With Senior Clients: A Financial Advisors Guide To Best Practices. Rosenblatt, a registered nurse and elder law attorney, has more than 45 years combined experience in her professions. She has been quoted in the New York Times, Wall Street Journal, Money magazine and many other publications. Davis, a clinical psychologist and gerontologist, has more than 44 years experience as a mental health provider. In addition to serving his patients, Davis creates online courses and products to assist professionals and the public with understanding aging issues. Rosenblatt and Davis have been married for 34 years.
The Senior Safe Act allows you to hold transactions when you suspect financial abuse of a client. The Act is designed, at least in theory, to allow time for the trusted contacts you have on file to take appropriate action. Many of those victimized by predators or manipulated by unscrupulous family have dementia and have lost their judgment about what makes sense financially. The Act urges you to get trusted contacts and provides that you are not breaking privacy rules to contact them in the reasonable belief that your client is being financially abused. The length of time you can hold a requested transaction can be as long as a month. This is where the Senior Safe Act has missed the mark.
Let’s look at the reality of impaired elders who are in charge of their wealth on the family trust. The trust is in order, and if the elder recognizes that he or she is experiencing decline in mental ability, that trustee may choose to resign. Simple. But that is not what happens in too many cases. For many persons who have cognitive decline and dementia, the elder does not recognize that he is impaired at all. “I feel fine!” he tells his worried family. When asked to resign as trustee, having total control over (theoretically) millions of dollars in a trust, the elder flatly and stubbornly refuses. Meanwhile, financial abuse by predatory people can continue unabated.
When an older person experiences cognitive decline, it typically has a very slow onset. Short-term memory loss does not raise enough red flags for those closest to the elder to take any action. “She’s just getting old” they say dismissively. But memory loss is often the first and earliest warning sign of Alzheimer’s disease, the most common form of dementia. The odds of having Alzheimer’s disease by age 85 are at least one in three. Think about your own older clients. Some live well beyond age 85. The risk of dementia rises with age. Short-term memory loss interfering with daily life is not a normal part of aging. Financial abuse and cognitive impairment often go together.
When financial abuse reaches a visible level, the advisor may do what the law allows and call the trusted contact person, usually an adult child. The advisor hopes that the call will somehow trigger something and the abuse will be stopped. But here is a reality check: The family can’t accomplish anything needed in two weeks or even a month if you hold transactions then. Here is a real case example of just such a situation, showing how long it really did take.
In our work with a family at AgingParents.com we saw rampant financial abuse of an elder by a family member. The elder had dementia but had not been formally diagnosed by his doctor. Over 70% of his income was going to the predator. He was asked to resign as trustee by his two adult children, who were reasonably worried that he was going to give away all his cash and further encumber his home. The dad, whom we’ll call Gene, had been developing dementia for at least two years. He felt obligated to the predator and was totally powerless in resisting her demands for money. He just kept writing checks, draining his own resources. It was clearly a case of financial manipulation.
We were involved in working to persuade Gene to allow what his family trust provided: to have his daughter, Jennie, become the successor trustee. He agreed, then reneged. He accepted the logic and then refused to accept it. The kids had no choice but to use the law to take over control. Their father was too stubborn to resign as trustee when asked, even with the entire family presenting a united front, asking and respectfully begging.
The trust, like many such documents provided that Gene could be removed as trustee by his appointed successor, his daughter, after two physicians had declared him to be incapacitated for handling his own finances. A court decision was not required. However, getting him to two doctors willing to assess him and put their observations in writing was a challenge that took months to accomplish. The total time spent getting the change of trustees accomplished according to the terms of Gene’s trust was eight months.
His children were the trusted contacts in the advisor’s file. They knew about the abuse and were in agreement with the advisor that Gene had to stop being the trustee. The adult children had to hire consultants (AgingParents.com), have meetings, hire an attorney, and try various methods to get the job done. Their time energy and thousands of dollars were expended to prevent an even worse outcome, which was being left to support their aging father if he were to totally deplete his own funds.
The takeaways:
Though well intended, we do not expect that the Senior Safe Act will do much to stop financial abuse because of the short time allowed for a financial professional to hold transactions. In Gene’s case, the predator would have been happy to wait a mere two weeks or a month before resuming the financial manipulation of Gene.
Know that any older impaired client may not understand that he or she is cognitively impaired and will ignore pleas to resign as trustee with total control over any family trust.
If you see that an older client is showing signs of cognitive decline, do not wait until it gets worse. Reach out at the time of your first suspicions of trouble. The family or other trusted persons may well have a better opportunity to persuade an elder to transfer power over finances to the appointed successor before complete loss of capacity. Expect this to take time.
In the case described above as a result of ongoing financial abuse, nearly all of Gene’s cash was depleted during the eight months of effort on the part of his adult children to have him removed. The advisor did the right thing but too much of Gene’s cash was depleted in the period when the abuser could keep manipulating him for those months of effort by family to have him removed as trustee.
If you are seeing abuse and feel lost about how to stop it, contact us at AgingInvestor.com for a confidential consultation with our nurse-lawyer, geriatric psychologist team so you can do everything possible to protect your vulnerable client.
The U.S. Census Bureau projects that by 2060, nearly twenty-five percent of Americans will be age 65 and above. At the same point, the number of people age 85 and older will triple. What will they all be doing in those long retirement years? If they live into their 90s, will they run out of money?
Many who have not saved enough ultimately find new jobs. Working in retirement is something to discuss with clients who are aging, have set a retirement date and have no answers to what happens if they outlive their savings. The advisor is not a miracle worker who can stretch their dollars beyond what is reasonable with prudent investments.
Maybe some clients will consider seeking a “not too big” job that is relatively easy, compared with what they did in a prior career. For the advisor with a client whose invested assets have a predictable length that does not match life expectancy, it is wise to help them plan how to keep their dignity as they live longer than they thought possible. That is through producing some earned income, even if modest.
If an older client is determined to retire from a stressful job, that’s fine. No one needs high pressure forever. But every job is not stress filled and some are more satisfying than others. The stereotypical image of a retired elder serving fast food is not for everyone, especially for educated clients who may have more interesting choices. For some retirees, long stretches without structure lead to isolation, boredom and even to depression. The routine of some kind of work relieves that risk and can bring enjoyment a person never had in the prior career.
Some may need the double benefit of bringing in money while finding ways to be with others. Elders certainly don’t need to go from one job to another at the point of retirement, but the holistic retirement plan for a person with modest investments should include some form of earning money through work. Your client may expect that family is willing and able to provide financial support if the client runs out of money. This prospect does not appeal to many younger families who are still supporting their own children and saving for their own retirement. They fear the idea of having to support aging parents and rightly so.
Imagine a client finding something to do in retirement that pays and something the client likes. Here’s an example.
My 30-something daughter is a regular Uber user who likes to converse with her drivers in San Francisco. She reports that three of her drivers in past two weeks were over age 65. One was age 80. He told her that he had retired from a union job at age 65. His wife had passed away and he got withdrawn and bored, having no sense of purpose. He worked part-time as a warehouse floor worker and cashier. He liked the walking and being around people. He worked another few days a week driving which he enjoyed because it kept him sharp, using the app, navigating around the city, keeping track of the best ways to get places, and most importantly, he liked chatting with his passengers.
Longevity creates a pool of older workers available either part-time or full-time, not necessarily expecting a benefits package and having no lofty career aspirations. Employers in a broad variety of service fields can benefit, as can the potential workers. We have met elders at AgingParents.com who have gotten a teaching credential after retiring from a high pressure career and are happily teaching part-time. We have found others who are mentoring in businesses, working in nonprofits, doing childcare, working in retail and otherwise using their natural talents while earning a paycheck. These were all part-time positions and all were glad to be doing them.
Discussing the possibility of working with your older clients should include when in retirement the client should consider doing it. Physical and mental loss of ability can preclude work of any kind, even volunteering. They can’t necessarily count on being able to work in the later years of retirement when they may run low on cash. Someone might be fine at 70 and impaired at 85. The time for planning an appealing part time job is in the earlier stages of retirement when the client is feeling good and is not impaired by health problems.
If your client has a modest portfolio that with a conservative drawdown would only last 20 years and life expectancy is 30 years, you need to encourage working. Take the axiom “know your client” to a realistic individual plan for living long with sufficient means.
As an advisor, you hope that your clients trust you and will stay on with you for life. You may be doing well in managing their finances. You may never hear any complaints about your fees. But unseen forces can be at work and any one of them can prompt your client to think he or she needs to go somewhere else. Lures of lower fees, better returns or a younger family member urging them to give up your management can undermine the trust you thought you had. How do you maintain the relationship? What can you do besides your essential job of skilled management to keep clients?
Consider that everyone appreciates being thought of and attended to one way or another. If you look at marketing efforts from another industry, real estate, you note that brokers and agents send lots of mailings and notices to prospects over time, just in hope of keeping themselves, top of mind. They may not even know you but they send mailings to your address or email anyway. If they do know you, you may even read what you receive. It makes sense to find reasons to contact clients regularly even if there is no need to update them on the performance of their portfolios. One way is to send them something as a courtesy, to let them know you want to be helpful.
You may know that financial abuse of elders is a massive problem in our country. In fact, research shows that it costs elders over $36B a year. Most aging clients have heard of abuse or scams, but may think warnings would not apply to them. But of course no one is immune. At AgingInvestor.com, where we focus on advisor education and training about age-related issues, we urge every advisor to keep retirement-age clients informed of scams and fraud. There are two important reasons for this. First, you may actually prevent a client from getting ripped off by educating them. And second, sending regularly scheduled communications about these issues and more can strengthen your relationship with the client.
If you don’t have time to write or look up what to send clients, we make it easy for you. Go to AgingInvestor.com and get started. Send your clients the AARP tip sheet on avoiding scams you’ll find HERE. They can learn about common scams and what to watch for. We even created a brief suggested cover letter or email you can send with it. You can use this one or create a letter that works for you. We have a series of free things we assembled so you can use them to maintain the best, warmest communication with your aging clients. It will deepen your client relationship and they’ll appreciate you even more!
Clients Without Family: Financial Planning With “Elder Orphans”
Every financial advisor will eventually come across an aging client who is essentially alone in the world. The elder may be single, widowed, or otherwise without a partner. Some are members of the LGBTQ community and never had children. Others were childless, or have lost children and significant others in their long lifetimes. The end result is that the usual support systems that exist for others are not available to these clients when they may need support the most.
Some refer to these elders who are alone with no family as “elder orphans”.
Heidi is an example. She has a financial advisor who has worked with her over decades. He referred her for advice, which she wanted and I visited her at home. She is 90 and lives alone in her own house, which she owns outright. She has a modest portfolio and is comfortable. She was widowed 20 years ago and she has no children, nor any relatives in the U.S. She relies on her best friend and neighbor when she needs help. This need is increasing now that her vision is impaired. When I spoke with Heidi I asked her about her one best friend. She mentioned that this neighbor is 86, but is “doing pretty well”. Heidi had recently fallen twice in her home, but fortunately escaped serious injury from those falls.
Heidi has a will and a trust, power of attorney and healthcare directive. The appointed person on those documents is her cousin who lives in another country. If an emergency occurs, it is not at all clear who would be available to assist her.
This situation is a disaster waiting to happen. The risk of another fall, vision problems that will likely prevent her from driving, and the age-related risks to her friend the 86 year old who could also become disabled or unavailable are all looming. I ask if her financial advisor has discussed the future with her, possible other living arrangements, a local person for a healthcare agent and what to do when she can no longer drive. “No” she replies, “we’ve never gotten into that”.
I urged Heidi to contact her financial advisor right away so plans could be made and her safety assured. She also needed to speak with her estate planning attorney to update her documents, ensuring that an appointed local person had authority to assist in any crisis or if Heidi loses independence. She is close to needing help now.
Think about your book of business and whether you have any “elder orphans” in it. If so, there are things any responsible advisor should address with such clients. Here are three essentials for every advisor’s discussion.
First, the legal documents. The advisor can get permission from the client to contact the estate planning attorney and find out what plans exist for an appointed person to step in and take over the reins when or if the client becomes impaired. a local appointee is critical. Someone has to be able to make financial decisions if the client loses the ability to make them independently.
Next, alternative living arrangements. A 90 year old with impaired vision who has fallen at home may need to consider options of where to live with help available onsite. The financial advisor knows what assets are available to pay for a choice such as assisted living. The advisor should bring this up and ask the client about what he or she wants.
The need for a local appointed person to be not only the advisor’s trusted contact, but your client’s person to reach in the event of an emergency. An appointee in another country is not going to be of immediate help. Explore other choices.
The advisor needs to expand the limits of the usual role of simply managing the money with elder clients who do not have any family. To keep you on track and aware of the special planning these aging investors need, get your free checklist of points to address at AgingInvestor.com. With it, you can be sure of what you need to cover in your planning conversations with you “elder orphan” clients. Download Your Advisor’s Seven Point Checklist— Best Planning For Aging Clients With No Family now so you can excel in appropriate future planning.
Scammers targeting your aging clients are getting smarter about how to fool them. Thieves can use spoofing computer software to trick the recipient of a call by showing a “real” number on caller ID. Pretend caller ID isn’t new but using it to target seniors on Social Security is a cruel tactic used to intimidate seniors. Here’s how it works. The evil caller has your older client’s telephone number and knows him to be at least of Social Security age. When the call comes in, it shows on the ID that yes, it’s Social Security. The caller immediately tells the elder in an authoritative voice that her Social Security number has been blocked. Of course this draws the expected reaction from most people–fear. They are not going to question what it means to have the SS number “blocked” or if that is even possible. (It isn’t.)
The caller says it is urgent and that in order to “reactivate” the SS number, the elder must act immediately, or their Social Security benefits will be affected. As your senior clients had paid into Social Security since its inception they don’t want to lose it. The scammer convincingly fakes concern and wants to “help”. All your aging client has to do is pay a fee and the number will be unblocked, they’re told. Many elders have heard of identity theft and believe that this person is going to help them prevent unauthorized use of their SS number, because that is what they hear on the call. Of course the caller then needs to “verify” the number and your client complies and recites the number. Instantly the number can be put into use any number of ways identify thieves have devised. And worse yet the elder pays them the “fee”.
Even if you believe with all your heart that YOUR aging loved is not dumb one and won’t fall for any of this, do not be so sure. Anyone can be caught off guard. Scammers are very clever at using fear and other strong emotions to manipulate unsuspecting aging parents to give up information without thinking about whether the request for it makes sense. You want to warn them. You want to remind them that they are never to give out any personal information like a SS number to a person they did not call themselves. Everyone’s Social Security numbers are potentially floating around in cyberspace enough as it is, without handing them to a telephone stranger who is lying to get them to pay money. You can warn your aging parents that the Social Security Administration will never ever call and ask anyone to verify the SS number. You can remind them that even if the caller ID shows something that looks real, it can be fake because spoofing software can show anything the scammers want it to show.
Millions of elders are approached regularly by this telephone scam and many others. My own mother in law, now passed, was very smart at fending off such phony calls and smelling a scam. But by age 95, that scam sensor she used to have seemed to fade. One day a man called her landline and said he was from Medicare. He just wanted to “confirm her Medicare number”. She had an active Medicare claim going on at the time, and we were helping her address the details. Because she had that claim, she fell for the trick. She gave the caller her full name, address, date of birth, mother’s maiden name, and her Social Security number. Fortunately we found out within a day and were able to jump into action to change all her accounts and credit cards. It took four months to straighten out the mess. The scammers got nothing. We got a lot of work, and had to take her to her banks and financial institutions in person to change everything. She felt bad because she was supposed to know better. Yes, but she forgot. We were lucky to find out before anything worse happened.
The takeaway here is that financial advisors are in a unique position of trust with your clients and they are likely to read a friendly letter from you, just giving them a heads-up about the latest scam. We urge you to create an old fashioned series of letters warning them about scams, about things happening in your industry that affect them, such as the Senior Safe Act and just staying in contact. When they hear from you in a friendly way, it reminds them of why they like and trust you. You’re more likely to retain them that way.
No time to write? Let us help at Aging Investor.com. We have free, pre-made client education material created just for seniors. You can simply download and send them out at intervals to all your retirement-aged clients. To access these items, ebooks and checklist, go to the Books and EBooks menu on our home page and find Resources for Clients. It can only make you look good to your investors!
Dr. Mikol Davis and Carolyn Rosenblatt, co-founders of AgingInvestor.com
Carolyn Rosenblatt, RN, Elder Law Attorney offers a wealth of experience with aging to help you create tools so you can skillfully manage your aging clients. You will understand your rights and theirs so you can stay safe and keep them safe too.
Dr. Mikol Davis, Psychologist, Gerontologist offers in depth of knowledge about diminished financial capacity in older adults to help you strategize best practices so you can protect your vulnerable aging clients.
Podcasts featuring Dr. Mikol Davis & Carolyn Rosenblatt
As aging experts Dr Davis & Ms. Rosenblatt are often featured on podcasts hosted by financial advisors through out US and Europe. We are happy to post the latest episodes as they become available. Thank you for taking the time to listen. We always appreciate any feedback you have, questions, or additional areas we should include in further podcasts.
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It used to be that we could think of retirement in a kind of predictable way. People lived into their 70s perhaps, and we measured retirement by that. We used tables, algorithms and other tools to tell us how much we should save and how much we could spend in retirement. And it was all based on assumptions that may no longer apply.
Life expectancy for a woman in the U.S. in 2018 was 84 years. For a man, the figure is 80 years. Those averages do not take into account the fact that well educated and financially secure people live longer than average. This is presumably based on the notion that people who know what a healthy lifestyle is and who can afford the best medical care will outlive those who do not have those advantages. In my own county, for example, which has a high proportion of elders compared to other counties in California, one wealthy city shows a life expectancy for men of 93 years.
Suppose that your aging client lives to be 93, having retired at age 65. That’s 28 years of retirement. What the algorithms don’t clarify is what you, the advisor needs to plan for with your client during the last decade of life, from 83-93. No formula is going to help you with the individual discriminations you need to make concerning your client’s risks for care and how to assess and plan for them. They can be a substantial cost, out of pocket, not covered by Medicare, and absolutely necessary.
The way we age is determined by two main factors: hereditary tendency and lifestyle. Our genetic makeup directs only about 30% of the equation. The other 70% is driven by the way we choose to live our lives. There are plenty of folks who think that a healthy lifestyle is just too much bother. They avoid exercise, eat whatever they feel like eating, never learn to manage stress and say they’d rather die a few years sooner than give up their habits, which their doctor advises against.
Here’s the problem with that belief. Leading an unhealthy lifestyle does not just cause you to “die sooner”. Rather, it may likely cause you to live with impairments, disabilities and a need for expensive long term care for chronic health conditions. These can go on for decades.
Take obesity, for example. Over two-thirds of Americans are overweight or obese. Obviously excess weight increases our risks for all manner of health issues, including diabetes, heart disease, high blood pressure, and strokes. When a doctor makes a diagnosis of one of these, the person doesn’t typically just die on the spot and save a lot of expense later on. No. The medical providers will keep the person going with medications, surgery in some cases, lots of diagnostic monitoring and trips to the doctors. These chronic conditions usually lead to disability late in life, particularly when more than one of them exists in the same person.
If you have aging clients, you definitely need to understand health risks in a basic way, so that you can help your clients set aside funds for the care they are likely to need in the last years of their retirement lives. All of the chronic conditions I mentioned are manageable with an effort toward a healthy lifestyle but for those who do not wish to do the work involved, you can bet on a likely need for long term care. While you can’t predict the future, you can plan for risk. It’s what you do.
My own mother in law had high blood pressure and chronic kidney disease for decades. She worked vigorously at diet, exercise, social activities and other components of a healthy lifestyle. Heredity was not on her side. She lived to be 96. During the last 3 years of her life, she needed help. She moved to a seniors’ community where help was available and eventually, she paid for private caregivers. Her cost of living at the last part of her life was $120,000 a year. If this were your client, would he or she have at the ready $360,000 to pay for care? How about if there was no pursuit of a great lifestyle? The care expense could easily be 10 years.
The takeaway here is that advising for longevity needs to include the skill of assessing fundamental health risks that create a need for out of pocket, long term care. You don’t need to be a doctor and you can’t predict everything, but you can do what is reasonable to help your client plan. Ask the right questions. Keep track of your client’s general health picture.
In a conversation with a prominent retired financial advisor from a large institution, I heard the following:
“Financial advisors are not interested in retired people. They’re taking money out. The advisors are interested in investors who are putting money in, not the other way around.”
Just hearing this generalization, whether true or not, gave me a kind of sick feeling in the pit of my stomach. Millions of Boomers fall into this category of retired. If their advisors lose interest in them when they are no longer increasing their investments, where does that leave the retired person in need of advice? The generalization sounded like age discrimination.
As a professional devoted to the well-being, financial safety and quality of life of older adults, I can only hope the statements I heard about lack of interest are untrue. I have met plenty of financial advisors who are indeed interested in maintaining their relationships with their oldest clients, not just based on whether the portfolio is increasing. They actually do care about the clients. For them, it’s not just an empty advertising slogan. I hope this is the majority!
Millions of clients served by advisors will retire soon enough or these clients are already in that phase of their lives. Competent financial advisors who have the ethics they hold themselves out as having will increase their skills in planning for lifespans for some of their clients who will live into their 90s and beyond. No logarithm nor mathematical table will do a complete job of this.
Here are some of the areas involved in longevity planning that the best advisors will fully understand by their increased training and preparation:
Social Security, and how to maximize the benefit.
Particularly with married couples, this requires specialized knowledge in order to give appropriate advice. When I asked my own long time B-D at our financial institution about it, he was very vague and couldn’t even refer me to anyone who could answer questions my husband and I raised. We fired him. We found an independent advisor who was very knowledgeable about Social Security. We referred three other people to this new advisor in the meantime and all became his clients. Take heed. Word spreads.
Long term care planning.
Telling a client who is reluctant to purchase long term care insurance that self-insuring is a choice is fine, but the longevity advisor understands how to address the risk of needing long term care and has actual figures at hand to spell this out for the client. If this is not your area of expertise, you can get a clear understanding of the costs of all types of long term care in my book, Hidden Truths About Retirement & Long Term Care. About 70% of people will need some long term care at some point. Know what it costs.
The nexus between financial planning and estate planning.
It never fails to surprise me about the disconnect between the financial advisor and the client’s estate planning attorney. Both should be working together to ensure that the client’s later years are financially safe. Successor trustees should be known by both the advisor and the lawyer, so that if a client begins to show cognitive decline, they can coordinate efforts to have the named successor take over decision making at the appropriate time. If you are worried about confidentiality of protected information, get the client’s permission in advance of any impairments, to communicate with the attorney involved. In other words, do this at the time of retirement.
Targeting relationship building with the next generation.
A loss of interest in a retired client deprives the advisor of a huge opportunity. That is, to establish a connection to and trust with your retired client’s heirs. Have you even spoken with any of them at the point of the aging investor’s retirement? If not, you have an explanation for the reason why about 80% of the heirs move their inherited assets to someone else after the patriarch or matriarch dies. The heirs can get to know you well in advance if you invite them, with your client’s permission of course, into the planning conversations. Don’t lose that chance.
In a nutshell, the older client needs the skill the financial advisor has and retirement should not change the advisor’s interest level. Keeping clients for life takes an understanding of longevity. Make it your business to do just that.
The financial services industry often refers to retirement planning for the future with aging clients in terms of “housing choices”. This reflects some degree of misperception about what happens as we age. For healthy people of retirement age, there is little interest in planning for the need for care and planning for loss of independence. People usually resist talking about it. We don’t choose to lose our independence. It happens. It is up to the advisor to raise it if you want to advise for longevity. The subject is emotional and can be difficult.
Where we need to get help when we can’t be independent any longer is really a choice about care, rather than housing. This is not house shopping. Does a client want to pay for care in her own home when that time comes? Most would say yes, they want to remain at home. They then must calculate what a home care worker costs and whether that is the best way to receive the help they are likely to need one day with their activities. Can the resources be available to enable that choice of where care will be given?
If an elderly client is living alone and can’t manage at home anymore without assistance, there are indeed choices, often driven by the degree of care needed and the cost of getting it. Elders may not be interested any longer in maintaining a house, cooking, shopping, and other necessary chores. For them, assisted living may be desirable because their daily lives will be different and free from the burden of the household that has become unmanageable. The choice to go to assisted living is usually not one a client is going to make because of wanting to downsize into an apartment for its own sake. Rather that is the price of going to the place where assistance is on hand. Again it is to receive care, not because they love the idea of not having their home any longer. For many elders, downsizing from a house to an assisted living apartment is a difficult adjustment, required because of physical or mental changes of aging. From that perspective it is a choice forced upon them.
A factor every advisor should know is that the likelihood of living alone increases with age. Almost half of women age 75+ lived alone in 2010, according to the Institute on Aging. The “choice” of a different living arrangement is brought on by safety and care concerns, often raised by their adult children.
It will be good for every advisor who wants to help clients plan for longevity to consider that their role is to introduce the issue of possibly needing care in the future, as about 70% of us will one day. If your client has you in her life, she already has housing. Planning for “housing” is a misnomer. Focus on places and choices where care can be delivered. Having no care plan can be disastrous, as sudden health crises can force decisions without considering the cost of care in advance.
In helping to educate your client about where he or she can receive care, the costs of all the offerings available in most areas are spelled out in detail in our book, Hidden Truths About Retirement & Long Term Care. You can develop quick expertise on the subject there. Skilled advice about longevity for your aging clients requires knowing your numbers, what care options are available where they live and how much they can expect to spend for that care. Smart advisors gather the data before a crisis happens and urge clients to look at it with them.
Most advisors who even ask this question of their retirement-aged clients never spend time on it. About 90% of those asked say they want to remain in their own homes as long as possible. That sounds fine. Until one faces physical decline, cognitive impairment or both. The advisor providing competent guidance about financing aging at home had better know the facts.
None of us like to think about losing physical ability or needing help. We abhor the thought of losing our total independence. In our view at AgingInvestor.com, the only advice clients are getting is about the long term picture is whether or not to purchase long term care insurance. Since most people don’t do that, the actual costs of living at home can boggle the mind. It’s the best advisor’s obligation to educate your client about the risks of the plan to age in place, just as it is your obligation to educate them about balancing their portfolios. You are giving the client added value if you take the time to talk them through the risks and dollars they may need to have available.
Here are some briefly stated facts from a real case in which an 89 year old wanted to age in place and his wife promised he would never have to leave home.
At the outset of his declining health, he had about $3M in invested assets. His portfolio was healthy and balanced for his age, according to conventional wisdom. He began to lose his ability to walk due to multiple medical problems. His wife hired home helpers, three days a week at first. As his conditions progressed he needed more and more help. He had to have a wheelchair, and a special van. A stair chair was installed in their two-story home. By the time he reached age 95, he was spending over $150,000 a year on care and assistance around the clock. In the space of time during which he was steadily losing independence until he passed away at 95, his assets were depleted to the tune of $2M. He lived in a higher end market for the needed help but the reality is that in any market, the kind of care he needed would be very expensive.
For him, aging in place was more costly than a skilled nursing facility would have been. Home modifications, private caregivers, (none of whom were licensed nurses), equipment, medications, adaptive devices, etc. drained his resources by 2/3. And not everyone has as much invested as he had to even start the journey. His wife had her own assets and she paid the cost of household maintenance, taxes, food, and utilities with her funds. Had she relied on him for those things too, there would likely have been little left at the end of his life.
It is not all doom and gloom however. Many clients live rather well in their last years without all the care this gentleman needed. Some get by with family caregiving help, and some have fewer medical conditions. But if you are going to competently help your clients plan for longevity, it’s essential to understand the real out of pocket costs of aging in place or anywhere else outside the home. If you want to add value to your services to older clients, know what they need to know to properly anticipate what can happen with living into one’s 90s and beyond.
Learn all the actual costs of care for every aging client option in our book, Hidden Truths About Retirement & Long Term Care. Be well prepared to walk your client through the scenarios they could face in their futures. You distinguish yourself from other advisors when you sharpen your knowledge in planning for longevity.
Your clients are getting ready for retirement. You’ve done the calculations, balanced the portfolio and advised them of what income to expect. You’ve discussed how much spending is ok. You used your program and your analysis was thorough. You’ve done your job, right?
Not exactly. There is probably no algorithm nor program that will calculate your client’s individual profile of health risks that will likely lead to the expense of long term care. That can be a whopper. Maybe you’ve suggested long term care insurance. Most people don’t choose to buy it. For those who do, the benefits are limited and the “elimination period” (deductible) is thousands of dollars. There go your careful calculations. At least 90% of folks don’t have that coverage. Now what?
But how can you predict what’s going to happen to anyone’s health in retirement, you ask. You can’t be precise, but you surely can make some rational observations and give advice accordingly. Those observations consist of two parts: what you can see with your own eyes and what you can glean by asking a few basic questions. If you think asking any client about their health conditions is too nosy or not your job, consider that if the client needs long term care and runs out of money because of it, they’re not going to think much of you. And the cost can wipe out their security.
Asking about health issues is not nosy at all. Rather, it’s what any smart advisor planning for longevity must do. Let’s not keep pretending that everyone stays the same physically and mentally from the start of retirement to end of life. Our bodies go through wear and tear and things break down. Cognitive decline affects at least a third of people who reach the age of 85. The risk of Alzheimer’s disease keeps climbing after that. Now, what was that life expectancy you were using in your calculation? Was it age 99?
Let’s start with what you can see in your client with your own eyes. (If they’re not in front of you, perhaps Skype is an option). Is your client obese, as about 40% of the U.S. population is? This leads to heart disease, stroke, and diabetes, among other diseases and conditions. The medical care people receive in many cases will save them from dying but they then live with disabilities. And yes, they will be very likely to need expensive long term care. Neither health insurance nor Medicare will cover long term care. Such help as a part time caregiver at home is how most folks start out with long term care. Your client pays out of pocket most of the time. Did you calculate how much it costs as well as how long they will likely need it? If they have multiple medical conditions, and have started long term care, they’ll probably continue to need some form of it for all their remaining years.
Find out what you may not know from simply observing your client’s appearance by asking questions. You can make your own list or get a health care provider to help you with a few targeted questions. You will need to educate your client as to the reason why you need this information. It’s to help them plan for how much to save in their retirement years.
Here are some examples of basic questions that can help you predict the need for possible long term care:
How’s your health these days? Has a doctor told you that you have any long term conditions?
Are you taking medications? What are they for?
Do you smoke?
Are you concerned at all about any health issues you have at this time?
Do you recall your parents’ ages when they died?Your aging clients will not be eager to talk about the potential need for long term care. When you told them about what to expect for “out of pocket medical costs in retirement”, you did not give them a figure that included long term care. Long term care is not “medical” according to Medicare. Rather, it is called “custodial care”. The client probably will not bring it up, so you must do this.
When you have done your observations and gotten answers to your health-risk related questions at least there is a place to start a meaningful conversation. You can give them figures as to the cost of typical kinds of care, such as a non-medical home care worker. We at AgingInvestor.com recommend starting your projections at age 80 as to when a person might need physical help. Many of us know someone who did require help with at least some part of his or her life at that age. Then you can talk about how any condition your client identifies for you, such as high blood pressure, diabetes, etc. as shortening normal life expectancy and increasing the risk for needing help. If your client already has difficulty with some normal daily activity such as walking or bathing, they are definitely at high risk for needing paid help sooner than a person without these problems.
Clients may be completely unaware of such things as the hourly cost of a home care worker, what assisted living costs each month and what home modifications cost if they are able to remain in their own home. You can find a thorough discussion of these and many other parts of long term care in our book, Hidden Truths About Retirement & Long Term Care, written specifically for financial advisors like you.
Every conscientious advisor needs to wake up to the reality that your retirement income calculator omits the reality check of health problems. We’re not talking about nursing homes, but every other kind of care and help most people will need as they age. If you do want to help clients who are reaching retirement age to plan realistically, include the health risks you can see or learn about by asking.
Scams, theft and fraud with seniors’ money is a growing problem. Now the Wall Street Journal reports that banks in our country calculated a 12% increase in financial elder abuse just in the last year. Why do the thieves pick on grandma or grandpa so much? It looks so ugly to take advantage of an elder.
Your aging clients, whether getting advice or investing in your institution, are targets without a doubt. They hold a disproportionate amount of our country’s wealth. And you can help stop them from being victimized. Over $36B a year is stolen from elders in the U.S. alone.
Your aging parents are easy targets for scammerThe Ss for lots of reasons. Elders in this country hold a disproportionately high level of wealth compared to younger people. Some have accumulated significant assets and they may not see themselves as vulnerable at all. Clearly, diminishing cognition makes it easy for thieves and manipulators. Cognitive decline affects at least a third of people over age 85. Your aging client may not have the awareness any longer to spot a fishy-sounding line from anyone. Widowed clients live alone and are isolated, ready to engage with that friendly sounding, cheerful voice from the clever scammer on the phone.
Thieves stay in contact and weave a trap over time. Many aging folks are dependent on others for care, for help at home and for social contact. Dependency makes them vulnerable. Unscrupulous family members lead the pack of those who seize on that vulnerability and trust to rip off their elders. It’s all too easy to influence an aging person to give a “loan”, access to an account, or power of attorney to a person with ulterior motives, which essentially creates a license to steal. Eventually they all want your elderly client to give them money. That’s where your awareness can thwart them.
Banks are making efforts step up their reporting of suspected elder abuse, but that is not enough to thwart the crime. The Senior Safe Act gives you, the financial professional protection if you report suspected financial abuse. Great. But how about stepping up your contact and review of transactions with any elderly client before abuse happens? Too often, the customer-facing bank employee does not see anything wrong until far too much money has been drained from the elder’s account. After the abuse has occurred, it is too late to get the money back. And there is hesitation at the banks, even when they are warned. To put bluntly, banks can add to the problem.
One example of this involved a client of ours at AgingParents.com where we consult with families and elders. She was the daughter of an 87 year old dad who had some memory problems and was frail, losing independence. Her father was a wealthy man, in a long-term relationship with a younger woman. She had manipulated him into giving her access to his family’s trust account into which his significant income was deposited each month.
The man’s daughter found out after a suspicious withdrawal from the account and she contacted the bank immediately. She traveled to her father’s state, went to the bank in person and showed them the trust, which did not have the girlfriend’s name on it anywhere. She asked them to stop the access by the girlfriend. The bank complied and put the funds into an account to which the girlfriend did not have access. After the man’s daughter left the state, the girlfriend took the elder back to the bank and told him to say that he wanted her on the account. Presto! The bank complied and the girlfriend then had access once again, only one day later. The bank aided the girlfriend in financial abuse of their own elderly customer, despite a specific request to stop it and evidence of manipulation. The matter ended up in litigation. We can only say “how ridiculous!” The financial professional, bank employee or manager should have known better. The picture was classic: warning had been given, paperwork proving the problem was given to the bank, and the bank agreed to take the pushy girlfriend off the account. Then they turned around the next day and did the opposite, just because the elderly customer was standing there. Never mind that he was manipulated into saying what the woman told him to say, prodding him as he stood there. That kind of scenario is what needs to change.
If you are now supposed to report abuse, you definitely need to know what the red flags of diminished capacity look like and how to see the warning signs of financial abuse. At AgingInvestor.com, we offer accredited courses to train financial service employees, compliance officers and managers in how to spot warning signs of cognitive decline and financial elder abuse.
Get your free checklist of the red flags of diminished capacity here.
Here are some takeaways:
1.The Senior Safe Act gives you some immunity if you report abuse. It offers you no guidance in how to spot elder financial abuse.
2. Aging clients with diminished capacity are, of course, much more vulnerable to manipulation by an unscrupulous romantic “friend”, family member or stranger on the phone or internet. They need your protection.
3. Odds are that by the time you report suspected abuse, the money is already gone and authorities cannot get it back. It makes more sense to be proactive in protecting aging clients rather than merely reporting abuse. Learn about how to do that by training.
Do any of your
older clients have a problem with alcohol or addiction? You may be surprised at
the prevalence of these problems in our older population.
Opioid
addiction is not just about young people. Some sources tell us that opioid
dependency is present among people of all ages, which can include your aging
investor clients. According to a treatment facility exclusively for adults over age 50, the number of
adults over 50 with substance abuse problems will double from 2.5 million in
1999 to 5million in 2020.
Why
should this matter to you, as an advisor? There are several reasons why this
client health issue is important, particularly in retirement planning. First,
any substance abuse problem can affect financial decision-making capacity.
Dependency can lead to desperation, related physical issues added to existing
age-related issues and loss of capacity to make reasonable and necessary
judgments about any investment. Further, it can destroy family relationships,
just when you may need family members to get involved in helping an older
client make essential decisions about the portfolio and needed adjustments.
Your
aging client may not tell you about being substance dependent but sometimes you
can see the signs. They may confess to “a bit of drinking too much”,
or feeling depressed about their future. Perhaps
the client comes to your office reeking of alcohol. Or you see them taking
pills right in front of you, with a shaking hand. That behavior doesn’t look to
you like just some benign blood pressure pill or the like. There’s a frantic
air to it, needing that pill fix. You can’t be sure but your gut tells you
something isn’t right. Listen to your gut.
Elders with a
drinking problem are not often talked about but we certainly hear about the
issues they cause at AgingParents.com, where we work with families to solve
problems with the elders and their adult children. According to publications at
the National Institutes of Health, prevalence rates for older-adult at-risk
drinking (defined as more than 3 drinks on one occasion or more than 7 drinks
per week) are estimated to be 16.0% for men and 10.9% for women. There is
also a substantial proportion of the older-adult population who are binge
drinkers (generally, 5 or more drinks per episode). This is not some small
problem among us.
You’re not a
doctor, nor a mental health professional. Why should you care? Should you do
anything about a client who appears to you to show signs of substance abuse
risk? It can affect your client relationship if you do nothing. Your client can
accelerate age-related physical decline faster with substance problems than if
they aren’t part of the picture. If they decline too much, you can’t work with
them. If the client can’t communicate or can’t make decisions, you may have to
get rid of the client and the fees you earn on managing that portfolio. The
client can ruin your connection to them.
Have a plan
You can think
ahead and develop a plan if you suspect these issues are affecting your client.
One
essential strategy involves being prepared to reach out to your client’s family
or close friends for help. Many, though not all investors have done some estate
planning. Often they wanted to protect their legacy and had a trust and will
drawn up by an attorney. Imagine that all their financial assets you manage are
in a trust. The trust will name a successor to your client, who is the person
who decided what the trust should contain. The successor trustee can assume
authority while your client is living, when he or she becomes impaired. Trusts
are written in many ways with no standard applied to when an impaired trustee,
your client, must or can step down and let the successor take over.
What to do first
You
can speak with your client about whether they have done estate planning. This
should be part of your job anyway. You don’t want them to fail to do this and
have too much of their assets unnecessarily given to taxes after they pass or
have them go where the client didn’t want them to go. Educate them. That’s what
you do as part of your services. While you are on the question, find out whom
they’ve appointed as a successor trustee (assuming there is indeed a family
trust). Then ask for permission, in
writing to communicate with that successor trustee, whom they chose,
“in case of emergency” or some other event that may cause them to be
unable to function, such as a stroke. For help in getting the permission right,
reach out to us at AgingInvestor.com. We can help!
How to use permission to
communicate with a third party
That
permission will give you one essential thing: the ability to tell the appointed
person that you are worried about what you have observed (be specific; e.g., strong
odor of alcohol, forgetting appointments, etc.). You can simply request their
help. It’s up to them to take it from there. You may not be able to solve any
problem your client has but with this kind of communication, you are doing all
you have a right or obligation to do to be of service. And who knows, your
contact with the right and motivated appointee, often a family member, could be
the trigger that starts their stepping in to assist with financial decisions.
Try this and you’ll sleep better at night rather than worrying that your impaired client may do something dumb with their money, and expose you to scrutiny by heirs for your failure to act. This simple and proactive step can apply not only to a client you think may have a problem, but to any aging client. Make it your practice. It can prevent your loss of management of the client’s assets.
“My dear girl, the day you see I’m getting old, I ask you to please be patient, but most of all, try to understand what I’m going through. If when we talk, I repeat the same thing a thousand times, don’t interrupt to say: “You said the same thing a minute ago”… Just listen, please. Try to remember the time when you were little and I would read the same story night after night until you would fall asleep. When I don’t want to take a bath, don’t be mad and don’t embarrass me. Remember when I had to run after you making excuses and trying to get you to take a shower when you were just a girl? When you see how ignorant I am when it comes to new technology, give me the time to learn and don’t look at me that way… remember, honey, I patiently taught you how to do many things like eating appropriately, getting dressed, combing your hair and dealing with life’s issues every day… the day you see I’m getting old, I ask you to please be patient, but most of all, try to understand what I’m going through. If I occasionally lose track of what we’re talking about, give me the time to remember, and if I can’t, don’t be nervous, impatient or arrogant. Just know in your heart that the most important thing for me is to be with you. And when my old, tired legs don’t let me move as quickly as before, give me your hand the same way that I offered mine to you when you first walked. When those days come, don’t feel sad… just be with me, and understand me while I get to the end of my life with love I’ll cherish and thank you for the gift of time and joy we shared. With a big smile and the huge love I’ve always had for you, I just want to say, I love you… my darling daughter.”
Most advisors who even ask this question of their
retirement-aged clients never spend time on it. About 90% of those asked say
they want to remain in their own homes as long as possible. That sounds fine. Until one faces physical
decline, cognitive impairment or both. The advisor providing competent guidance
about financing aging at home had better know the facts.
None of us like to think about losing physical ability or needing help. We abhor the thought of losing our total independence. In our view at AgingInvestor.com, the only advice clients are getting is about the long term picture is whether or not to purchase long term care insurance. Since most people don’t do that, the actual costs of living at home can boggle the mind. It’s the best advisor’s obligation to educate your client about the risks of the plan to age in place, just as it is your obligation to educate them about balancing their portfolios. You are giving the client added value if you take the time to talk them through the risks and dollars they may need to have available.
Here are some briefly stated facts from a real case in which
an 89 year old wanted to age in place and his wife promised he would never have
to leave home.
At the outset of his declining health, he had about $3M in
invested assets. His portfolio was healthy and balanced for his age, according
to conventional wisdom. He began to lose his ability to walk due to multiple
medical problems. His wife hired home helpers, three days a week at first. As
his conditions progressed he needed more and more help. He had to have a wheelchair, and a special
van. A stair chair was installed in their two-story home. By the time he
reached age 95, he was spending over $150,000 a year on care and assistance
around the clock. In the space of time during which he was steadily losing
independence until he passed away at 95, his assets were depleted to the tune
of $2M. He lived in a higher end market for the needed help but the reality is
that in any market, the kind of care he needed would be very expensive.
For him, aging in place was more costly than a skilled
nursing facility would have been. Home modifications, private caregivers, (none
of whom were licensed nurses), equipment, medications, adaptive devices, etc.
drained his resources by 2/3. And not everyone has as much invested as he had
to even start the journey. His wife had her own assets and she paid the cost of
household maintenance, taxes, food, and utilities with her funds. Had she
relied on him for those things too, there would likely have been little left at
the end of his life.
It is not all doom and gloom however. Many clients live rather well in their last years without all the care this gentleman needed. Some get by with family caregiving help, and some have fewer medical conditions. But if you are going to competently help your clients plan for longevity, it’s essential to understand the real out of pocket costs of aging in place or anywhere else outside the home. If you want to add value to your services to older clients, know what they need to know to properly anticipate what can happen with living into one’s 90s and beyond. Learn all the actual costs of care for every aging client option in our book, Hidden Truths About Retirement & Long Term Care. Be well prepared to walk your client through the scenarios they could face in their futures. You distinguish yourself from other advisors when you sharpen your knowledge in planning for longevity.
Your clients are getting ready for retirement. You’ve done the calculations, balanced the portfolio and advised them of what income to expect. You’ve discussed how much spending is ok. You used your program and your analysis was thorough. You’ve done your job, right?
Not exactly. There is probably no algorithm nor program that will calculate your client’s individual profile of health risks that will likely lead to the expense of long term care. That can be a whopper. Maybe you’ve suggested long term care insurance. Most people don’t choose to buy it. For those who do, the benefits are limited and the “elimination period” (deductible) is thousands of dollars. There go your careful calculations. At least 90% of folks don’t have that coverage. Now what?
But how can you predict what’s going to happen to anyone’s health in retirement, you ask. You can’t be precise, but you surely can make some rational observations and give advice accordingly. Those observations consist of two parts: what you can see with your own eyes and what you can glean by asking a few basic questions. If you think asking any client about their health conditions is too nosy or not your job, consider that if the client needs long term care and runs out of money because of it, they’re not going to think much of you. And the cost can wipe out their security.
Asking about health issues is not nosy at all. Rather, it’s what any smart advisor planning for longevity must do. Let’s not keep pretending that everyone stays the same physically and mentally from the start of retirement to end of life. Our bodies go through wear and tear and things break down. Cognitive decline affects at least a third of people who reach the age of 85. The risk of Alzheimer’s disease keeps climbing after that. Now, what was that life expectancy you were using in your calculation? Was it age 99?
Let’s start with what you can see in your client with your own eyes. (If they’re not in front of you, perhaps Skype is an option). Is your client obese, as about 40% of the U.S. population is? This leads to heart disease, stroke, and diabetes, among other diseases and conditions. The medical care people receive in many cases will save them from dying but they then live with disabilities. And yes, they will be very likely to need expensive long term care. Neither health insurance nor Medicare will cover long term care. Such help as a part time caregiver at home is how most folks start out with long term care. Your client pays out of pocket most of the time. Did you calculate how much it costs as well as how long they will likely need it? If they have multiple medical conditions, and have started long term care, they’ll probably continue to need some form of it for all their remaining years.
Find out what you may not know from simply observing your client’s appearance by asking questions. You can make your own list or get a health care provider to help you with a few targeted questions. You will need to educate your client as to the reason why you need this information. It’s to help them plan for how much to save in their retirement years.
Here are some examples of basic questions that can help you predict the need for possible long term care:
How’s your health these days? Has a doctor told you that you have any long term conditions?
Are you taking medications? What are they for?
Do you smoke?
Are you concerned at all about any health issues you have at this time?
Do you recall your parents’ ages when they died?
Your aging clients will not be eager to talk about the potential need for long term care. When you told them about what to expect for “out of pocket medical costs in retirement”, you did not give them a figure that included long term care. Long term care is not “medical” according to Medicare. Rather, it is called “custodial care”. The client probably will not bring it up, so you must do this.
When you have done your observations and gotten answers to your health-risk related questions at least there is a place to start a meaningful conversation. You can give them figures as to the cost of typical kinds of care, such as a non-medical home care worker. We at AgingInvestor.com recommend starting your projections at age 80 as to when a person might need physical help. Many of us know someone who did require help with at least some part of his or her life at that age. Then you can talk about how any condition your client identifies for you, such as high blood pressure, diabetes, etc. as shortening normal life expectancy and increasing the risk for needing help. If your client already has difficulty with some normal daily activity such as walking or bathing, they are definitely at high risk for needing paid help sooner than a person without these problems.
Clients may be completely unaware of such things as the hourly cost of a home care worker, what assisted living costs each month and what home modifications cost if they are able to remain in their own home. You can find a thorough discussion of these and many other parts of long term care in our book, Hidden Truths About Retirement & Long Term Care, written specifically for financial advisors like you.
Every conscientious advisor needs to wake up to the reality that your retirement income calculator omits the reality check of health problems. We’re not talking about nursing homes, but every other kind of care and help most people will need as they age. If you do want to help clients who are reaching retirement age to plan realistically, include the health risks you can see or learn about by asking.
Everyone is going to have someone in your book, sooner or later, who has cognitive decline. Studies tell us that the average advisor has at least 7 clients with some form of cognitive impairment now. We’d bet that when you became an advisor, your education did not give you guidance about what to do when you see the warning signs of decline in a client’s mental function. With increasing longevity, we have a problem like never before.
What are you supposed to do about it? Isn’t this the family’s problem? In truth, it’s not just the family’s issue—it’s an issue for everyone in an elder’s life, including the financial advisor. There are three essentials everyone should be doing to keep yourself and your client safer.
For openers, you, the advisor must be familiar with the warning signs of cognitive impairment. At AgingInvestor.com, we offer a free downloadable checklist of these red flags, so you can keep it and use it as a guide. Please do. You can’t ignore these signs, as they are very likely to worsen over time. When your client is too “out of it” to make decisions, you are in trouble.
Have two or three trusted contacts in your client’s file. If you have never asked for even one, now is the time. Make it part of your office policy, your task at a portfolio review, or what you decide to do this week because you are a smart, plan-ahead person. Why two or three? Because family members are often named first and family, unfortunately, are the ones who steal from aging folks most often. One of the contacts should be outside the family.
Get written permission from your client to speak to their estate planning attorney, their accountant and any other professional involved in managing their affairs. This can be extremely helpful to you as a client begins to show those red flags. All of the professionals can act together to protect the client, get an appointed surrogate decision maker in place or otherwise reduce the risks of financial fraud and abuse. All it takes to give permission is a letter from your client, a simple but very important step you must take. Draft it for the client, ask him or her to sign and do it.
The point of this action is to protect a vulnerable client from getting ripped off, from failing to attend to financial business, and from the neglect of basics that often accompanies this kind of mental impairment. You don’t need to be a hero. You do need to be a professional in the way you treat these older clients. And remember that if the client is “losing his marbles” and money gets drained by predators, decimating the portfolio, the family may look to you if you failed altogether to act. Remember, their inheritance could be at stake.
Dr. Mikol Davis and Carolyn Rosenblatt, co-founders of AgingInvestor.com
Carolyn Rosenblatt, RN, Elder Law Attorney offers a wealth of experience with aging to help you create tools so you can skillfully manage your aging clients. You will understand your rights and theirs so you can stay safe and keep them safe too.
Dr. Mikol Davis, Psychologist, Gerontologist offers in depth of knowledge about diminished financial capacity in older adults to help you strategize best practices so you can protect your vulnerable aging clients.
It seems that regulators are fond of creating new mandates for you without telling you how to implement them and what risks might be involved. The new FINRA rule that says you must “try” to get a trusted contact person (TCP) for new clients is illustrative.
First of all there is no firm requirement that you actually get a TCP for anyone. All you have to do is make an attempt. If the client says “no”, you’re out of luck in trying to solve any problem that may exist without anyone to call in the event of an issue you see. Such issues might include someone ripping off your client or your client really losing his marbles. The intent of the rule was good. The idea was to increase protections for vulnerable elders. It’s just that the way clients act and the issues you are sure to see with one TCP have been ignored in regulators’ creation of this mandate.
Research has given us important information about protecting elders from financial abuse. We know that family members are the most frequent abusers of elders. Guess who most elders would think of as a TCP? The family member, of course. The idea of a single TCP is flawed from the outset. If the idea is to keep your client financially safer, you don’t want to be limited to the potential abuser as the TCP. That defeats the purpose.
Here at AgingInvestor.com we are on a mission to keep elders safer. We make every effort to fill in the blank places your regulators leave when they come up with a mandate like getting a TCP for your clients. Here are our recommendations on this subject and why we say what we say about TCPs.
First, we believe every advisor should not only “try” to get a TCP for every client–we think you should insist on it as a matter of your intelligent, proactive senior office policy. Every client, new and existing should be approached with a courteous, respectful explanation and request to name a TCP you can contact in case of need. You let clients know that you have a policy to protect them from potential predators who are out there trolling for your clients, particularly the seniors. You could write this explanation and request up and send it around or bring it up at every portfolio review.
Next, we recommend that you get not just one TCP for every client, but three. The reason for this is that since family members are often the abusers of vulnerable people, you need someone else to call if “sonny boy” is ripping off dad’s account and dad is too impaired to realize it. “Sonny boy” just might be the one TCP his dad, your client named and you would then be stuck with no way to protect your client in that situation. Someone outside the family would be ideal. This could be the estate attorney, a competent friend, or a clergy person your client trusts. Any of them would need to be able to intervene when learning of suspected financial abuse of your client. A third TCP could be another family member your client also sees as trustworthy. With information going from the advisor to three people at once, the risk of abuse is lessened and the chances of effective action in the event of abuse are increased.
Finally, we recommend that you consider all the risks involved in a decision to reach out to the TCP when you see red flags of diminished capacity in your client, or when you see warning signs of financial abuse of your client. You do need a written internal office policy that directs you as to the observations, documentation and steps to take when an issue comes to your attention. Legally, you are probably on firm ground, carrying out the intent of the FINRA regulation. However, you don’t want to set your client up for harm.
For instance, if the client is in the middle of a contentious divorce and the ex- spouse is the TCP, do you want to release information about your client’s finances that could harm your client in the divorce proceeding? Give yourself time to discuss the options with other, knowledgeable people in your office, or group. The value of having a proactive office policy for aging clients in this situation is that you have others to ask and weigh in with their points of view.
Need help with that smart, proactive senior office policy? Ask for a consultation at AgingInvestor.com and get the guidance you need from our nurse-lawyer, geriatric psychologist team
<p><code> </code></p><div class="signature"><table style="border: 2px solid #999; border-style: solid; background-color: #f5fff5;"><tbody><tr><td style="width: 110px; vertical-align: text-top; align-content: center;"><div style="border: 1px solid #eee;"><img class="alignleft" src="http://www.aginginvestor.com/wp-content/uploads/2015/04/DavisRosenblattPublicityPhoto.jpg" alt="" width="123" height="116"></div></td><td><h4>Dr. Mikol Davis and Carolyn Rosenblatt, co-founders of AgingInvestor.com</h4><p>Carolyn Rosenblatt, RN, Elder Law Attorney offers a wealth of experience with aging to help you create tools so you can skillfully manage your aging clients. You will understand your rights and theirs so you can stay safe and keep them safe too.</p><p>Dr. Mikol Davis, Psychologist, Gerontologist offers depth of knowledge about diminished financial capacity in older adults to help you strategize best practices so you can protect your vulnerable aging clients.</p><p><a href="http://www.aginginvestor.com" target="_blank" rel="noopener">AgingInvestors.com</a> offers accredited cutting edge on-line continuing education courses for financial professionals wanting to expand their expertise in best practices for their aging clients. To learn more about our courses click <a href="https://agingparents.leadpages.co/ceu-choices/" target="_blank" rel="noopener">HERE</a></p></td></tr></tbody></table></div>
With the recent Texas Court of Appeals decision striking down the authority of the DOL to enforce its fiduciary standard, the industry remains enmeshed in its own conflict. Some firms embraced the concept of acting in a client’s best interests for retirement accounts. Others fought it tooth and nail. What about your own clients if you are a broker and do not have to follow the DOL rule? Do you think no one is going to question you, your advice, or your commissions and fees?
With the amount of publicity generated in the long fight to get the rule passed in the first place, and the aftermath efforts to have it overturned, the public is more aware than ever of the need for transparency in what you recommend and in what advice you offer. Some clients may trust you and never ask a question about why you suggest a product, but don’t count on that being universal. The public’s perception of what you do is changing and in a sense, the cat is out of the bag.
In their marketing, firms that embraced the fiduciary standard can brag about it and when you have rejected the premise of prioritizing a client’s best interest, you can’t brag about it. In fact, prospects may be asking more and more often whether you are a fiduciary. What are you going to tell them?
Here at AgingInvestor.com, we educate advisors of all stripes about managing aging clients, particularly those with diminished capacity. Our associated site, AgingParents.com, is a resource for those with aging loved ones. At AgingParents.com, we advise and counsel families about watching over their aging parents’ finances and we strongly encourage them to review what their elders are doing with their money. When they follow our advice, they are going to be looking at what you’ve done with the elder’s portfolio. If you adhere to a fiduciary standard, no problem is likely. If you don’t, beware. Your client’s heirs are gradually assuming power over their parents’ investments as their loved ones age and become less capable of financial decision making. Dementia is a frequent cause of loss of capacity. Often the adult children can take over as successor trustees or agents who are appointed as power of attorney long before the parent passes.
About 70% of women change advisors after the death of their spouses. Their adult kids will be encouraging them to find someone with a fiduciary standard. Perhaps large numbers of adult children will switch advisors before the death of the patriarch, once they scrutinize what choices you have recommended. They may even get a second opinion about your work.
This is merely a caution to any advisor who does not adopt a fiduciary standard, regardless of whether it is mandated legally. The next generation is looking at a parent’s portfolio with fresh eyes and you may lose clients because of this. Keep the older clients in your book for life and future generations by staying the course as an advocate and making decisions in their best interest, always.
The regulators are trying. They want to help advisors protect aging clients from financial abuse. They don’t want you to fear doing something wrong if you refrain from handing over assets to what looks like an abuser. But not living in the real world of how to stop abuse by determined abusers has its disadvantages. The new rule tells you who is at risk (elders and other impaired adults). It tells you that you just need a reasonable suspicion of abuse, not unquestioned evidence. It tells you what a temporary hold is and how long it can be: 15 days, 25 at max. Sounds ok. Until you actually know how long it takes for the legal steps to halt abuse.
Here at AgingInvestor.com we see this problem in the world of families and those who want to rip them off, not from inside an institutional setting or financial services firm. The world from here looks different from what FINRA imagines. There is usually no way anyone can stop abuse in 15 days or even in 25. We explain. In a real case, the kind this rule is designed to affect, we worked with family in an unfortunately typical situation of an unscrupulous son trying to squeeze money out of his 90 year old father who had dementia. The advisor had seen the pattern. He knew the son never did well on his own and he had been given handouts from dad for years. Dad, whom we’ll call Joe, lived in a nursing home. He needed help with everything and his memory was shot. He was easily confused. Yet his advisor never questioned his ability to effect financial transactions. But when the son, we’ll call Jake, brought his frail father into the advisor’s office demanding $50,000 plus access to the cash management account, the advisor was sure it was abuse. He knew his client was too confused to disagree with Jake. The advisor dragged his feet and didn’t provide the check his client had asked for, pushed by Jake, Over a month later, he felt obligated to give his client the $50K, which of course Jake got right away from Joe. The advisor didn’t have Rule 2165 but he knew that Joe’s daughter Rhoda was the appointed person as power of attorney and successor trustee. He didn’t have permission to contact her, so he did it, as he said “on the QT”. Rhoda was upset. She called us for advice. She found us through her own advisor who had the sense to send her to a resource who could answer her questions and guide her.
First we looked at the trust and what it said about Joe being removed as trustee or resigning as such. Two doctor’s letters were needed, verifying that he was no longer competent to manage finances if he was to be removed as trustee. We advised her to get those letters asap. Rhoda lived out of state from Joe. She found the doctors and flew into town to take him to the appointments. Fortunately the doctors were able to say that Joe had indeed lost his capacity for handling his money. A couple of weeks after the appointments, Rhoda got the letters she needed. She then had to take them to Joe’s estate planning attorney, who met with her and eventually gave her a Certificate of Trust, showing that she was now the successor to Joe and was in charge of his money. She then had to get the Certificate to his advisor’s firm, which had to review it and after two weeks, they accepted it. Only then was Rhoda able to stop any further disbursements from Joe’s account without her permission. Her brother was furious. His gravy train had stopped. The advisor had sent a debit card for the cash management account Joe requested under pressure to Rhoda, not to Joe. Rhoda destroyed it. Abuse stopped in its tracks.
Reality check: this scenario of stopping abuse involved a lawyer, an elder willing to go to two doctors, the cooperation of two doctors, travel between states, the approval of the Certificate of Trust with Rhoda’s name on it through a process by the advisor’s firm and a lot of time spent by Rhoda. The entire matter of protecting Joe from abuse took three months. Rule 2165 supposedly authorizes advisors to “take immediate action” when abuse is reasonably suspected. What is myth rather than reality is how long it takes to actually protect the elder and stop a predator. This was a case of undue influence by Jake who had a history of manipulating his father. And the new rule would not have helped at all. Jake would have happily waited for a mere 15 days to get his hands on the cash. Rhoda couldn’t possibly get Joe removed as his own trustee without the doctors’ letters. This sort of prerequisite of needing doctors to verify incapacity is commonly required in typical trusts. Perhaps the drafters of Rule 2165 never had to go through the process described here in their own lives. If they had, the new rule would provide for a 90 day authorization to hold transactions, rather than a maximum of 25 days. Maybe going forward when the myth gives way to reality, the rule will be revised. For now it is inadequate.
Dr. Mikol Davis and Carolyn Rosenblatt, co-founders of AgingInvestor.com
Carolyn Rosenblatt, RN, Elder Law Attorney offers a wealth of experience with aging to help you create tools so you can skillfully manage your aging clients. You will understand your rights and theirs so you can stay safe and keep them safe too.
Dr. Mikol Davis, Psychologist, Gerontologist offers in depth of knowledge about diminished financial capacity in older adults to help you strategize best practices so you can protect your vulnerable aging clients.
You may have heard of the fake calls from thieves pretending to be from the IRS. It can be a threatening robocall. Or it can be a male with an aggressive manner telling the recipient of the call that they will be arrested for owing back taxes if they don’t pay immediately. These criminals carefully select older people and anyone they consider vulnerable to their fake pressure. Your aging clients could be a target and scammers want to terrify them.
How do they get the names of our aging parents? They buy them. Information is for sale, from lottery entry forms, contests, magazine subscriptions and from hacking whatever can be hacked. Identity information can even be purchased on the black market. “Information brokers” have been around for decades and so have these telephone scams. Supposedly, the entities that sell the names don’t care what the buyer does with them. There are likely millions of names and telephone numbers available to the scammers, given the nationwide nature of their ripoff efforts. Apparently, names and numbers are very easy for them to get.
Here’s how it works: The caller catches the unsuspecting older person off guard. The call is official sounding: “This is Officer James with the Internal Revenue Service and I am calling about an urgent matter! Do not hang up!” Sometimes they are even able to secure a fake caller ID that says “IRS” or looks like a legitimate government entity to those with caller ID. There were also reported cases when they used the name and email address of a CFPB employee.
They then tell the stunned elder that they or their spouse has an overdue debt to the IRS and if it is not paid immediately they will be arrested. Of course, they want the elder to use a wire transfer or a prepaid debit card so the thief can’t be traced. The frightened person will hurriedly comply and realize only later that it was a scam. In the moment of reacting to the threat, they are not thinking clearly. They are moved by fear–just what the thief was hoping for.
No matter how many public service announcements are sent out, and no matter how many Federal Trade Commission, AARP or National Center on Elder Abuse warnings are posted, the scam is still working. We at AgingParents.com think the best way to keep our aging loved ones financially safer is to personally warn them yourself about these scams. They will probably listen to family more readily than they would seek information from the internet or official sources trying to spread the word. Of course, the IRS will never, under any circumstances call someone and demand payment of a debt. Their official communications about taxes are by snail mail.
If these evil scammers were not successful, they would stop doing this. But sadly, it works and they are relentless. My neighbors, many elders, have reported that they have gotten these calls this week. Beware. Please take the time to alert your loved ones to this problem. And don’t think your mentally alert aging loved one is too smart to fall for this. No one is immune from being shocked and intimidated by a sudden call. It can happen to anyone.
We at AgingInvestor.com think the best way to keep your older clients financially safer is to personally warn them yourself about these scams. They will probably listen to family more readily than they would seek information from the internet or official sources trying to spread the word. Of course, the IRS would never, under any circumstances call someone and demand payment of a debt. Their official communications about taxes are by snail mail and that is not likely to change anytime soon.
If these evil scammers were not successful, they would stop doing this. But sadly, it works and they are relentless. My own neighbors, many elders, have reported that they have gotten these calls this week. Beware. Please take the time to alert your clients to this problem. And don’t think your ever so sharp client is too smart to fall for this. No one is immune from being shocked and intimidated by a sudden call. It can happen to anyone.
If you want to send a friendly letter to your clients about this scam and don’t have time to put it together, we make it easy for you. Just go to this link and download a free pre-made letterto send out.
Revise it with your name or firm name and you’ll look good by showing that you do care about their financial safety. You’ll never regret doing your part to thwart thieves and prevent financial elder abuse.
Dr. Mikol Davis and Carolyn Rosenblatt, co-founders of AgingInvestor.com
Carolyn Rosenblatt, RN, Elder Law Attorney offers a wealth of experience with aging to help you create tools so you can skillfully manage your aging clients. You will understand your rights and theirs so you can stay safe and keep them safe too.
Dr. Mikol Davis, Psychologist, Gerontologist offers in depth of knowledge about diminished financial capacity in older adults to help you strategize best practices so you can protect your vulnerable aging clients.
Dr. Mikol Davis and Carolyn Rosenblatt, co-founders of AgingInvestor.com
Carolyn Rosenblatt, RN, Elder Law Attorney offers a wealth of experience with aging to help you create tools so you can skillfully manage your aging clients. You will understand your rights and theirs so you can stay safe and keep them safe too.
Dr. Mikol Davis, Psychologist, Gerontologist offers in depth of knowledge about diminished financial capacity in older adults to help you strategize best practices so you can protect your vulnerable aging clients.
How Do You Advise Clients Who Plan To Self-Insure For Long Term Care?
By Carolyn Rosenblatt, RN, Elder law attorney, AgingInvestor.com
Of course, your clients think they will never need long term care and they likely resist talking with you about it. Retirement planning is much more fun when you’re discussing cash flow, travel and leisure, and being free from the responsibility of work. And then there’s this thing called reality: retirement is not all fun.
Here at AgingInvestor.com, we offer you the benefit of our experience in dealing with countless families with aging folks among them. The adult children are our most frequent clients in our companion endeavor, AgingParents.com, and the stories they tell us are a jarring wake-up call for anyone. No one expects to need to be taken care of so no one wants to look at how frighteningly expensive it is.
For the moment, let’s leave aside the issue of long term care insurance. (My husband and I bought it if that’s an indication of what I think about the subject). Knowing that so few people bite the bullet and shell out those premium dollars, we are looking at the vast majority of clients who choose to self-insure against the risk of needing to pay for long term care. What are you telling them about this prospect? What do you say about their risks?
Here is one thing every advisor with a retirement-age client who chooses to self-insure should know: health status at retirement matters. A lot. Maybe you think that your client’s health is not your business, as you’re in the money management field. Maybe you see the health questions as being outside your area of expertise and you want nothing to do with the subject. It’s personal after all. And so is running out of money and needing care.
Measuring risk in investment products is at the heart of your job. If you want to add true value to your client’s engagement with you, an elementary look at the client’s health status at retirement is also part of your job. There is a direct correlation between chronic health issues and the likely need for long term care. I do not suggest that you need to be an expert or have any health background. You need your two eyes, your ears, and your common sense to ask a few essential questions. Those questions and the answers will give you some solid ground to stand on when you talk with a client about planning for this potential expense and how likely it is that the client will need this care. They may or may not listen to you, but if you fail to give them the facts, you are not serving them well.
Here are some of the essential questions you need to bring up when you talk with them about retirement, the long view, living past 80, and how long their assets can be expected to last.
How is your health, generally speaking? Do you have any chronic conditions like heart problems or diabetes?
Do you smoke?
Has any doctor ever given you any warnings about your health or what you should do differently now?
With your client’s answers, you then can progress to the discussion about why he or she probably has a higher risk than someone else without that problem/ condition/smoking history of needing long term care. At least a third of our population will need to pay for it at some point in their lives. Those with chronic illness may have to pay for long term care for years and years. It would also be helpful for you to do some calculations for your client. This is the “just in case, let’s imagine you have to pay for a helper at home” conversation.
If you feel awkward about how to bring this up, what questions to ask and how to talk about the dollars involved in long term care we can help you. Our newest book, Hidden Truths About Retirement & Long Term Care: The Guide For Financial Professionals is loaded with tips, sample scripts and all the costs of different kinds of long term care spelled out for you. Get your copy here today so you can put your mind at ease!
Dr. Mikol Davis and Carolyn Rosenblatt, co-founders of AgingInvestor.com
Carolyn Rosenblatt, RN, Elder Law Attorney offers a wealth of experience with aging to help you create tools so you can skillfully manage your aging clients. You will understand your rights and theirs so you can stay safe and keep them safe too.
Dr. Mikol Davis, Psychologist, Gerontologist offers in depth of knowledge about diminished financial capacity in older adults to help you strategize best practices so you can protect your vulnerable aging clients.
You’re trying to help the sixty-something clients plan for what they can anticipate spending for medical care in the future. You tell them about the average amounts a couple retiring at age 65 will need. The language seems fuzzy. Are you, the advisor, completely clear about what the term means when you say “out of pocket medical costs”?
That which is “medical” and what is paid by Medicare does not seem to be clear to many financial professionals we’ve interviewed. If you want to help your clients plan adequately for retirement, here are some critical points you need to make with them.
Medicare never paid for what it calls “custodial care”. This is not medical care by Medicare’s definition. It did not cover it in the past and it does not pay for it now. There is a distinct and very important difference between what it covers and what most people need over the long run in their retirement years. If your idea of “out of pocket medical costs” is hazy, let’s clear it up right now. This is a list of things Medicare doesn’t pay for, which just happen to be the most common things people need as they age. This is only a partial list.
Nursing home (“rehab”) after a limited number of days. The maximum coverage depends not on how sick the client is, nor how much help they really need due to such disabling conditions as a stroke, nor how they feel. It depends solely on what the nursing home administration decides about whether they are continuing to make the right kind of progress. That progress must require skilled care which can be nursing, physical, speech or occupational therapy. There may be 100 days available for coverage, but this does not mean that all of it will be covered or that the person will get that much in the rehab facility. If it is decided that there is not enough progress, the person’s care is termed “custodial” and they are cut off from Medicare.
Home Care. Millions of people who are released from a nursing home after surgery, an emergency or a fall, for example, need help at home either short term or long term. Medical events change us and can rob us of complete independence. There is a false belief around that Medicare will cover what you need if you have to have home care. This is true only for a very short time and only if skilled, licensed nurses or therapists are needed at home. Most of the time, a person is cut off from help when leaving a facility and has to pay for home care out of pocket. The national average hourly rate is $20, which can eat up one’s assets quickly in a fairly short time frame.
Help at home to stay out of a care facility. A lot of folks think they’ll live to be 100 years of age. No one discusses with them what it would mean to live that long without being completely independent. Help costs money. Many people assume that family or someone will take care of them if care is needed. But not everyone is willing to or capable to undertake what is often a serious burden. Even when family does take on caregiving, they need a break, and relief. Then help from outside must be hired. Without constant help many older people would have to be in a care facility. Does it make sense that when assets are largely all spent, Medicaid will pay for a nursing home but Medicaid will not pay for preventing the need for a nursing home, a far more economical alternative? Of course not, but that’s how it works.
The Takeaways
Fully two thirds of us will need long term care at some point in our lives. Unless the client is the rare one with long term care insurance, there is no way to pay for long term care other than to do so out of pocket. Sometimes this depletes all the client’s assets and leaves them with no choices in the last part of their lives. For those who live into their 90s and beyond, the need for some kind of long term care by family or a facility seems almost inevitable. Your clients need to stop pretending that it’s not going to happen to them, and you, the professional must steer them in the direction of saving and anticipating this need as much as you can. They will resist! Keep trying. Educate yourself first. You can get all the facts and figures you need to have a wise conversation with your older clients in our new book, Hidden Truths About Retirement & Long Term Care. Get your copy now and start adding value to those retirement discussions with your clients.
Dr. Mikol Davis and Carolyn Rosenblatt, co-founders of AgingInvestor.com
Carolyn Rosenblatt, RN, Elder Law Attorney offers a wealth of experience with aging to help you create tools so you can skillfully manage your aging clients. You will understand your rights and theirs so you can stay safe and keep them safe too.
Dr. Mikol Davis, Psychologist, Gerontologist offers in depth of knowledge about diminished financial capacity in older adults to help you strategize best practices so you can protect your vulnerable aging clients.
Most financial professionals see themselves doing fine in helping their clients plan ahead for retirement. And their clients are probably in for a nasty surprise no one is talking about. The professionals have done the calculations, used the algorithms, had the conversations about their clients’ goals. You may have forgotten something. Are you missing the elephant in the room: long term care?
At least a third of your clients are going to need it at some point. We’re not talking about nursing home care here. We’re talking about all the other out of pocket costs clients are not considering but that they will likely need as they age. Think about longevity today. Both men and women will probably live into their 80s at least. How many 85 year olds do you know who do not need any sort of help with anything in their lives? Not many, we’ll bet.
As the body ages, it is harder to see, hear, get around physically, drive, and manage households and finances. Help with all of those things is actually an out of pocket cost we consider to be long term care. Medicare calls it “custodial care”. That means all the kinds of support an aging person needs to stay out of a nursing home. The actual cost of a nursing home is another discussion altogether. When we talk about custodial care here we mean help with bathing, dressing, walking, eating, getting to the bathroom and getting out of bed onto a chair and back. These are called “activities of daily living” or ADLs. We are also talking about help with shopping, cooking, paying bills, cleaning the house and doing laundry. These are called “instrumental activities of daily living” or IADLs.
Your clients don’t want to think about needing help. In this country, we insist on believing that we will always be independent–it’s embedded in our culture and myths about aging. But those myths are not true. Independence declines with age for most of us. And help is expensive.
Consider that the averages you hear about do not address this at all when it comes to retirement planning. “The average couple age 65 will spend (fill in the blank here, anywhere from $265,000 to $400,000) on out of pocket medical expenses.” OK. Custodial care is NOT medical care. Medicare does not cover it. Health insurance, including Medigap coverage does not pay for it. Who then does? Some long term care insurance policies cover some of it, with restrictions. Otherwise, it’s all an out of pocket non-medical cost your client will have to cover. Imagine the costs when you calculate the “burn rate” of their retirement funds. Didn’t factor that in? It’s time for a second look at the plan.
if you have no idea how to calculate this or what your client’s chances are for needing to pay for any kind of long term care, you can learn the basics and the costs in our newest book. Get the facts quickly that will help you in Hidden Truths About Retirement and Long Term Care: The Financial Advisors’ Guide. Order your copy by clicking HERE.
Dr. Mikol Davis and Carolyn Rosenblatt, co-founders of AgingInvestor.com
Carolyn Rosenblatt, RN, Elder Law Attorney offers a wealth of experience with aging to help you create tools so you can skillfully manage your aging clients. You will understand your rights and theirs so you can stay safe and keep them safe too.
Dr. Mikol Davis, Psychologist, Gerontologist offers in depth of knowledge about diminished financial capacity in older adults to help you strategize best practices so you can protect your vulnerable aging clients.
Your older investors are sure it will never happen to them but Medicare fraud can trick anyone. Even those without a hint of cognitive decline can get taken by scammers. At AgingInvestor.com, we educate advisors about protecting clients from elder financial abuse and we thought we had our own family covered. With a 94 year old mother, we are especially alert. We were stunned when mom told us that someone “from Medicare” had called and asked her to “verify” her personal information.
Alice is a sharp 94 year old, living mostly independently in a seniors’ complex. She’s active, does her own shopping and is engaged with her neighbors in the community. She had an issue with Medicare not paying a bill for a service she had received some months prior. With our help, she had undertaken an appeal process, which involves a lot of repetitive paperwork. When a man saying he was from Medicare called, she thought it was about the appeal. Of course it wasn’t. The scammer asked her to “verify” her Social Security number, her address, date of birth and mother’s maiden name and she gave him that information.
A few hours later, she mentioned what had happened and said she had been wondering if it was right to give out that information. We were shocked! How is it that she didn’t see the potential ID thief when we talk about this all the time? We knew we had to jump on this right away to stop the thieves from using the information to open new accounts in her name. Hours were spent the next day calling the two banks where she had accounts, her credit card company, the credit reporting agencies and Social Security. We had to stop the auto debits on her bill payments. We cleaned up the mess.
So far so good. No unauthorized transactions have happened. Her old accounts were closed and new ones opened. Social Security sends her payments to the new account. Fraud alerts are on everything now. Whew! This was a lesson that even the alert older person can get fooled with the right pitch on the phone.
Here’s the takeaway.
Warn your clients: Medicare will NEVER call and ask you for your personal information. Never give it out unless you place a call to order something that you know is legitimate.
Medicare fraud can happen in many forms. This was just one of them. I believe that there was probably a connection between her Medicare appeal and the fraud attempt. It’s too much of a coincidence that they called when she had communication with Medicare going on already with her appeal. The appeal had not yet been resolved. This information got into the wrong hands, making it easy to trick a sharp person by saying he was calling from Medicare. Mom could be just like any one of your older clients.
Why is this important? You’re on the front lines and you have a trusting relationship with clients. Speak up and make basic efforts to educate them about these scams. A lot of money can be drained from an account instantly with all the client’s personal information out there. Make yourself look good. A word from you can remind your aging clients that you care about their financial safety and that you are looking out for them.
Carolyn Rosenblatt, RN, Elder Law Attorney, & Dr. Mikol Davis, Psychologist, Gerontologist, co-founders AgingInvestor.com
Dr. Mikol Davis and Carolyn Rosenblatt, co-founders of AgingInvestor.com
Carolyn Rosenblatt, RN, Elder Law Attorney offers a wealth of experience with aging to help you create tools so you can skillfully manage your aging clients. You will understand your rights and theirs so you can stay safe and keep them safe too.
Dr. Mikol Davis, Psychologist, Gerontologist offers in depth of knowledge about diminished financial capacity in older adults to help you strategize best practices so you can protect your vulnerable aging clients.
How Much Should You Plan On For Retirees’ “Out of Pocket Medical Costs”?
For those outside the caregiving world, there is a lot of confusion about this cost. Calculations abound in retirement planning circles for helping your clients ensure that they have enough for the things they are likely to need medically. The usual calculations outline Medicare Part A premiums (deducted from Social Security payments), Medicare Part B supplemental health insurance premiums, also called “Medigap” and for medication expenses, as some are not covered my Medicare. In plain English, this means that your client’s Social Security is less to them when the Medicare payment comes out and they have to pay out of pocket for the other kind of insurance that covers outpatient care, clinic and doctor visits, as well as prescription meds.
OK what’s wrong with these calculators? Can’t you rely on them? I think for an unusually healthy person who is your client, one who needs little care and has no chronic illnesses, they would be fine. I’m not sure where the folks making up the calculations get their statistics but I think they grossly underestimate the real costs of out of pocket medical care in retirement.
From personal experience with thousands of elders I visited at home as a nurse over a career, I did not see much of the unusually healthy. What I did see was the average person then taking numerous medications, having multiple chronic conditions and being at risk for those getting worse with age. And now, decades later, we live longer, have more health risks as a result of greater longevity and we have to pay more for the problems that go along with living to be 100. We have better diagnostics and we can catch and treat conditions more. That means more out of pocket expenses for those exotic tests Medicare will not cover. That also means more and more drugs being prescribed to manage and control chronic illness. They work, but we pay. You would be amazed at what Medicare does not cover.
Here’s the message I want every retirement planning advisor to heed: you cannot predict how much out of pocket medical expense your client will have unless you really know a lot about both their genetic disposition and their health habits and condition. And then it’s only an educated guess. How educated are you?
We do know that the way we age is about 30% due to our genetics. The other 70% of the picture is directed by how we choose to live. That means what we eat, how much we move our bodies, how we manage stress, how we socialize and how we succeed or not in our relationships with others. All of these factors affect our health and longevity and consequently, how much it’s going to cost to keep living with conditions like heart disease, diabetes, cancer, hypertension, arthritis, etc.
We haven’t even touched on the subject of Alzheimer’s disease. If you are calculating out of pocket medical I’ll bet you never calculate what it costs to care for someone at home 24/7 with specialized skill for dealing with this devastating disease. It can last 20 years. Nursing home care and caring for a person with any serious illness at home is long term care. That is not in the calculations in those handy tables describing the out of pocket medical costs for an average couple retiring at the age of 65 and living to be 85.
Here’s an example. Mort is 95. He has multiple health issues and early dementia. He can’t do anything by himself. He has 4 caregivers in shifts every day in his home. He isn’t sure he wants to keep going but he doesn’t want to stop the numerous medications he takes to stay alive. It costs over $250,000 a year just for the caregivers, not for the other costs of housing, utilities, transportation via handicap van and such. And the out of pocket medical is still there. The dentist, the hearing aids, the medications that no insurance pays for, the stair lift, the ramp on the front of the house, the high-end wheelchair and more.
If you want to help your clients plan so they won’t run out of assets, you’ll need to be realistic. Lots of cash may need to be available at the later end of life. It is more likely than not. Forget reliance on a calculator or use one that has the highest number you can find. Then add on expenses like Mort’s and you’re on the right track.
Dr. Mikol Davis and Carolyn Rosenblatt, co-founders of AgingInvestor.com
Carolyn Rosenblatt, RN, Elder Law Attorney offers a wealth of experience with aging to help you create tools so you can skillfully manage your aging clients. You will understand your rights and theirs so you can stay safe and keep them safe too.
Dr. Mikol Davis, Psychologist, Gerontologist offers in depth of knowledge about diminished financial capacity in older adults to help you strategize best practices so you can protect your vulnerable aging clients.
by Carolyn L. Rosenblatt.
Revise it with your name or firm name and you’ll look good by showing that you do care about their financial safety. You’ll never regret doing your part to thwart thieves and prevent financial elder abuse.
