Market penetration rates for long term care insurance remain low, but once-hesitant advisors are beginning to see its need. Where, exactly, are advisors in their acceptance of long term care insurance, and what does the near future hold for the product? We asked long term care expert Bruce Lederman, vice president with Lenox Advisors in Chicago. Lederman joined the advisor business after owning and operating three nursing homes, and he's seen
firsthand the devastating toll that a lack of long term care planning can take.
Boomer Market Advisor: Many advisors that speak to high-net-worth clients aren't on board with long term care insurance. The majority recommend other strategies or self-funding. Do you think this is starting to change?
Bruce Lederman: I definitely think it is. As I look at our client base, with our corporate clients, who as you know are Fortune 500 companies, as well as high-net-worth individual clients, we're seeing dynamics within both client groups. With corporate clients, we're seeing an increase in the presence of corporate-endorsed long term care insurance plans. In that case, the employer is recognizing that in today's tight job market there is a distinct advantage in attracting and retaining quality employees, and the long term care insurance benefit is one way to do that.
BMA: And for your individual high-net-worth clients?
BL: For our individual clients, a number of trends are developing. One is the recognition that long term care insurance can operate as a permission slip for the healthy spouse. In other words, regardless of the presence of available assets to pay for long term care, studies have shown that typically a healthy spouse feels a psychological obligation to provide the care. But seeing as the average age of using the product is over 80, typically, that healthy spouse isn't as healthy as they once were. So the presence of a long term care insurance plan can operate as a way of saying, "It's OK to ask for help. We've planned for this. We've talked about it."
BMA: Well-known psychologist and gerontologist Dr. Ken Dychtwald told us you're not going to see LTCI take
off until it's offered as a benefit by corporations. Are you saying this has now begun?
BL: It's now starting to happen.
BMA: A major criticism of the long term care industry is they haven't figured out their pricing models. Has the
pricing come down to make it more affordable for a 50-year-old to take a look at it?
BL: I believe the products today are underpriced in the market. I think every two to three years the industry goes
through a price re-evaluation. I'm a former nursing home owner/operator. I've had a lot of conversations with children of high-networth individuals who look at me and say, "I wish my mom and dad had done something to plan for this care."
BMA: A major focus of your firm is in the corporate executive niche. How do you incorporate the long term care discussion into your client meetings? Is it a team environment when you meet with clients?
BL: I will be brought in with the financial professional as another voice to say, "Let's take a look at these numbers and see what this means for you. Truthfully, we are all planning to lead long lives and chances are that at some point during our long lives, we are going to need custodial care."
BMA: Is there a lot of initial hesitation?
BL: Not so much and I'll tell you why: I see people purchasing long term care insurance for their parents.
BMA: So they're waking up to the longevity, income and health care issues that boomers are going to face here as we go forward with retirement?
BL: No question, because they're seeing their parents live well into their 80s. My younger clients are looking at their mothers and fathers and saying, "Mom's in her late 60s. We should look into buying her a long term care plan." That then prompts them to begin looking at what they're doing for themselves.
BMA: Although the advisory industry as a whole might not have woken up to the idea of LTCI, I think our readers
have and I think it's going to be a big dose of relief to know that this is finally getting through.
BL: I absolutely see it now. I think we've broken through in the marketplace.